Clubs are formed for the mutual benefit of members who contribute to share the cost of providing a collective benefit, namely, the social or recreational facility, e.g. running clubs, angling clubs, bowling clubs etc.
Section 10(1)(cO) read with Section 30A
Clubs are formed for the mutual benefit of members who contribute to share the cost of providing a collective benefit, namely, the social or recreational facility. The common objective of recreational clubs excludes personal financial gain of individual members. Under this principle, the sharing of expenses by various members joining together based on mutuality, does not generate additional taxable income for the recreational club and it is to this extent that clubs enjoy preferential tax treatment.
Sporting organisations qualifying for preferential tax treatment may be divided into two categories, namely –
- Recreational clubs; and
- Amateur sporting bodies generally approved as PBOs.
Although both categories qualify for exemption from income tax on certain of their receipts and accruals, they are approved under different sections of the Act, each section having its own requirements and conditions.