Registering as a Public Benefit Organisation (PBO): why, with whom and how?
An NGO may apply to SARS for tax exemption as a Public Benefit Organisation (PBO), if it meets the requirements of the Income Tax Act of 1962.
As is the case with NPO registration, PBO registration is also voluntary (an organisation does not need to be an NPO in order to be approved as a PBO).
The main reason why organisations might want to consider registering as a PBO, is that PBOs are entitled to the following further tax benefits:
- Certain receipts (mainly derived from Donors) are exempt from income tax.
- Donors prefer organisations to be registered as PBOs.
To qualify for registration as a PBO, organisations must have as their primary objective, one or more of the following Public Benefit Activities listed in Part 1 of the Ninth Schedule to the Income Tax Act:
- welfare and humanitarian
- health care
- land and housing
- education and development
- religion, belief or philosophy
- conservation, environment and animal welfare
- research and consumer rights
- providing of funds, assets or other resources
To register as a PBO, organisations need to submit the following documents to the Tax Exemption Unit of SARS.
- A certified copy of the organisation’s founding document
- A completed application form to register a PBO (Form EI 1)
- A written undertaking to be signed by three trustees confirming that they take fiduciary responsibility for the PBO (Form EI 2)
- A written undertaking to be signed by three trustees if the organisation provides bursaries or award for study.
- An NGO must register with SARS even if you are not going to register as a PBO. If you do not obtain PBO status from SARS, your organisation will be liable for Income Tax (if any income is received).
- When applying to become a PBO, we suggest also applying for S18A status which will allow your organisation to issue S18A certificates. This will allow Donors (which are taxable entitities) to deduct their donations made to your organisation (subject to certain limitations).
- The application can take two months before approval is granted, so it is best to start the process as soon as possible.