Tax & statutory aspects

Let’s Get Technical

(psst…this is a new development, and will be added to as we go...please let us know if you have a specific area of interest for us to address.)

These are some helpful guides in the areas that we consult in and manage…hope you find it helpful.

 

PBO Guide [income tax]

Firstly, what is a PBO and where does this acronym fit in, in the world of tax exemptions and charity-type work?...

About PBO reg:

  1. A PBO (Public Benefit Organisation) is a tax designation - i.e. it only exists, and is useful, in the world of income tax. It is SARS' term for a tax-exempt organisation. If you qualify under the required criteria for tax exemption (mainly by your principal object being the carrying on of one or more SARS-listed PBA's (Public Benefit Activities) then you could be designated with PBO status and receive a PBO number.

  2. The TEU (Tax Exemption Unit), based in Pretoria are responsible for overseeing PBO's.

  3. Your PBO number does not take the place of your Income tax number. Each organisation first registers for Income tax and gets that number and thereafter receives the PBO number. Annual Income tax returns are still required, and not only that, but…

  4. PBO's may still need to pay tax - as they may have some activities that do not fall within their PBO activity (eg rental income or sale of goods or services). SARS have established limits that this activity needs to fall into: so it is crucial to accurately define and classify income streams and track it accurately for year-end reporting.

  5. Annual submissions to the TEU are required which include the annual financials.

  6. Many other tax and statutory requirements fall away for PBO's - like SDL.

  7. S10(1)(cN) of the ITA (Income Tax Act) deals with the tax exemption provisions of PBOs

  8. The Basic PBO guide referenced below has most of the contents mentioned here with good explanations.

 

PBO and related acronyms:

  1. Section 18A of the Income Tax Act (referred to as S18A): this is a particular sub-category of PBO's. PBO's obtain S18A categorisation by conducting S18A activities. You need to consult this section in the tax act together with SARS' Public Benefit Activities listings in the Ninth schedule of the Income Tax Act to see if you fall within s18A

    1. Why should you care?: all donations made to (and only to) a S18A PBO are tax deductible. Which means there is real incentive for donors to give to these PBOs.

    2. Most s18A's are those that have activities in Part II of the Ninth Schedule - so that's what you will look for; but do consult both sections of the tax act for full clarity and details.

    3. As from May2024 SARS has implemented bi-annual submission of all s18A receipts issued by s18As.

  2. NPO: this is a completely separate registration; it stands for Non Profit Organisation and it is a registration with the Department of Social Development

    1. NPO registration may be important for obtaining funding - both government, and other organisations.

    2. Requirements after registration are annual reporting and abiding to their guidelines and rules.

  3. NPC: very often PBO's take the route of forming a non-profit company (NPC) which is a special, limited version of a private company with a Board of Directors instead of  Shareholders.

    1. NPCs, though intended for non-profit activities are not tax exempt. The PBO registration alone does that job.

    2. Alternatives to NPC's are Associations of persons, Trusts, or local branches of foreign tax-exempt organisations.

  4. VAT: this still applies with the usual entrance requirements and limits of use, but there is a whole guide for VAT for PBOs.

    1. The most important factor here is the subset of PBOs in the VAT act, designated as Welfare Organisations - with vastly preferable VAT concessions…but difficult, even for s18As to fall into.  

References and links (subject to update or change):

PBO basic guide: https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-IT-G16-Basic-Guide-to-Income-Tax-for-Public-Benefit-Organisations.pdf

PBO tax-exemption guide (more detailed): https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-IT26-Tax-Exemption-Guide-for-Public-Benefit-Organisations-in-South-Africa.pdf

Basic guide to S18A approval: https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-IT17-Basic-Guide-to-Section-18A-Approval.pdf

Yes - the above 3 have much overlap, which can be confusing, but find what works best for you and reading widely and deeply is always helpful for increasing understanding

NPO Directorate: https://www.dsd.gov.za/index.php/npo

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