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Which entities qualify as PBOs?

by , 07 March 2014
Do you know the type of entities that qualify as Public Benefit Organisations (PBOs)? If not, continue reading to find out so you can reap the tax benefits.

The following entities qualify as PBOs

The Practical Tax Loose Leaf Service says the following entities will qualify as PBOs if they satisfy all the income tax exemption requirements:

  • Section 21 companies (formed under Section 21 of the Companies Act);
  • Trusts established in South Africa;
  • An association of persons incorporated, formed or established in South Africa; and
  • A branch, in South Africa, of any company, association or trust incorporated, formed or established in terms of the laws of a foreign country that is exempt from tax on income in that other country.

SARS' website explains that nonprofit organisations play a significant role in society as they take a shared responsibility with Government for the social and development needs of the country. As a result, they get preferential treatment when it comes to tax (tax exemption)

'Preferential tax treatment is designed to assist non-profit organisations by augmenting their financial resources.'

Important: The preferential tax treatment for not for profit isn't automatic. Your entity has to qualify as PBO as we've explained and meet the requirements set out in the Income Tax Act (ITA).

What's more…'your organisation will only enjoy preferential tax treatment after it has applied for and been granted approval as a Public Benefit Organisation by the Tax Exemption Unit (TEU),' says SARS.

Well there you have it. Now that you know the type of entities that qualify as PBOs, make sure you look out for a follow up to this article. We'll give you all the requirements your organisation's constitution must meet so you can qualify as a tax-exempt PBO.

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