Exempt Institutions and Submission of Annual Returns (IT12EI)

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Exempt Institutions and Submission of Annual Returns (IT12EI)

• 14 September 2023
• Tax Administration
• SARS

All Exempt institutions MUST annually submit an IT12EI – Return of Income Tax Exempt Organisations – External Form income tax return.

The income tax return enables the Commissioner to determine:

• The tax liability of a partially exempt Tax Exempt Institution (EI); and
• Whether the approved EI is operating within the prescribed legal parameters of the relevant approval granted.

The following fields are required when completing the IT12EI:

• Particulars of organisation
• General Financial Information (even if there is no income tax liability)
• Information in Respect of Trading Activities (if applicable)
• Taxable Income / Loss (if applicable)
• Tax Deductible Receipts Issued in Respect of Donations (Section 18A) (for approved Section 18A tax exempt institutions)
• Additional Information.

If your approved Tax Exempt Institution was dormant for the year of assessment, please indicate “Y” under the “Additional Information” section of the IT12EI. Tax Exempt Institutions are also required to indicate if the dormant organisation has any assets or reserves.

The return for companies or other entities must be completed and submitted within 12 months of the financial year end of the exempt institution. Returns for trusts must be completed and submitted annually by the due dates announced by the Commissioner as set out in the annual notice issued.

NOTE: SARS reserves the rights to audit all IT12EI returns submitted by approved Tax Exempt Institutions, whether active or dormant.

NOTE: Returns must be submitted regardless of the exempt status, and even if there is no tax liability. NO NIL returns may be submitted unless it is supported by the necessary documents to show that there has been no economic activity, such as your bank statements.

Helpful Hints:

1. Organisations that have applied for income tax exemption but have not received an outcome should file a normal tax return dependent on their legal entity type, e.g., ITR14 (NPC and Voluntary Association) or IT12TR (Trusts).
2. Approved tax-exempt organisations are not considered provisional taxpayers but are required to submit tax returns as prescribed by the Commissioner of SARS.
3. If returns are not submitted on time, the exempt institution will be liable for administrative penalties, and will be required to pay administrative penalties incurred.

The TEI Segment will be providing more information on the submission of returns in the coming months.

Source: SARS

 

FAQs

1. Are tax-exempt institutions required to file annual tax returns? 

Yes. All approved Tax Exempt Institutions (TEIs), including PBOs and NGOs, must strictly submit an annual IT12EI return to SARS, regardless of their tax liability.

2. What is an IT12EI return? 

The IT12EI is the "Return of Income Tax Exempt Organisations". It is used by SARS to determine if a partial tax liability exists and to check if the entity is operating within the legal parameters of its exemption approval.

3. When is the deadline for submitting the IT12EI return? 

For companies or other entities, the return must be submitted within 12 months of the financial year-end. For trusts, it must be submitted annually by the dates announced in the Commissioner’s annual public notice.

4. Must a dormant exempt institution file a tax return? 

Yes. Even if the institution was dormant, an IT12EI must be filed. You must indicate "Y" under the "Additional Information" section for dormancy and declare if there are any assets or reserves.

5. Can I submit a NIL return for my exempt institution? 

SARS states that NO NIL returns may be submitted unless they are supported by necessary documents (like bank statements) proving there was absolutely no economic activity.

6. What happens if an exempt institution fails to submit returns? 

Failure to submit returns on time will result in administrative penalties. The institution will be liable to pay these penalties, and non-compliance can jeopardize their tax-exempt status.

7. What specific information is required on the IT12EI? 

You must provide particulars of the organisation, general financial information, details of any trading activities, taxable income/loss calculations, and Section 18A donation certificate details (if applicable).

8. How do I declare Section 18A tax-deductible receipts? 

If your organisation is approved for Section 18A, you must complete the specific field "Tax Deductible Receipts Issued in Respect of Donations" on the IT12EI return.

9. Do exempt institutions pay provisional tax? 

Generally, approved tax-exempt organisations are not considered provisional taxpayers. However, they must still submit their annual IT12EI returns as prescribed.

10. What should I do if my exemption application is still pending? 

If you have applied for exemption but haven't received an outcome, you should file a normal tax return based on your entity type (e.g., ITR14 for an NPC or IT12TR for a Trust) until the exemption is confirmed.

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