Tax Exempt Institutions

What’s New

• 16 August 2024 – Changes were made to the Legal Counsel pages of the SARS website.

Category 5 – Interpretation and Rulings

Interpretation Notes 121 – 140

Income Tax Act, 1962 Interpretation Note 133– Income tax exemption: Water services provide Explanatory Note This Note provides guidance on the interpretation and application of the definition of “water services provider” in section 1(1) for purposes of the exemption of the receipts and accruals of a qualifying water services provider from normal tax under section 10(1)(t)(ix).

• 6 August 2024 – Changes were made to the Legal Counsel pages of the SARS website as per the summary below.

Category 5 – Interpretation and Rulings

Interpretation Notes 81 – 100

Income Tax Act, 1962 Interpretation Note 98 (Issue 2) – Public benefit organisations: The provision of funds, assets or other resources to any association of persons Explanatory Note This Note provides guidance on – a conduit1 PBO providing funds, assets or other resources to an association of persons carrying on PBA 10(iii) in Part I, in South Africa; the requirement imposed under section 30(3)(f) on a conduit PBO providing funds to an association of persons; and the meaning of “association of persons”

Binding Private Rulings 401–420

Income Tax Act, 1962, and Securities Transfer Tax Act, 2007 Binding Private Ruling 409– Acquisition by a public benefit organisation of forfeited share incentive scheme shares Explanatory Note This ruling determines income tax and securities transfer tax consequences for a public benefit organisation acquiring forfeited share incentive scheme shares.

• 8 July 2024 – Changes were made to the Legal Counsel pages of the SARS website as per the summary below.

Category 10 – Legal Counsel Publications

Find a Guide – General

General Tax Exemption Guide for Small Business Funding Entities Summary This guide provides general guidance on the approval of small business funding entities under section 30C of the Income Tax Act 58 of 1962 (the Act) and partial taxation of its receipts and accruals under section 10(1)(cQ) of the Act. The guide deals with the following taxes and duties that may affect entities approved by the Commissioner as small business funding entities: Capital gains tax Dividends tax Donations tax Employees’ tax Estate duty Income tax Securities transfer tax Skills development levy Transfer duty Unemployment insurance fund contributions Value-added tax

• 4 July 2024 – Changes were made to the Legal Counsel pages of the SARS website as per the summary below.
  
  

  Category 5 – Interpretation and Rulings

  Binding General Rulings 1–20

  Income Tax Act, 1962, and Transfer Duty Act, 1949 Binding General Ruling 20 (Issue 4)– Meaning of the expression “substantially the whole” Summary This Binding General Ruling provides clarity on the interpretation of the expression “substantially the whole” as referred to in various sections of the Income Tax Act 58 of 1962. It has been updated with non-technical wording changes.

  
  

  Category 10 – Legal Counsel Archive

  Binding General Rulings

  Income Tax Act, 1962, and Transfer Duty Act, 1949 Binding General Ruling 20 (Issue 3) – Interpretation of the expression “substantially the whole”

• 24 May 2024 – Tax Exempt Institutions Connect Issue 5 (May 2024)
  
  
• 18 April 2024 – Non-profit sector in South Africa assessed for exposure to terrorist financing risk

South African government and private sector partners published a report on the terrorist financing risk assessment on the non-profit organisation (NPO) sector that will result in focused, proportionate, and risk-based measures to mitigate the identified risks.

The report is being launched today, 18 April and tomorrow, 19 April.

The sector risk assessment is in line with the Financial Action Task Force (FATF) global standards to combat money laundering and terrorist financing, as well as South Africa’s follow-up action plan to address grey listing by the FATF in 2023. The FATF is an intergovernmental body which sets global standards and measures for combating money laundering and terrorist financing. As a member of the FATF, South Africa is obliged to meet these standards.  Read the full media statement.

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.

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