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FAQ - 20 April 2016

20 April 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Can an NPO where activities occur outside South Africa register for tax exemption in South Africa?

Q: A NPO receives donations from South African and International donors. All public benefit activities are carried out in Mozambique. Can this NPO register for tax exemption in SA?

A: The definition of ‘public benefit activity’ (in section 30(1) of the Income Tax Act) only refers to the activities listed in the Ninth Schedule.  It refers to the source or place where the activities are carried out.  It is then in the definition of ‘public benefit organisation’ where reference is made to the fact that each ‘public benefit activity’ carried on by that organisation must be for the benefit of, or is widely accessible to, the general public at large, including any sector thereof (other than small and exclusive groups).  

The relevant phrase is ‘the general public at large’.  It is also not qualified or limited to the public in the Republic of South Africa.  

Section 30 had the requirement that "at least 85 per cent of such activities, measured as either the cost related to the activities or the time expended in respect thereof, are carried out for the benefit of persons in the Republic, unless the Minister, having regard to the circumstances of the case, directs otherwise…”  This requirement was deleted from section 30 of the Income Tax Act by Act 3 of 2008.  

The Explanatory Memorandum explained it as follows:

"Currently, in order for a PBO to qualify as such, it must conduct at least 85 per cent of its public benefit activities for the benefit of persons in the Republic.  Given the fact that many PBOs conduct a substantial amount of activities outside South Africa and the fact that foreign PBOs fall outside the South African tax net per se, it is proposed that this restriction be removed.”  

As they will finally have to approve the entity, it may be advisable to obtain a ruling from the Tax Exemption Unit.  

2. What are the PAYE implications for an employee who is also a director of a company? 

Q: How or what is the SARS treatment of PAYE for an employee who is a director of a private company and yet is also a full time employee? Does section 11C of Fourth Schedule apply in such cases? If yes, how is it applied? 

A: If the individual concerned is a director of a private company paragraph 11C of the Fourth Schedule to the Income Tax Act applies.  The paragraph (g) part of the definition of employee includes an individual not included under paragraph (a) (both references are to the definition of employee in paragraph 1 of the Fourth Schedule to the Income Tax Act).  In essence the company will have to withhold employees’ tax from the higher of the actual remuneration or the remuneration determined according to the paragraph 11C formula – see paragraph 9(5) of the Schedule.  It is only where paragraph 11C (6) applies (more than 75% by way of fixed monthly payments) that the formula will not apply.  

Disclaimer: Nothing in these queries and answers should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.  



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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