Institutions That Qualify for Income Tax Exemption
An organisation must be constituted in one of the following ways to be approved as a tax exempt institution:
Public Benefit Organisation
- An NPC incorporated in South Africa.
- A trust established in South Africa.
- An association of persons formed or established in South Africa. This association of persons must be formally established by adopting a legal founding document
- A branch of a foreign tax-exempt organisation.
Recreational Club
- An NPC incorporated in South Africa
- A society or other association of persons formed or established in South Africa. This society or other association of persons must be formally established by adopting a legal founding document
Membership Associations and Professional Bodies
- An NPC incorporated in South Africa
- A society or other association of persons formed or established in South Africa. This society or other association of persons must be formally established by adopting a legal founding document
Small Business Funding Entity
- An NPC incorporated in South Africa.
- A trust established in South Africa.
- An association of persons formed or established in South Africa. This association of persons must be formally established by adopting a legal founding document
Home Owners Association
- An NPC incorporated in South Africa
- An association of persons formed or established in South Africa. This association of persons must be formally established by adopting a legal founding document.
Public Institution
- Any institution, board or body established by or under any law (usually gazetted entities or entities required to register under any law). This specifically excludes the following entities:
- Any company or NPC
- Any trust
- Water services providers
- Automatic exemptions or entities exempt in terms of other sections
Companies Owned by Public Institutions
- A company incorporated in South Africa (100% shareholding by one or more government institutions) or an association.
Automatic Tax Exemption
The Income Tax Act allows for automatic income tax exemptions of certain entities that do not require additional approval from SARS in so far as Income Tax registration. These exemptions are set out in the Income Tax legislation in detail. Examples of automatic exemption can be seen below. A few of these entities may qualify to issue tax deductible receipts under section 18A (e.g. government and specialised UN agencies) and will be required to submit an application to SARS. These entities will also be required to meet the Commissioner’s reporting requirements.
Type of Exempt Entities and / or Categories | Section of the Income Tax Act (ITA) |
Government Spheres (national, provincial, and local), e.g. National and provincial departments, municipalities. | S10(1)(a) |
Foreign government and foreign government institutions: UN Specialised Agencies The section provides an exemption in respect of : 1. any sphere of foreign government, 2. institution or body established by a foreign government to perform its function in terms of an official development assistance agreement which is binding in terms of section 231(3) of the Constitution of the Republic,1996 and the agreement provides that the receipts and accruals of that institution, board or body must be exempt, and 3. any multinational organisation providing foreign donor funding in terms of an official development assistance agreement that is binding in terms of section 231(3) of the Constitution of the Republic of South Africa,1996 to the extent- a. the receipts and accruals are derived pursuant to the organisation supplying goods or rendering services in relation to projects that are approved by the Minister after consultation with the Minister of Foreign Affairs b. the agreement provides that those receipts and accruals of that organisation must be exempt and c. the Minister announces that those receipts and accruals ate exempt by notice in the gazette | S10(1)(bA) |
Multi-national Banks as defined in the applicable section Section 10(1)(bB) of the provides an exemption from normal tax in respect of the receipts and accruals of the following : 4. African Development Bank established on 10 September 1964; 5. World Bank established on 27 December 1935 including the International Bank for Reconstruction and Development and International Development Association; 6. International Monetary Fund established on 27 December 1945 7. African Import and Export Bank established on 8 May 1993 8. European Investment Bank established on 1 January 1958 under the Treaty of Rome; 9. New Development Bank established on 15 July 2014. | S10(1)(bB) |
All funds defined in section 1 of the Pension Funds Act; Pension Funds, Pension Preservation Funds, Provident Fund, Provident Preservation Funds, Retirement Annuity Funds, Beneficiary Funds. Benefit Funds defined in section 1(1) of the Income Tax Act: Friendly societies and Medical Aid Schemes | S10(1)(d)(i)-(ii) |
Any registered Body Corporate and Share Block Company in relation to the levies received or accrued: This exemption is applicable to the levies income and other receipts and accruals to the extent that they do not exceed R50,000 per annum, and is automatically available upon selection of the relevant entity type (e.g. Body Corporate or Share Block Company) on submission of an annual ITR14 return. Only entities duly registered under the Sectional Title Schemes Management Act and the Share Blocks Control Act may make this election in their annual returns. * Partial taxation rules apply | S10(1)(e)(i)(aa)-(bb) |
The entities listed under Section 10(1)(t): CSIR, SAIDC, SANRAL, ARMSCOR (incl. wholly owned subsidiaries), traditional councils, water service providers, DBSA, compensation funds, reserve funds, licenced mutual associations, NHFC | S10(1)(t) |
Political Parties All political parties registered with the Independent Electoral Commission in terms of section 15 of the Electoral Commission Act, 1996 (Act No. 51 of 1996). | S10(1)(cE) |
How to Apply for Income Tax Exemption
Taxpayers are required to be registered for Income Tax OR can register for Income Tax and apply for Exempt Institutions status simultaneously. Taxpayers are advised to download the required documents from the website, complete the forms, and book an online appointment at a Branch Office nearest to them to submit the application (New applications to apply for exemption from income tax can unfortunately not be submitted via email at this time).
Once the appointment has been made, a case reference number will be issued which must be used to upload the application forms and supporting documents on the SARS Online Query System (SOQS). SARS will be in contact with the applicant to confirm the type of appointment and confirm if all the required documents have been uploaded. When the documents have been uploaded, the case number may be sent to the following email address for follow-ups: [email protected]
Helpful resources:
- Click here for full list of application documentation per exemption category
- Income Tax Exemption Application Checklist
- Income Tax Exemption Leaflet
Supporting Documents
Proof of address of the representative will also be required if the individual is not registered for tax purposes. A CRA01 Form will need to be completed where applicable (Confirmation of Entity Residential/Business Address form)
In order for taxpayers to change the entity name, a “compliant” status is a prerequisite.
Related Documents
EI1 – Application for Exemption from Income Tax – External Form
EI2 – Public Benefit Organisation Written Undertaking – External Form
EI2A – Public Benefit Organisation Written Undertaking Associations – External Form
EI2B – Foreign Branch Approved as a Public Benefit Organisation – External Form
EI2C – Income Tax Exemption Recreational Clubs – External Form
IRP30A – Application for and Exemption Certificate iro Employee Tax – External Form
LAPD-IT-G16 – Basic Guide to Income Tax for Public Benefit Organisations
Legal-Pub-Guide-IT17 – Basic Guide to Section 18A Approval
Legal-Pub-Guide-IT26 – Tax Exemption Guide for Public Benefit Organisations in South Africa
