Interpretation Note 125 – Associations: Funding Requirement
SARS issued an Interpretation Note to provide guidance on the interpretation and application of the “funding requirement” contemplated in section 30B(2)(b)(ix) of the Income Tax Act 58 of 1962 (“IT Act”), requiring that substantially the whole of an entity’s funding must be derived from it’s annual or other long-term members or from an appropriation by the government
This Note considers only the “funding” requirement and does not consider any of the other requirements required for approval under section 30B(2) of the IT Act for purposes of the exemption from income tax under section 10(1)(d)(iii) or (iv) of that act.
The entities referred to in section 30B of the IT Act fall outside the scope and income tax rules for public benefit organisations (PBOs) and recreational clubs.
The definition of “entity” in section 30B(1) provides for two distinct categories of entities, comprising
- Mutual loan associations, fidelity or indemnity funds, trade unions, chambers of commerce or industry and local publicity associations; and
- Professional bodies.
The above 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.
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.
The Interpretation Note can be accessed here.
07/12/2022
Contacts