SARS-General3

New Interpretation Note 125 titled Associations: Funding Requirement

14 November 2022

The entities referred to in section 30B(1) fall outside the scope and income tax rules for public benefit organisations (PBOs) and recreational clubs. Entities under section 30B(1) are:

  • mutual loan associations, fidelity or indemnity funds, trade unions, chambers of commerce or industry and local publicity associations; and
  • professional bodies.

The respective entities are diverse in nature but have in common that they usually do not have a profit motive nor do they provide any monetary gain or material advantage for their individual members. The entities are membership based and exist for the benefit of their members. Although these entities are established to conduct their activities with and for the benefit of their members, they are not prohibited from dealing with non-members within prescribed parameters.

These entities are subject to requirements of section 30B(2) to be exempted from income tax as per section 10(1)(d)(iii) or (iv). The approval under section 30B(2) is limited to those entities that can demonstrate that substantially the whole of their funding is derived from their annual or other long-term members or from an appropriation by the government.

Interpretation Note 125 provides guidance on the interpretation and application of the “funding” requirement with examples and case studies for entities applying for tax exempt status under section 10(1)(d)(iii) or (iv).

You can read Interpretation Note 125 here.

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