I would like to get clarity on the PBO tax implication . I was as the seminar on the 12 March 2018 and the presenter stated that PBO are all subjected to tax. I am compiling AFS for public school and my query is, are public schools also entitled to pay tax
Important:
This answer is based on tax law for the tax year ending 28 February 2019.
Answer:
The statement that all public benefit organisations are subject to tax is not 100% correct. It would be correct of the public benefit organisation is not one that is approved by SARS under section 30 of the Income Tax Act.
With regard to schools, SARS explains it as follows in their guide (SARS’s Tax Exemption Guide for Public Benefit Organisations in South Africa):
“An independent school must be registered as such by the Head of the Education Department responsible for education in a province. A registered independent school can be established as an association of persons, or a trust or a non-profit company. The independent school will either have a constitution, trust deed or memorandum of incorporation as a founding document. Provided the activities and the founding document comply with the provisions of section 30, the TEU may approve an independent school as a PBO. It may also apply for approval under section 18A to issue tax deductible receipts.”
We therefore submit that the ‘private school’ will also have to register as a taxpayer and will have to apply for approval.
The form E1 (Application for exemption from income tax in terms of section 10(1) is used for the application and is submitted to the tax exempt unit. They will register the school for tax purposes. The tax exempt unit can be contacted at teu@sars.gov.za and you can contact them regarding the information that they require in support of the application.