My client is a Voluntary Association, but was not registered as an NPO. Must all Voluntary Associations register as an NPO or can they continue as just the association?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We understood your request and our guidance was appropriate, namely that registration as an NPO “is not a not a condition for approval as a PBO since the registration as an NPO under the NPO Act is a voluntary registration”. This is not really a tax related issue, but see the following page where this is confirmed:
http://www.dsd.gov.za/index.php/2-uncategorised/6-non-profit-organisations
We copied the following from the page:
“The Register of Nonprofit Organisations (NPOs) is a voluntary registration facility that enhances the credibility of the registered NPO as it reports to a public office. The NPO Directorate, as a public office, holds information about registered NPOs for the public to access. This thus, increases the transparency and accountability of the organisation beyond its immediate role-plays. This accountability and transparency improves the governance of an organisation as it is also expected that a registered NPO must comply with the requirements of the NPO Act. The NPO registration status is also a funding requirement for most donor and funding agencies. The national NPO registration facility therefore brings NPOs into a public system that allows for information about the sector to be gathered and made publicly available which in many ways increases the confidence of the public in the nonprofit sector.”
“An NPO is defined, in terms of section 1 of the NPO Act, as a trust, company or other association of persons established for a public purpose and of which its income and property are not distributable to its members or office bearers except as reasonable compensation for services rendered.”
From a tax point of view the following is relevant:
In terms of section 1(1), and for purposes of the Income Tax Act, "company" includes any association (not being an association referred to in paragraph (a) or (f)) formed in the Republic to serve a specified purpose, beneficial to the public or a section of the public – see paragraph (d) of the definition of “company”. It was our view that the voluntary association may be a company (in terms of the above).
Registration as a taxpayer, not as an NPO, is necessary before the application for approval under section 30 is made. It is normal to do this simultaneously. The constitution of the association is required for this approval as SARS will only approve if all the requirements, relevant to the constitution, as required by section 30 appear there.