Must all voluntary associations be registered as an NPO and PBO at SARS or is there specific criteria that needs to be met?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
A non-profit organisation (NPO) is in most instances a company for tax purposes (see section 1(1) of the Income Tax Act). It must therefore register as a taxpayer. In order to qualify for the exemption from normal tax, under section 10(1)(cN) of the Income Tax Act, the ‘organisation’ must be “approved by the Commissioner in terms of section 30(3)” of the Income Tax Act. As defined in section 30(1) of the Act, “public benefit organisation” means “any organisation—
(a) which is—
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a non-profit company as defined in section 1 of the Companies Act or a trust or an association of persons that has been incorporated, formed or established in the Republic or;
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…
(b) of which the sole or principal object is carrying on one or more public benefit activities, where—
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all such activities are carried on in a non-profit manner and with an altruistic or philanthropic intent;
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…”
The advice you obtained is not correct. SARS agrees with us and explains it as follows in their Tax Exemption Guide for Public Benefit Organisations in South Africa (Issue 5):
“Registration as an NPO is not a condition for approval as a PBO since the registration as an NPO under the NPO Act is a voluntary registration lodged with the Directorate of NPOs.”