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PBO
Tax
Workshop
Hoosen Agjee26th January 2010
www.TaxBenefits4ngos.co.za
Business solutions for commerce & NGOs
South African individuals GIFT
R 930 million
a month to Charity
Prof. Adam Habib CCS (Sept 2006)
R 12 billion a year !!
Breaking free to financial freedom
NPO
A turning point in your organisation
Private /Family/Group Endowment
Few undertake actual activities.
Religious & societal needs.
Mainly Education & Bursaries.
Provide funds to other NPOs.
Family Charity Trust
Trust NGO
PRIVATE FOUNDATION > 1994
• Corporate Social Responsibility arm.
• BEE points.• Link to marketing strategy.• Wider community sees Group
contribution.• Control over funds.• Partner with a public NPO.
Public NPO
Section 21 Company (Memo & Articles)
Trust (Trust Deed)
Voluntary Association (Constitution)
Separate Ownership
Legal Entity
Section 21 Co.
• Juristic
• Memo & Articles
• Final say – Companies Act
• Minutes. Meetings
• Audit compulsory
Trust• Trustees
• Trust Deed
• Final say - Master
• Minutes , Meetings
• No Audit
Association of Persons
• Non juristic – Office bearers
• Constitution
• Final say - Common law
• Minutes , Meetings
• No Audit
The Choice
Tax Benefits are the SAME for all
Becomes a Formal Body
• S21 Company – CIPRO issues certificate.
• Trust – Master issues Letters of Authority
• Constitution – Once signed by all parties
Can open bank acc &
Start operating
C
Questions ?
Empowering you !
Voluntary registration into NPO Sector
NPO Number 354-123 NPO
• Co-operation between Donors & PBO’s
• Regulated by the NPO Act
• Transparency
• Access to info on PBO’s.
NPO
Why an NPO ???
Broaden Donor Base !
U Save Money !
NPO
Benefits of an NPO Number
No Tax Benefits
Access to Govt & corporate funding
NPO becomes a body corporate
Discounts – Civic Venues hired,
adverts etc.
NPO
1970
2010
Organisations
Donor
NPO
2. Narrative Report
NPO No. & Obligations
3. Submit Financial Statements – 6 months after year end
NPO
1. Receipt all monies
Questions ?
Empowering you !
&NPO’S
Voluntary registration for Tax Exemption
“ Only if the NPO is officially tax exempt can it enjoy the benefits that SARS offers “
Formal Tax-Exempt Status
TAX BENEFITS
Gateway
Trust Deed, Constitution or Memorandum
• 3 Unconnected persons as Trustees.
• Funds used for PBA.
• Transfer assets on dissolution.
• No excessive remuneration.
NO tax-exemption without these clauses
NPO
Public Benefit Activities
Welfare and Humanitarian;
Religion; Cultural; Health care;
Education & Development; Land & Housing; Research;Provision of
FundsConservation & Animal Rights
NPO
Fields of Activity
Separate Activities qualify for :
18A Donor tax certificates
Rates Exemption
Claiming input VAT
Branch of a Foreign Charity can be a PBO
• Foreign charity must be tax exempt in its foreign country
• Special rules on dissolution
Enjoys same benefits as local PBO
Public Benefit
Organisation
(PBO)
Ordinary organisation BECOMES
NPO
Questions ?
Empowering you !
Income Tax
NOT TAXABLE • Fundraising – dinners, golf day, fairs
• Donations & Grants
• Membership Fees, School Fees
• Occasional income from items made & sold
• Integral & directly related (Rehab)
• Cost Recovery & Volunteers (tuck shop)
Tax Exemption = Money in your Pocket
BUSINESS INCOME
• Rent, Hire of Facilities
• Interest on loans in private companies
• Any activity that competes with normal businesses.
TAXED @ 28%
Tax-free portion of PBOs
Business IncomeGreater of R 150 000 ; or 5 % of PBO’s Gross
Income
28 % Income Tax
PBO
R500 000
Rental Income
Rental income R 500 000
R 500 000
R 98 000R 402 000
R 98 000
Rental Income R 402 000
Charity Trust Taxed on
Business IncomeRental / Business income R 500 000Exempt portion 150 000
----------------Rent taxable 350 00028 % Income Tax R 98 000
PBO Relying on Rental Income
Rental income R 500 000Exempt portion 150 000Amount taxable 350 00028 % Income Tax (on R 350k) 98 000AVAILABLE TO USE R 402 000
PBO Relying on Rental Income
has 20% - 25 % LESS rental to use on activities
NON TAX-EXEMPT NGO
PAY 40 % income tax on ALL your
trading income!
