The first way that an organisation may not comply with the SARS requirements and could lose their Section 18A status relates to the clauses in their constitution. Eleven specific clauses are required in your constitution and experience with SARS has shown that it is best if these clauses appear in the organisations’ constitution verbatim.
Once an organisation’s constitution has been amended and approved at the organisation’s Annual General Meeting or Special General Meeting, whichever your organisation’s constitution permits, the amended and approved document needs to be submitted to SARS for approval, within 12 months of the amendment. This can be e-mailed to SARS at email@example.com
The Act is now very specific as to what MUST appear on a Section 18A Tax-Deductible receipt and the items are:
SARS in addition require additional reporting on Section 18A receipts, previously an organisation was required to submit an annual Income Tax Return (IT12EI) by the due date.
The IT12EI must be requested, it is not sent out automatically by SARS. The easiest way to do this is by registering online at www.sarsefiling.co.za to access, request and submit the IT12EI electronically, or:
There are however now some additional SARS requirements to retain your Section 18A status and they are that organisations are required to submit what is referred to as a statement and supporting documentation. There is some debate as to the need to have these documents prepared by your auditor or independent accounting officer. What we do know however, is that they must contain:
SARS provides strict guidelines as to what tax-deductible receipts may be issued for and the terms they use are that they can only be issued for bona fide donations, as listed in Annexure A. Annexure A provides details on What is considered a bona fide donation for S18A purposes? And I quote:
Annexure A goes further to include what does NOT constitute a bona fide donation and the following do not qualify for Section 18A receipts:
Annual Section 18A Exemption Approval
SARS goes on to advise organisations that the exemption approval is subject to annual review by the Tax Exemption Unit upon receipt of an annual income tax return and S18A supporting documentation. Furthermore SARS must be informed in writing within 21 days of any change in registered particulars (e.g. Representative, change of name, address, trustee details, office bearers, etc.). 18A funds may only be provided to organisations approved for exemption and Section 18A.
In essence this means that an organisation’s Section 18A status will be reviewed annually and failure to comply with the SARS requirements could cause an organisation to lose that coveted status. I am reliably informed that once SARS has revoked an organisation’s Section 18A Tax status it cannot be reinstated but rather has to be reapplied for from scratch. It is undeniable than an organisation which loses their Section 18A tax compliance will lose donors.
Organisations are advised that these reporting requirements do not replace the reporting requirement of the NPO Directorate, which organisations need to comply with to retain their NPO Status.
With acknowledgement to Gordon McDonald, Executive Director, Ubuntu Community Chest.