We have requested the constitutions as well as EI1 and EI2 from management as this is a new client but have not received them yet. Under usual NPC legislation the services provided should be impartial, available to everyone, services rendered are paid out
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
It is imperative to obtain the letter from SARS where the tax-exempt status of the entity is confirmed. The application forms, on its own, would not be sufficient. A body corporate is not required to apply for an exemption under section 10(1)(e)(i)(aa). These entities are required to register at a branch office, not at the tax exempt unit, and submit annual income tax returns IT14’s.
One must then ‘test’, in a sense, the main objective of the organisation against the specific paragraph, of the Ninth Schedule, and then the relevant section 10 provision. It is unlikely that a body corporate would get an exemption under section 10(1)(cN) of the Income Tax Act.
The service offered by us is limited to tax related issues and we can’t comment on the ‘legality of the non-profit companies’ – that is a Companies Act issue. The same applies with respect to the activities carried on by the entity (and whether it has been incorrectly been set up). From the Income Tax Act one can only look at section 30 and then the Ninth Schedule. The Income Act departs, in a sense, from the assumption that there is a non-profit company registered with CIPC.
The exemption of the company, if approved by SARS as a public benefit organisation, is then under section 10(1)(cN) and it doesn’t apply, with some exception, to receipts from business activities.