Exemption Institution and PBO. The levy a minimal fee for school fees to help recover costs. The rest is donations received. SARS tax the school fees. Is this correct?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
School fees are not automatically exempt from normal tax. It would be if the school is a public benefit organisation and is one that is approved by SARS under section 30 of the Income Tax Act. The fact that SARS taxed the fees indicates that the school is not approved.
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.