Income tax
Depending on the type of exemption you have been granted, partial taxation rules may apply. Tax exempt entities may have a liability after the submission of the income tax return. In such instances where the tax exempt entities have a liability arising from the submission of the tax return, the tax must be paid on or before the due dates reflected on the income tax assessment (second date reflected on the income tax assessment). If the tax exempt entity does not agree with the income tax assessment issued, they may lodge a dispute.
If the tax exempt entity does not have enough funds to pay the liability, they must contact our offices and request for an arrangement to pay the existing debt over a period of time. This application does not mean it will be granted as a number of things are considered.
Partial Trading Rules:
Partial taxation is applicable to certain Tax Exempt Institutions as per the relevant requirements. For more details on the Partial Taxation Rules, please clink on the following links:
VAT
Tax exempt entities that are registered for VAT must ensure that the VAT 201 return and payment (if there is a liability) is paid by the last day of the month. If the last day of the month falls over the weekend, payment and return must reach our office on or before the last working day before the weekend. The submission date of the last day of each month applies for e-filers.
If the exempt entities file their VAT 201 in the local SARS office, payment and submission must be made on or before the 25th of each month. If the 25th falls over the weekend, payment must be made on the last preceding day before the weekend.
Penalties and interest will be imposed where the return or payment is not made on the required dates.
PAYE
Tax exempt entities that are registered as employers with SARS must file the EMP201 on or before the seventh day of each month. The payment will include PAYE deducted, UIF and SDL where applicable. Payment must also reach our office by the seventh day. If the seventh day falls over the weekend, the return and payment must reach our office on the last working day preceding the weekend.
In addition, the tax exempt entity will be required to submit bi-annual reconciliations on the date set out by the Commissioner .
Donations Tax
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Donations tax is payable by the donor, but if the donor fails to pay the tax within the prescribed period, the donor and donee are jointly and severally liable for the tax. The exemption from donations tax is contained in section 56 of the Act. Donations made by or to the following institutions exempt from income tax are exempt from donations tax:
- The national, provincial, or local spheres of government exempt from income tax under section 10(1)(a) of the Act.
- Any institution, board or body exempt from income tax under section 10(1)(cA)(i) of the Act.
- Any company wholly owned by an institution, board or body exempt from income tax under section 10(1)(cA)(ii) of the Act.
- Any political party exempt from income tax under section 10(1)(cE) of the Act.
- Any Public Benefit Organisation (“PBO”) approved by SARS under section 30 and whose receipts and accruals are exempt from income tax under section 10(1)(cN) of the Act.
- Any recreational club approved by SARS under section 30A and whose receipts and accruals are exempt from income tax under section 10(1)(cO) of the Act.
- Any small business funding entity (SBFE) approved by SARS under section 30C and whose receipts and accruals are exempt from income tax under section 10(1)(cQ) of the Act.
- Any pension fund, pension preservation fund, provident preservation fund, retirement annuity fund, a beneficiary fund, or a benefit fund exempt from income tax under section 10(1)(d)(i) or (ii) of the Act.
- Any entity approved by SARS under section 30B and whose receipts and accruals are exempt from income tax under section 10(1)(d)(iii) or (iv) of the Act.
- Any body corporate or share block company whose levy income is exempt from income tax under sections 10(1)(e)(i)(aa) or (bb) of the Act.
- Any other association of persons approved by SARS and whose levy income is exempt from income tax under section 10(1)(e)(i)(cc) of the Act.
Capital Gains Tax (CGT)
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CGT is the portion of income tax payable by a taxpayer on a taxable capital gain arising from the disposal of assets determined under the Eighth Schedule of the Act.
CGT is not payable on the disposal of certain assets by certain exempt institutions. However, CGT is a very complex subject. For a full explanation on CGT the following guides may be consulted:
Helpful Resources:
Estates Duty
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state duty is levied under the Estate Duty Act 45 of 1955 (Estate Duty Act) at the rate of 20% on the first R30 million of the dutiable amount of the estate of a deceased person, and at the rate of 25% of the dutiable amount that exceeds R30 million.
