Tax Exemption Guide for - samemonfoundation.co.za

1 Tax Exemption Guide forPublic Benefi t Organisationsin South AfricaPBOs 1 PBOs 111/5/07 9:24:43 AM11/5/07 9:24:43 AMPBOs 2 PBOs 211/5/07 9:24:46 AM11/5/07 9:24:46 AMTax Exemption Guide for Public Benefi t Organisations in South AfricaThis document is a general Guide dealing with the tax Exemption of Public Benefi t Organisations in South fairly comprehensive it does not deal with all the legal detail associated with the Exemption of Public Benefi t serves the purpose of a Guide only and should not be used as a legal reference.

2 Binding general rulings are therefore not dealt with in this Guide is based on the legislation as at 31 August 2007. If an answer to your specifi c situation is not provided in this document or should you require additional information you may: Contact your own tax advisors or practitioners Contact the SARS Tax Exemption Unit (contact details in Annexure I) Visit the SARS website at and updated by:Legal and Policy Division SOUTH AFRICAN REVENUE SERVICE Date of fi rst issue: 30 November 2002 Date of second issue: 15 March 2004 Date of third issue: 10 October 2007 PBOs 3 PBOs 311/5/07 9:24:46 AM11/5/07 9:24.

3 46 AMContents1 Glossary .. 12 Introduction .. 33 Background .. 34 Income tax Exemption .. 45 Qualifying PBOs .. 5 Public Benefi t Organisation .. 5 Public Benefi t Activities .. 6 Formal requirements to be incorporated in founding 6 Other requirements .. 86 Trading and partial taxation .. 10 Background ..10 Current provisions ..10 Meaning of certain terminology.

4 11 Trading rules categories of trading activities not subject to tax .. 13 Integral and directly related trade .. 13 Occasional trade .. 14 Ministerial approval .. 15 Basic Exemption .. 15 Transfer of immovable property .. 16 7 Specifi c issues in respect of PBOs .. 16 Tax rates for trading activities in respect of PBOs .. 16 PBOs 4 PBOs 411/5/07 9:24:46 AM11/5/07 9:24:46 AM Provisional tax payments.

5 16 Branches of foreign charities .. 16 Educational Institutions: Schools .. 17 Public schools .. 17 Independent 17 Sporting associations .. 17 Social and recreational clubs .. 17 Amateur sporting bodies .. 18 Scholarships .. 18 Transfrontier areas / Peace Parks .. 19 Granting of Loans.

6 198 Reporting requirements .. 19 Record keeping .. 19 Income tax returns .. 19 Financial statements .. 20 Information available to SARS .. 209 Implementation dates .. 2010 Transitional Provisions .. 21 Organisations exempt in terms of the repealed legislation .. 21 New applications .. 21 PBOs 5 PBOs 511/5/07 9:24:46 AM11/5/07 9:24:46 AM11 Group registration ..21 General ..21 Non-compliance.

7 2212 Tax avoidance /non-compliance .. 22 Exemption not granted .. 22 Offences ..22 Penalties ..23 Additional taxes .. 23 Withdrawal of approval .. 2313 Tax deductibility of donations .. 23 General ..23 Organisations qualifying for section 18A approval .. 24 Deduction of donations from taxable income .. 25 Donations .. 26 What is a bona fi de donation?

8 26 Donation of property made in kind .. 26 Donation in respect of services rendered .. 26 Payments that do not constitute a bona fi de donation for purposes of section 18A .. 27 Value in respect of the donation of property made in kind .. 27 Receipt to be issued .. 27 Control measures .. 28 PBOs 6 PBOs 611/5/07 9:24:46 AM11/5/07 9:24:46 AM Abuse of approval .. 28 Intentional abuse of approval.

9 29 Re-application for approval .. 29 Effective date to issue receipts .. 2914 Exemption from other taxes and duties .. 29 Donations tax .. 29 Estate duty .. 30 Transfer duty .. 30 Stamp duty .. 30 Uncertifi cated Securities Tax (UST) .. 30 Skills development levy .. 30 Capital Gains Tax .. 3115 Objections and appeals .. 3516 VAT Implications .. 35 17 Employees tax (SITE and PAYE).

10 3818 Unemployment Insurance Fund contributions .. 3819 Customs and Excise Implications .. 38 AnnexuresA Other exemptions in terms of the Income Tax Act .. 41B Section 10(1)(cN) of the Income Tax Act .. 42C Section 18A of the Income Tax Act .. 43 PBOs 7 PBOs 711/5/07 9:24:46 AM11/5/07 9:24:46 AMD Section 30 of the Income Tax Act .. 48E Section 30 Approved PBAs Part I of the Ninth Schedule .. 53F Section 18A Approved PBAs Part II of the Ninth 59G Example of Section 18A certifi cate .. 63H Regulations.