Tax Exempt organisations

What's New

  • 04 May 2020 - Dealing with Tax Exemption Unit (TEU) during lockdown

    • New applications to register as a Public Benefit Organisation (PBO)

      New applications to register as a Public Benefit Organisation (PBO) can unfortunately not be submitted via email because of size constraints. Taxpayers are advised to download required documents from the website, complete and schedule an online appointment with Branch Office to submit. You will obtain a case number for submitted applications and TEU will make direct contact with you while processing the applications. 

    • Emergency registrations (disaster management related activities organisations)

      These will be treated as an emergency, where all documents are received from the taxpayer in support of such an application, it will be finalised within seven working days.  Taxpayers must indicate that the application is about response to COVID-19.

    • Requested supporting documents/ additional information for submitted applications

      Where a Taxpayer has submitted an application at a Branch Office as stated above and they receive an instruction for outstanding information from TEU, they must submit such on [email protected], clearly citing the case number and income tax number of the taxpayer for ease of linking to the original case.

    • Submission of returns

      IT12EI income tax return must be submitted on eFiling and notice of submission emailed to [email protected]. TEU taxpayers are encouraged to register on eFiling:
      • Taxpayers not registered for eFiling must submit an online application for an appointment at your nearest SARS Branch Office to submit returns. You will be issued with a case number for submission.
      • Where supporting documents are requested in support of an assessment, taxpayers must direct these to the Requestor, clearly indicating the tax reference number.

    • Documents required to apply for Income Tax exemption:
  • 24 February 2020 - The IT12EI form will now be available in HTML format, and no longer in the former Adobe format. As part of our objective to make it easy for taxpayers to comply and fulfil their obligations, we have embarked on a journey to move all online forms, including the IT12EI, to the HTML platform. The HTML format is compatible with all modern browsers.

  • SARS TEU new location - The SARS Tax Exemption Unit (TEU) moved from the old Land Bank Building in Veale Street to SARS Pretoria CBD branch, 2nd floor, corner of Lillian Ngoyi and Frances Baard Streets. The move enables SARS TEU to offer an end-to-end service to taxpayers.

Not for Profit Organisations and Tax

Not for profit organisations play a significant role in society as they take a shared responsibility with Government for the social and development needs of the country. Preferential tax treatment is designed to assist non-profit organisations by augmenting their financial resources.
 
The preferential tax treatment for not for profit organisations is however not automatic and organisations that meet the requirements set out in the Income Tax Act, 1962, must apply for this exemption.  If the exemption application has been approved by SARS, the organisation is registered as a Public Benefit Organisation (PBO) and allocated a unique PBO reference number.
 
It is important to note that an organisation that has a non-profit motive or is registered as a non-profit organisation (NPO) or Non Profit Company (NPC) does not automatically qualify for preferential tax treatment. An organisation will only enjoy preferential tax treatment after it has applied for and been granted approval as a Public Benefit Organisation (PBO) by the Tax Exemption Unit (TEU).

What is a Public Benefit Organisation (PBO)

The conditions and requirements for an organisation to be approved as a PBO are contained in section 30 while the rules governing the preferential tax treatment of PBOs are contained in section 10(1)(cN). Section 10(1)(cN) provides for the exemption from normal tax of certain receipts and accruals of approved PBOs. Certain receipts and accruals from trading or business activities will nevertheless be taxable.
 
Approved PBOs have the privilege and responsibility of spending public funds, which they derive from donations or grants, in the public interest on a tax-free basis. The donations or grants may be received from the general public or directly or indirectly from the State. It is therefore important to ensure that exempt organisations use their funds responsibly and solely for their stated objectives, without any personal gain being enjoyed by any person including the founders and the fiduciaries.  
 
Approved PBO’s must continue to comply with the Act and related legislation throughout their existence. This includes the submission of annual income tax returns on an IT12EI form. The income tax return enables the Commissioner to assess whether the approved PBO is operating within the prescribed limits of the relevant approval granted and to determine whether the partial taxation principles must be applied to receipts and accruals derived from a trading activity or business undertaking which does not qualify for exemption.

An organisation which provides scholarships, bursaries and awards for study, research or teaching must comply with the conditions prescribed in Regulation R.302 (published in Government Gazette No. 24941 on 28 February 2003).

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.
 

Submission of IT12EI (Income Tax Return)

Exempt organisations must annually submit an IT12EI income tax return in the following manner:
  • Through eFiling if you are a registered eFiler;
  • By visiting your local SARS Branch, on appointment; or
  • By making an appointment to visit the Tax Exemption Unit (TEU) office
Note: The return for companies must be completed and submitted within 12 months of the financial year end of the exempt organisation, but the returns for trusts or other entities must be completed and submitted annually by the due dates announced by SARS.
 
To help with the completion of the IT12EI return, you can refer to How to Register on eFiling and Complete the IT12EI Return for Exempt Organisations external guide.
 

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​
 
 
The TEU does NOT consider exemption applications for Individuals, Labour Brokers (IRP30), Co-operatives, Close Corporations, Special Trusts, Body Corporates, Share Block Companies, VAT, PAYE/UIF/SDL, Benefit Funds and Burial Societies. For assistance on any of these, please phone the Contact Centre on 0800 00 7277.
 

Contact details of the Tax Exemption Unit

Physical address:
2nd floor, SARS Pretoria CBD branch,
C/o Lillian Ngoyi and Francis Baard Streets
Pretoria, 0002

Postal address:
P.O. Box 436
Pretoria
0001
 
Telephone: 012 - 483 1700
Fax: 012 - 483 1701
 
To access this page in different languages click on the links below:
Last Updated: 07/07/2020 3:43 PM     print this page
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 Top FAQs

What is a public benefit organisation (PBO)?
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

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

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.

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.

What is a public benefit activity (PBA)?
A PBA is an activity determined by the Minister of Finance as being of a benevolent nature having regard to the needs, interests and well-being of the general public