Tax Exempt Institutions

What’s New

• 31 March 2025 – Updated Tax Treatment of the Receipt or Accrual of Government Grants

Interpretation Note 59 (Issue 3) – Tax treatment of the receipt or accrual of government grants

This Explanatory Note deals with:

• • the tax consequences of the receipt or accrual of government grants;
  • the exemptions from normal tax applicable to government grants; and
  • anti-double-dipping rules applicable to expenditure funded by such grants.

• 28 March 2025 – Updated Tax Exemption Guide for Institutions, Boards, or Bodies (Issue 2)

The updated guide provides general guidance on the exemption from income tax of qualifying institutions, boards or bodies under section 10(1)(cA)(i) of the Income Tax Act 58 of 1962 (the Act).

These institutions, boards or bodies enjoy preferential tax treatment after they have been granted approval by the Commissioner and continue to comply with the relevant requirements and conditions as set out in the Act. Any institution, board or body approved by the Commissioner under section 10(1)(cA)(i) of the Act carrying on public benefit activities in Part II of the Ninth Schedule to the Act in South Africa may also qualify for approval under section 18A of the Act.

• Updated Tax Exemption Guide for Public Benefit Organisations in South Africa (Issue 7)

SARS has issued an update Tax Exemption Guide for Public Benefit Organisations in South Africa (Issue 7) which provides general guidance on the:

• • approval by the Commissioner of an organisation as a public benefit organisation (PBO) under section 30 of the Income Tax Act 58 of 1962 (the Act);
  • partial taxation of PBOs under section 10(1)(cN) of the Act; and
  • approval by the Commissioner of a PBO under section 18A(1)(a)(i) of the Act to issue section 18A receipts potentially entitling donor taxpayers to an income tax deduction for bona fide donations actually paid or transferred during a year of assessment.
• 22 January 2025 – Changes were made to the Legal Counsel pages of the SARS website.

• 18 December 2024 – Latest tutorial video for Tax Exempt Institutions:
  • NEW! How to apply for the Public Benefit Status
  • How to Activate the IT3 for IT3D Form on eFiling
  • How to Complete and Submit IT3D on eFiling

• 5 December 2024 – Special edition Tax Exempt Institutions Connect newsletter
  
  Read all about the new EI1 – Application for Exemption from Income Tax form and how to complete it.
  
  

• 2 December 2024 – Guide to Complete the EI1 Application Form

  A guide and annexures have been developed to assist organisations applying for Income Tax Exemption with the completion of the EI1 form.

  The guide and annexures provide the requirements for the completion of the EI1 form and the required supporting documents per category.

  To qualify for Income Tax Exemption, the applicable entities are required to register for Income Tax and submit the Application for Exemption from Income Tax (EI1) form.

  Applying entities are required to complete the form with the applicable organisations information and provide the required supporting documents.

  • GEN-AE-01-G01 – How to Complete the EI1 Application Form – External Guide
  • EI1 – Application for Exemption from Income Tax – External Form

Tax Exempt Institutions Segment

This is a segment of taxpayers that require the Commissioner’s approval for exemption from income tax and other related benefits. Each category of exemption is considered according to specific legislative provisions as contained in the Income Tax Act (ITA). These institutions include

• Public Benefit Organisations
• Recreational Clubs,
• Membership Associations,
• Small Business Funding Entities,
• Home Owners Associations,
• Government (Public) Institutions and
• Private Companies owned by Government Institutions.

For more information on automatic exempt categories, please click here. 

Definitions

Non-profit organisations play a significant role in society as they assist with the social and development needs of the country.  Preferential tax treatment is designed to assist Not for profit organisations by augmenting their financial resources.  

The preferential tax treatment for Not for Profit organisations is not automatic and organisations that meet the requirements set out in the Income Tax Act must apply for this exemption. 

An organisation will only enjoy preferential tax treatment after it has applied for and been granted approval as a Tax Exempt Institution by SARS. If the application has been approved by SARS, the organisation will be registered with SARS as a Tax Exempt Institution, issued with an approval letter that confirms the type of exemption status, and allocated a unique exemption reference number in addition to their tax reference number.

NOTE: An organisation that has registered as a Non-Profit Organisation (NPO) (with DSD – NPO Directorate) or as a Non-Profit Company (NPC) (with CIPC) does not automatically qualify for preferential tax treatment and needs to apply for exemption with SARS.

Connect Newsletters

• For a complete list of archived Connect Newsletters, click here.