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Ruling to benefit non-profit organisations

Published Jan 9, 2006


By Sheetal Schneider

The South African Revenue Service (Sars) has amended its income tax ruling on public benefit organisations.

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Previously, any non-income generating organisation that opened additional businesses to sustain themselves financially would lose their tax exemption.

Organisations like the Red Cross, Salvation Army and churches are considered to be of public benefit and exempt from tax deductions because they are non-profit organisations.

In many instances, such organisations started a business as a means of financial support and their exemptions fell away because the business was seen as generating an income.

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The law was amended after careful consideration of a number of requests from various non-profit organisations which could not afford to lose their tax exemption, but needed their businesses as a source of finance to continue charity work.

The amendment will take effect on April 1. It separates the two entities and only allows the business to be taxed, while the organisation or charity organisation remains tax exempt.

Sars spokesperson Marco Granelli said: "A number of organisations have other business interests and any income derived affects the tax status of the entire tax exemption. The amendment will allow public benefit organisations to remain tax exempt while their business is taxed."

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He said the amendment would allow organisations to supplement their income.

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