Qualifying entities, that have been approved as PBOs, may obtain additional approval to issue tax deductible donations to donors.
Section 18A status falls in two broad categories, namely a “doer” and a “conduit”. If the PBO conducts the qualifying activities, it is a “doer” OR provides funds or assets (excl. services and other resources) to other S18A approved entities it is a “conduit”.
In addition to PBOs, the following institutions may also apply for approval to issue S18A receipts, and if approved, these entities will also be required to meet the Commissioner’s reporting requirements.
· Government Departments
· Specialised United Nations (UN) Agencies
Section 18A (1)(b)
Part II of the Ninth Schedule
Please note that you need to first apply for tax exempt institution status then apply for S18A status. This can also be done simultaneously.
Government has recognised that certain organisations are dependent on 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 section 18A receipts is restricted to certain Tax Exempt Institutions (incl. PBOs, Public Institutions, Government Departments, and Specialised UN Agencies) that use the donations to carry on or fund specific Public Benefit Activities in South Africa.
These institutions must formally apply to the Commissioner for approval under section 18A to issue section 18A receipts for donations received. A section 18A receipt may be issued by a section 18A-approved organisation only from the date SARS has confirmed section 18A approval and has issued a reference number for purposes of section 18A that must appear on such receipts.
For PBOs, section 18A status falls in two broad categories, namely a “doer” and a “conduit”. If a PBO conducts the qualifying activities, it is a “doer” OR if it provides funds or assets (excl. services and other resources) to other S18A approved institutions (excl. Specialised UN Agencies), it is a “conduit”. PBOs which conduct both qualifying and non-qualifying activities may obtain a ring-fenced section 18A approval and may only issue tax deductible receipts and apply related funds on qualifying activities. “Conduit” PBOs and PBOs with ring-fenced section 18A approval must comply with additional rules and reporting requirements.
Government Departments and Specialised UN Agencies which conduct the qualifying activities may also be approved by the Commissioner, subject to certain reporting requirements.
Are you the donee (issuer of receipt)?
The eligibility to issue section 18A receipts is restricted to specific organisations approved by the Commissioner that use the donations to carry on or fund specific Public Benefit Activities (PBAs) in South Africa. These organisations must formally apply to the Commissioner for approval under section 18A to issue section 18A receipts for donations received. A section 18A receipt may be issued by a section 18A-approved organisation, only from the date the Commissioner has confirmed section 18A approval and has issued a reference number for purposes of section 18A, that must appear on such receipts.
An application for approval under section 18A can be made simultaneously when an organisation applies for approval as a PBO under section 30 or as an institution, board, or body under section 10(1)(cA)(i). If, however, a PBO or an institution, board, or body, subsequent to obtaining approval under section 30 or section 10(1)(cA)(i), respectively, wishes to apply for section 18A approval, it may do so by a written request to SARS. The following information and documentation must be provided:
- The relevant PBAs in Part II of the 9th schedule for which approval is sought.
- A detailed demonstration of how those activities are carried on.
- Relevant supporting documentation that may include the latest founding document and annual financial statements.
Section 18A-approved organisations are required to maintain proper control over the application and spending of donations received that qualify for a tax deduction and must therefore comply with the conditions and requirements as set out by legislation.
The Commissioner may withdraw the approval granted under section 18A(1) if there are reasonable grounds for believing that the person who is in a fiduciary capacity responsible for the management or control of the income or assets of an approved Section 18A PBO has breached any of the prescribed regulations.
To read more on obtaining and retaining approval under section 18A click here
Are you the donor (claiming a receipt)?
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.
Verify here if the institution you are donating is a S18A approved organisation