Under section 4 of the Estate Duty Act, any property bequeathed is excluded from the value of the estate and not subject to estate duty if that property is bequeathed to the following institutions exempt from income tax:
- Any exempt institution approved by SARS under section 30 and whose receipts and accruals are exempt from income tax under section 10(1)(cN) of the Act.
- Any institution, board or body exempt from income tax under section 10(1)(cA)(i) of the Act, having as its sole or principal object the carrying on of any PBAs.
Transfer Duty
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The exemptions from transfer duty are contained in section 9 of the Transfer Duty Act.
Transfer duty is not payable for the acquisition of property by the following institutions exempt from income tax:
- The national, provincial, or local spheres of government exempt from income tax under section 10(1)(a) of the Act.
- Any “water services provider” as defined in section 1(1) and whose receipts and accruals are exempt from income tax under section 10(1)(t)(ix) of the Act.
- Any exempt institution approved by SARS under section 30 and whose receipts and accruals are exempt from the payment of income tax under section 10(1)(cN) of the Act, provided the whole or substantially the whole of the property acquired is used to carry on one or more PBAs.
- Any institution, board or body approved by SARS and whose receipts and accruals are exempt under section 10(1)(cA)(i) of the Act, provided the whole or substantially the whole of the property acquired is used to carry on one or more PBAs.
Dividends Tax
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The exemptions from dividends tax for cash dividends are contained in section 64F while the exemptions for dividends in specie are contained in section 64FA(1). The following institutions exemption from income who are beneficial owners of dividends are exempt from dividends tax:
- The national, provincial, or local spheres of government exempt from income tax under section 10(1)(a) of the Act.
- Any exempt institution approved by SARS under section 30 of the Act.
- Any institution, board or body approved by SARS under section 10(1)(cA) of the Act.
- Any person exempt from income tax under section 10(1)(t) of the Act.
- Any SBFE approved by SARS under section 30C and whose receipts and accruals are exempt from income under section 10(1)(cQ) of the Act.
- Any fidelity or indemnity fund approved by SARS under section 30B and whose receipts and accruals are exempt from income tax under section 10(1)(d)(iii) of the Act.
The dividend tax exemption applies only if the above institutions have submitted a declaration to the company that declared and paid the dividend or to the regulated intermediary that paid the dividend, that they are exempt from dividends tax. The institutions are also required to submit a written undertaking to the company or regulated intermediary that it will inform such company or regulated intermediary in writing should it cease to be the beneficial owner of the shares or if the circumstances affecting the exemption from income tax change.
Securities Transfers Tax (STT)
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The Securities Transfer Tax Act 25 of 2007 (STT Act) provides that a STT must be levied at a rate of 0,25% on the taxable amount of the transfer of every security issued by a close corporation or company incorporated in South Africa as well as foreign companies listed on an exchange.
The Securities Transfer Tax Administration Act 26 of 2007 contains the administration provisions governing the payment of STT. Any STT payment must be made electronically through SARS e-STT system.
The exemptions from STT are contained in section 8(1) of the STT Act. STT is not payable if the security is transferred to the following institutions exempt from income tax:
- Any exempt institution approved by SARS under section 30 and whose receipts and accruals are exempt from income tax under section 10(1)(cN) of the Act if that exempt institution would have been liable to pay the STT.
- Any institution, board or body approved by SARS under section 10(1)(cA)(i) of the Act, having as its sole or principal object the carrying on of any PBA, if that institution, board, or body would have been liable to pay the STT.
- The national, provincial, or local spheres of government exempt under section 10(1)(a) of the Act.
- Any “water services provider” as defined in section 1(1) and whose receipts and accruals are exempt from income tax under section 10(1)(t)(ix) of the Act.
The exemption is, however, subject to a declaration being submitted by any person to a participant who holds and administers that security. For more information on STT and the electronic submission of STT declarations and payments on the e-STT system via eFiling see Taxation in South Africa and External Reference Guide – Securities Transfer Tax.
