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South Africa: Proposal concerning approval process for tax-exempt applications

South Africa: Proposal concerning approval process

A pending legislative proposal would affect the retroactive application of approvals of tax-exempt status for certain public benefit organisations.

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Currently, organisations that conduct certain prescribed activities for the benefit of the public can apply to the South African Revenue Service (SARS) for approval to be treated as a tax-exempt public benefit organization.

Once approved, the organisation does not need to pay income tax on its receipts and accruals. Additionally, such an organisation may also apply to SARS to enable it to issue special receipts, in a prescribed format, for donations made that fund its activities. Donors that receive these special receipts from the organisation may claim a tax deduction for their donations. Annually, the organisation will require certificates issued by a registered auditor that demonstrate that it is using the donations received for its activities.

The current process in applying for public benefit status is lengthy and often takes more than one financial year. When approval is granted, previously taxed receipts and accruals become exempt from tax, and SARS must refund these amounts with interest retroactively (from the date when the organisation would have qualified for public benefit organisation status).

Pending legislation provides that approvals would be subject to a more limited SARS discretion. Furthermore such approvals would only be possible if the organisation has met all the requirements for tax-exempt status during the relevant periods as well as its obligations relating to filing of returns and payments of taxes.

Read a November 2019 report [PDF 414 KB] prepared by the KPMG member firm in South Africa

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