Non-PBO 40% Tax
NGO
Rental Income
R 500 000
R 200 000R 300 000
R 200 000
Rental Income R 300 000
Non-PBO Relying on Rent Income
Non-PBO has 40 % LESS rental
to use on activities
Income Generation & Reduction of Tax
• Link to objects
• Use a separate entity
• Network with other PBOs
Questions ?
Empowering you !
Tax-Deductible Donations
2 Types of 18A Bodies
Give funds to others to
undertake work
Undertake activities yourself
PBOs that can issue Certificates
Welfare & Humanitarian
Health Care ; Land and Housing
Education & Development
18 A Qualifying Activities :
18A money can only be used for these activities
Activities that DON’T qualify
• Religious & Cultural
• Madressah Salaries
• Dawah expenses
CANNOT USE 18A Money for these activities
Types of Donations
In KINDCASH / CHEQUE
Get a proper Receipt /Certificate
• Name and address of the PBO.• SARS PBO Number• Date of receipt of donation• Your name and address• Amount of cash donation or nature & value of donation made in
kind
•
Donation will only be used for 18A activities.
Individual Company Taxable Income 250 000 250 000Donation to PBO 25 000 25 000Income Tax Saved 4 750 8 750
S 18A BENEFITS
Ltd. to 10% of Taxable Income
DONORS SAVE TAX
S 18A Benefits to Community
Individual
Taxable Income R 50 000Donation to 18A Body 5
000Income Tax Saved by individual 900
DONORS SAVE TAX
100 000 people = R 90 million a year!
18A Tax NOT claimed is LOST !!
Are our Donors missing out on R 100’s m govt help every year ?
Donor
Questions ?
Empowering you !
Other Tax Savings
to DonorsEstate Duty
Donations Tax
Capital Gains Tax
Income Tax and Family Trusts
Money In YOUR pocket
Giving Charity Using a Family Trust
TRUST INCOME
1,000,000
Donation is Tax-deductible in a Trust
Income 1 000,000
To PBO 150,000
Tax Save
60,000
R 150 000 is taxed as business income in
PBO !
Donation to Non-Exempt Body
Donor NOT EXEMPT Org.
takes 20 %R 600 000 - R 100 000
R 500 000=
Donor
Donation to Tax-Exempt Body
Donor
NO Donations TaxR 600 000- R nil R 600 000=
PBO
Estate can claim the Bequest to a PBO
(irrespective of the amount)
& save the family 20% Estate Duty.
Heirs receive more
Estate Duty - 20 %
Donor DOES NOT pay CGT on
gains given to PBO
Donor Saves Tax
Capital Gains Tax
Benefits to your
Organisation
NGO saves 8 % DUTY on the
property acquired for use by PBO
NGO Saves Tax
TRANSFER DUTY- 8 %
CAPITAL GAINS TAX
PBO does not pay CGT on gains received or made
PBO pays CGT on investment property sold after 1 April 2006
(y/e 31 March 2007)
Rates
Differential rates
Welfare & humanitarian
Education & development
Health care
Questions ?
Empowering you !
VAT
REDUCE PBO’s EXPENSES
by 14 % VAT
CLAIM INPUT VAT
Input VAT on other types of expenses CAN’T be claimed
Health Care
Welfare and Humanitarian
Education
OUTPUT VAT
Membership School Fees
NO Output VAT
Fundraising
Donations & Grants
gives back VAT to PBOs
Are we missing out on millions
on VAT refunds yearly?
Amateur Sporting Bodies & Recreational Clubs
• By 31 March 2009 should apply to become a PBO
• Their business income > R 50 000 will be taxed from March 2010.
Questions ?
Empowering you !
Conclusion
NPO NUMBER
Broader Donor BaseIncrease your
Funding
=
TAX-EXEMPT STATUS
CASH SAVEDUndertake more activities
www.TaxBenefits4ngos.co.za
DONORS use tax incentives to give to YOUR ORGANISATION
Road to financial freedom has OPENED
NPO
A turning point in your organisation
• Meets your organisation’s requirements
• Easily gets you an NPO number
• Saves your NGO thousands in taxes & duties
At TPC we share our 27 years experience
to give you a Founding Document that
Visit our website:
www.TaxBenefits4ngos.co.za
Trust Deeds/ Constitutions & Section 21 Co’s. for NGOs
Family Trusts for individuals
Estate planning and Wills
Accounting Services
Administration of Estates
Business solutions for Commerce & NGOs
Produced by:
Cave Man inc(031)
2073323
