What is a public benefit organisation (PBO)?
A PBO is any organisation which is:
- a non-profit company (NPC) as defined in section 1 of the Companies Act or a trust or an association of person that has been incorporated, formed or established in the Republic; or
- any branch within the Republic of any company, association or trust incorporated, formed or established in any country other than the Republic that is exempt from tax on income in that other country;
- of which the sole or principal object is carrying on one or more public benefit activities, where-
- all such activities are carried on in a non-profit manner and with an altruistic or philanthropic intent;
- no such activity is intended to directly or indirectly promote the economic self-interest of any fiduciary or employee of the organisation, other than by way of reasonable remuneration payable to that fiduciary or employee; and
- where each such activity carried on by that organisation is for the benefit of , or is widely accessible to, the general public at large, including any sector thereof (other than small and exclusive groups).
What type of organisation can apply for approval as a PBO?
A NPC, or a trust ; or an association of person that is incorporated, formed or established in SA.
A branch within the Republic of any company, association or trust, formed, incorporated or established in any country other than the Republic that is exempt from tax on income in that other country
Does a registered non-profit organisation (NPO) or a NPC automatically qualify for PBO approval?
No, a NPO registered under the Nonprofit Organisations Act, 1997 with the Department of Social Development or a NPC as defined in section 1 of the Companies Act 2008, do not automatically qualify for PBO approval. These organisations will only qualify if approved by the Commissioner for this purpose and only if they comply with the relevant requirements and conditions as set out in the Income Tax Act.
How does SARS confirm PBO approval?
The notification of approval as a PBO is issued by the Tax Exemption Unit (TEU) by way of a letter, which contains a unique reference number allocated to the organisation. The original letter must be kept for the organisations own records and only certified copies may be provided to other entities or organisations requesting proof of the tax status of the approved PBO. NOTE: SARS does not issue a tax exemption certificate.
What is a public benefit activity (PBA)?
A PBA is any activity listed in Part I of the Ninth Schedule and any other activity determined by the Minister of Finance from time to time by notice in the Gazette to be of a benevolent nature, having regard to the needs, interests and well-being of the general public.
The approved PBAs are grouped into categories each with specific activities that qualify as PBAs. Refer to Part I of the Ninth Schedule to the IncomeTax Act for the comprehensive list of approved PBAs
Tax deductible donations (Section 18A receipts)
The South African Government has recognised that certain organisations are dependent upon the generosity of the public and to encourage that generosity has provided a tax deduction for certain donations made by taxpayers.The eligibility to issue tax deductible receipts is dependent on section 18A approval granted by the TEU, and is restricted to specific approved organisations which use the donations to fund specific approved Public Benefit Activities. A taxpayer making a bona fide donation in cash or of property in kind to a section 18A-approved organisation, is entitled to a deduction from taxable income if the donation is supported by the necessary section 18A receipt issued by the organisation or, in certain circumstances, by an employees’ tax certificate reflecting the donations made by the employee. The amount of donations which may qualify for a tax deduction is limited.
Tax Exempt Unit – TEU – Service Offering
The TEU is a dedicated office within SARS which deals with all applications by non-profit organisations for approval as PBOs. In order to prevent malpractice and abuse, the TEU also monitors compliance by PBOs with the requirements for approval. The TEU is also responsible for the assessment function.The TEU considers applications for exemption from income tax in respect of the following provisions of the Income Tax Act, 1962: –
|10(1)(cN)||All Public Benefit Organisations (PBO’s) engaged in activities such as crèches, welfare, health and conservation schools|
|Section 10(1)(cA)(i)||Institution, Board, or Body established by or under any law|
|Section 10(1)(cA)(ii)||Any South African company of which all the shares are held by a body exempt in terms of section 10(1)(cA)(i).|
|Section 10(1)(cO)||Recreational Club|
|Section 10(1)(d)(iii)||Fidelity or Indemnity Fund; Trade Union; Chamber of |
Commerce or Industries (or an Association of such Chambers); Mutual Loan Association; Local Publicity Association.
|Section 10(1)(d)(iv)(bb)||Company, society or other association of persons established to promote the common interest of persons, carrying on any particular kind of business, profession or occupation.|
|Section 10(1)(e)(i)(cc)||Association of persons formed for managing the collective interests common to all its members in respect of |
expenditure applicable to the common immovable property
|Section 18A:||Approval for tax deductible donations|