Inyathelo, The South African Institute for Advancement, is dedicated to helping build a strong, stable civil society and democracy in South Africa by contributing to the development of sustainable organisations and institutions. In advisory sessions over the years, many non-profit organisations (NPOs) have faced growing challenges in covering core costs and have approached Inyathelo for guidance and support. Coupled with the reality of an economic downturn and a change in donor funding focus...

In our experience in working with non-profit organisations, we have encountered some common myths in relation to tax. Unfortunately, the impact of these myths can be devastating for these organisations, so here we try to debunk them. Myth 1: “Non-profit entities are not taxpayers” Every legal entity must be registered as an income taxpayer with SARS (and have an income tax number) and submit an annual tax return, including non-profit organisations. Every legal entity, whether for-profit ...

 Ensure that the full, realistic costs of the project are included in the budget, including the staff and support (overhead) costs Projects are generally carried out within the context of an established organisation, with all its necessary infrastructure and systems. It is therefore right that the funding for each project also contributes proportionately towards these costs. When submitting the budget, be clear about the basis on which these costs are shared or allocated. Even...

It has surprised us how often staff, or governing body, members of non-profit organisations (“NPO’s”) have not been able to tell us which legal structure their organisation is established as – “we are an NPO” they insist! The Nonprofit Organisations Act defines, in section 1, an NPO as a trust, company or other association of persons established for a public purpose, the income and property of which are not distributable to its members or office bearers, except as reasonable compensation for...

Depending on their activities, public benefit organisations (“PBO’s”), as well as certain institutions and Government departments, can apply to SARS for approval in terms of Section 18A of the Income Tax Act. If this approval is granted, their donors can obtain a limited tax deduction (generally speaking of up to 10% of their taxable income in a tax year) in respect of the total donations made to such approved organisations. If an organisation has not formally received this approval from SAR...