Mallinicks

Is your organisation paying income
tax when it doesn't have to?


THE INCOME TAX ACT HAS RECENTLY BEEN AMENDED TO GIVE TAX RELIEF TO ORGANISATIONS THAT ARE INVOLVED IN ACTIVITIES THAT BENEFIT THE PUBLIC. THESE ORGANISATIONS CAN APPLY TO THE COMMISSIONER OF INLAND REVENUE FOR AN EXEMPTION FROM PAYING INCOME TAX. THE ACT CALLS THESE ORGANISATIONS PUBLIC BENEFIT ORGANISATIONS. THE REASON FOR THE EXEMPTION IS THAT THE GOVERNMENT RECOGNISES THE NEED TO PROVIDE TAX RELIEF FOR ORGANISATIONS WITH PHILANTHROPIC OBJECTIVES (AS OPPOSED TO PROFIT-MAKING OBJECTIVES).

HOW DO YOU KNOW WHETHER YOUR ORGANISATION WILL QUALIFY AS A PUBLIC BENEFIT ORGANISATION ("PBO")?

To be a PBO, your organisation must be either:

In addition, the objective of your organisation must be to promote one or more . "public benefit activities" in a non-profit making way. In other words, if the organisation carries on a trade with the aim of making a profit, it can't get the exemption.

WHAT IS A PUBLIC BENEFIT ACTIVITY?

A public benefit activity is one that promotes the interests and well-being of the general public. If your organisation's activities fall into one of the categories of activities identified below, your organisation may be a PBO:

Organisations that conduct activities not on this list are unlikely to qualify for. income tax exemption.

Remember that to qualify as a PBO, the organisation cannot carry on its business with the aim of making a profit.

HOW DOES AN ORGANISATION GO ABOUT APPLYING FOR
PBO STATUS AND INCOME TAX EXEMPTION?

If your organisation meets the above criteria, you should submit a copy of its founding document to the Commissioner for his consideration.

From this document, it must be clear that your organisation will conduct itself in a manner that is in line with the philosophy of a PBO. Once the Commissioner has considered your application, you will be notified whether or not your organisation qualifies for the income tax exemption.

WHAT ABOUT DONATIONS MADE TO PUBLIC BENEFIT ORGANISATIONS?

Tax benefits are also available to people who make donations to PBOs whose activities relate specifically to welfare, health care and education (not all PBOs). People who make donations to these PBOs can deduct the amount of the donation from their personal income tax and in this way can reduce their own income tax payment.

CONCLUSION

If your organisation conducts one of the identified activities and its aim is not to make a profit, but rather to promote the interest and well being of the public, then it is very 1ikely that it will be a successful applicant for an exemption from paying income tax.


'MALLINICKS'
ATTORNEYS
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