NPO - PBO

NPO - PBO

• 20 June 2024
• Corporate Tax
• Marita Jordaan

These articles are based on tax law for the year ending 28 February 2025.

1. The Problem / Facts

What are the compliance requirements for a Non-Profit Organisation (NPO) and Public Benefit Organisation (PBO)?

2. Answer

The concepts of NPO and PBO are not interchangeable. An NPO is regulated by the Department of Social Development (DSD), which requires a Constitution for an NPO. Registered NPOs must comply with sections 16-23 of the Non-Profit Organisations Act, which primarily involve submitting reports and informing the Directorate of any changes within the NPO. Here are the main requirements:

The Documentation of the NPO (section 16 & 17 Obligations)

The registered status and registration number of the NPO must be reflected on all its documents and the NPO must comply with the provisions of its founding document.

The Finances of the NPO (section 17 Obligations)

Every registered NPO must maintain accounting records for income, expenditure, assets, and liabilities according to GAAP standards, prepare financial statements within six months after the financial year ends, including a statement of income and expenditure and a balance sheet. Furthermore, an NPO must arrange for an accounting officer’s written report within two months of preparing the financial statements. This report must confirm whether the financial statements align with the accounting records, the accounting policies are appropriate and applied correctly, and whether the NPO complies with the Act and its constitution regarding financial matters. All financial records must be preserved for at least five years.

Required Information to be submitted to the NPO Directorate

An NPO must submit to the Directorate a narrative report, a copy of the signed annual financial statements (AFS) and the accounting officer’s report within nine months after the financial year ends. The NPO must also submit the names and addresses of office-bearers within one month of their appointment or election. It is important to provide a physical address in South Africa for receiving documents from the Directorate and to notify the Directorate of any address changes one month before the new address takes effect.

Changes to Founding Document (Section 19)

Notify the Directorate of any changes to the NPO’s constitution or name, including a resolution copy and a certificate confirming compliance with its constitution and laws. If the name changes, the original registration certificate must be submitted.

South African Revenue Service (SARS)

NPOs are also regulated by SARS. Once your NPO is registered, the entity can apply for Public Benefit Organisation (PBO) status with SARS. Therefore, an NPO is only a PBO when it has been registered with SARS as such. Organisations and companies with PBO status get the privilege of tax exemption. 

Section 30 of the Income Tax Act, No 58 of 1962 prescribes the requirements for an organisation to be approved as a PBO, which include the carrying on of one or more public benefit activities. Public benefit activities are listed in Part I of the Ninth Schedule. Further requirements are that the PBO must be carried out with altruistic or philanthropic intent, may not promote the economic self-interest of any employee or person in a fiduciary position, and the activity must be for the benefit of, or widely accessible to the public at large.

If an NPO is not registered as a PBO with SARS, the entity must submit an ITR14 tax return annually as well as provisional tax returns (IRP6). If the NPO is registered as a PBO with SARS, the entity must submit an ITR14EI return annually and no provisional tax returns are required.  

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