FAQ - 20 April 2016
20 April 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
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).
relevant phrase is ‘the general public at large’. It is also not
qualified or limited to the public in the Republic of South Africa.
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.
Explanatory Memorandum explained it as follows:
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.”
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?
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.