Tax Exempt Institutions Connect Issue 6 (October 2024)

Third-Party Data Submissions to SARS — IT3(d) Update

The first mandatory bi-annual submission of IT3(d) third-party data closed on 31 May 2024, with the second bi-annual submission scheduled for 31 October 2024. SARS extends its gratitude to all TEI taxpayers, including the professionals and service providers supporting them, for their dedication to submitting the first-ever IT3(d) third-party data. We are particularly encouraged by the submissions from a wide variety of smaller exempt institutions. Based on the data received, the submitting entities have shown a willingness to comply, primarily using the eFiling and HTTPS channels.

In preparation for the submission period, SARS hosted and presented various webinars, and provided guides, micro-learning videos, onboarding sessions, and technical assistance. The education efforts were augmented by other stakeholders in the sector who also hosted training and communication sessions. 

The following resources have been published and SARS encourages taxpayers and approved S18A entities to familiarise themselves with the contents and share this information within their respective networks.

• EI Connect 5^th Edition – IT3(d) Special Edition
• IT3(d) FAQs
• How to activate the IT3 for third-party data on eFiling
• How to Complete and Submit IT3(d) on eFiling
• Public Notice 3082 on the section 18A enhanced reporting requirements
• Public Notice 3631 on the submission of IT3(d) third-party data submissions
• Binding General Ruling 71—Section 18A Receipt: Donation of Property in Kind
• Binding General Ruling 70—Issue of a Single Section 18A Receipt to a Donor Taxpayer for Multiple Bona Fide 

SARS encourages approved S18A entities that have not yet submitted their data to do so as soon as possible.

If you need help with IT3(d) after watching the micro-learning videos and reading the guides, please contact [email protected].

Financial Action Task Force (FATF) Update and Feedback

South Africa conducted its first sectoral risk assessment of the terror financing (TF) risks affecting the Non-Profit Organisation (NPO) sector. The Risk Report was launched and published on 18 April 2024.

The assessment was conducted in consultation with a broad range of public and private sector stakeholders, including NPOs, and based on international best practices. 

The report indicates the inherent risks and vulnerabilities of the South African NPO Sector with regard to being used knowingly or unknowingly for TF. The report also indicates the types of NPOs that are most at risk of being used for TF, as well as the mitigation measures that Government and the NPO Sector can and will put in place to prevent the abuse of NPOs for TF. It should be noted that not all NPOs are at risk, but it is important for all NPOs to be aware of the potential risks of being used for TF.

The FATF SA NPO Terrorism Financing Sectoral Risk Report is available on the Tax Exempt Institutions webpage.

Amended NPO Act

As part of South Africa’s response, legislative amendments were made to several pieces of legislation, including the NPO Act. We encourage all our taxpayers and stakeholders to familiarise themselves with the amendments to the NPO Act and subsequent regulations. These can be accessed by visiting the Department of Social Development – FATF (dsd.gov.za) webpage.

Sectoral Risk Assessment

This progress made with the Sectoral Risk Assessment report, enabled South Africa to improve its Compliance status for Recommendation 8 from Non-Compliant to Partially Compliant during the August 2024 review.

We urge our taxpayers to read through the report and the additional reading material available. For more information about FATF Recommendation 8, and its impact on the NPO Sector and Public Benefit Organisation (PBO) taxpayers, please visit the FATF Recommendation 8 and Immediate Outcome 10 Fact Sheet.

As a country, we are still required to improve South Africa’s compliance with FATF Recommendation 8 and Immediate Outcome 10 as it relates to the NPO Sector. We need to move the dial from Partially Compliant to Largely Compliant to Compliant. This requires continued collaboration and cooperation between the various Regulators, public and private sector stakeholders and, most importantly, the NPO Sector.

SARS looks forward to continuing building on the work done between the NPO Sector and the various public and private sector stakeholders.

Voluntary Disclosure Programme

The Voluntary Disclosure Programme (VDP) is permanently available to qualifying entities that seek voluntarily to disclose and regularise its tax affairs. This includes clients in the Tax Exempt Institutions (TEI) Segment. SARS urges all Exempt Institutions (EIs) that may be in default on their tax affairs to approach SARS via the VDP. It is crucial to willingly seek assistance and guidance from VDP to resolve non-compliance before SARS escalates its enforcement.

To ensure that a VDP application is valid, a disclosure must be:

• Voluntary;
• Full and complete in all material respects;
• A default that has not occurred within five years of the disclosure of a similar default;
• A behaviour referred to in the understatement penalty-table in section 2023 of the Tax Administration Act;
• A result which does not result in a refund due by SARS; and
• Made in the prescribed form and manner.

Who can apply?

Exempt Entities that have tax defaults, seek relief from penalties, and want to avoid possible criminal prosecution, can voluntarily disclose their outstanding tax affairs.

If an Exempt Entity is registered for SARS VDP, these are the key things to consider:

• Previous defaults: Exempt Entities that defaulted within five years of disclosing a similar issue might not be eligible for the VDP again.
• Voluntary Disclosure: The disclosure must be made before SARS initiates an audit or criminal investigation.
• Complete Disclosure: The disclosure must be full and complete in all material aspects.

How to apply

All prospective applicants can apply for the VDP via SARS eFiling.

Need help?

Email us: [email protected]
Call us: 0800 864 613
Visit: Voluntary Disclosure Programme (VDP) 

PAYE Bi-Annual Filing Season 2024

The Bi-Annual EMP501 Reconciliation Submission period is from 16 September to 31 October 2024.

Exempt entities employers should submit EMP201s monthly, which will make bi-annual submission easy. Employers can use any of the following channels:

• eFiling (request and submit);
• eFiling ISV (submit); or
• e@syFile Employer (request and submit).

Channels to submit EMP501

• Employers with fewer than 50 employees can use SARS eFiling or SARS e@syFile.
• Employers with more than 50 employees must use SARS e@syFile.

Penalties for non-compliance

• An employer who files an EMP501 reconciliation late will be penalised under the provisions of paragraph 14(6) of the Fourth Schedule to the Income Tax Act.
• The penalty will equal 1% of the year’s PAYE for each month that the return is late, up to 10% of the year’s PAYE.
• If the EMP501 is received at any point during the ten months after the close of filing season, the 1% incremental administrative penalty will stop accumulating.