When the Income Tax Act 1962 was amended in 2000 to provide for the registration of public benefit organisations (PBOs), all tax exempt bodies were required to apply anew for exemption under the new provisions. Most of the exemptions applying to such bodies under section 10 of the Income Tax Act were deleted. The idea is that these bodies should all obtain their exemptions under section 30, the new section dealing with and controlling PBOs.
The exemptions in section 10 applied to organisations such as religious, charitable and educational institutions; organisations providing residential care to the aged, housing, medical services, research, nature conservation, or cultural activities. Also exempt were: amateur sporting associations; organisations providing social and recreational amenities or facilities for members; associations promoting the common interest of persons carrying on a particular business, profession or occupation; trade unions; chambers of commerce or industry; local publicity associations; and fidelity or indemnity funds.
Initially the legislation required re-registration to take place before 15 July 2002. This has proved to be too brief a period, probably for both the bodies seeking exemption and SARS, bearing in mind that it is not only these organisations that must register but also a host of NGOs that previously did not qualify for exemption but will now do so under section 30. In terms of SARS Media Release No 10 of 2002 the Minister of Finance is to recommend to Parliament that the final date for registration be extended to 31 December 2003. All qualifying NGOs and non-profit organisations, whether or not they were previously exempt, are required to register by that date.
The exemptions afforded to registered PBOs relate to income tax, donations tax, estate duty, stamp duty, transfer duty and, perhaps the biggest prize of all, approval for donations to such organisations to be tax deductible under section 18A of the Income Tax Act.
Applications must be made on the SARS form EI 1, accompanied by a copy of the founding document of the body and the most recent annual financial statements. We shall be pleased to assist clients in preparing their applications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.