I neglected to include the fact that the PBO is registered for S18A and can issue certificates. The Rotary Club does a variety of PBO activities and also does special projects (e.g. Fire Disaster Relief). They are now concerned that they won’t be able to
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We had access to the SARS letter issued to the Rotary Club Knysna as we had a previous request regarding the club. So, we knew that the club was an approved public benefit organisation and also has section 18A ‘approval’. Our guidance was therefore appropriate.
SARS explains it as follows in their guide:
“(a) Ring-fencing requirement
A PBO, institution, board or body carrying on a combination of PBAs, some of which are non-section 18A-approved in Part I, and some of which are section 18A-approved in Part II, may be granted approval to issue section 18A receipts for donations received solely for Part II PBAs.84 The section 18A-approved PBO, institution, board or body must therefore ring-fence the Part II PBAs. Donations for which section 18A receipts will be issued must be received subject to the prerequisite that it will be used solely on a Part II PBA in South Africa.
Donations received must therefore be controlled in such a manner that their usage is restricted to those PBAs only. The record-keeping of the section 18A-approved PBO, institution, board or body must clearly identify the donations received for Part II PBAs and the use to which those donations were applied.”
You will note, in paragraph 1.5 – 1.7 of the SARS letter to the club, that a similar statement was also made.
To repeat the law, the public benefit organisation may only issue a receipt contemplated in section 18A(2) in respect of any donation to the extent that, in the case of a public benefit organisation, contemplated in section 18(1)(a) which carries on activities contemplated in Parts I and II of the Ninth Schedule, that donation will be utilised solely in carrying on activities contemplated in Part II of the Ninth Schedule.