Recreational club exemption
07 July 2011
Posted by: SAIT Technical
Section 10(1)(cO) of the Income Tax Act provides an exemption from income tax for the receipts and accruals of recreational clubs approved by the Commissioner under s 30A of that Act. The exemption applies to the extent that the receipts and accruals of a recreational club are derived from the following sources:
- In the form of membership fees or subscriptions paid by its members.
- From any business undertaking or trading activity that is integral and directly related to the provision of social and recreational amenities or facilities for the members of the club, is carried out on a basis substantially the whole of which is directed towards the recovery of cost; and does not result in unfair competition in relation to taxable entities. (What a pity that this qualification does not apply to the exemption for business and trading activities of professional bodies such as the South African Institute of Chartered Accountants and similar bodies, which compete freely with tax-paying entities.)
- From any fundraising activities of the club, which are of an occasional nature and undertaken substantially with assistance on a voluntary basis without compensation.
- From any other source that do not in total exceed the greater of 5% of the total membership fees and subscriptions due and payable by its members during the relevant year of assessment and R100 000.
An amendment proposed in the draft Taxation Laws Amendment Bill, 2011 increases the amount that may be derived tax free from ‘other sources’ from R100 000 to R120 000. This amendment, once passed, will be deemed to have come into operation on 1 March 2011 and will apply to amounts received or accrued on or after that date.