I have a client who has a creche/daycare from home. She now heard from a teacher that creche's and schools are exempt from tax. Am I right in saying that this can only be true if she is registered as a PBO by SARS and then it will be exempt from tax? C
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We agree that the exemption is only available to a public benefit organisation that is approved by SARS under section 30 of the Income Tax Act. From the facts provided, the activities are carried on in the individual’s own name – approval by SARS would then not be possible.
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.