TPCSA • Tax exemption and donor receipts
PBO and Section 18A Approval in South Africa
Understand the approvals, prepare a coherent application and keep the conditions visible after approval.
PBO and Section 18A approval are related tax matters, but they are not the same approval. A South African NPO should establish what SARS has actually approved before describing its tax position or issuing tax-deductible donation receipts.
This guide is for boards and finance teams preparing an application or reviewing an existing approval file. It focuses on the records and decisions needed for a useful assessment, rather than promising an approval outcome.
Separate NPO registration, PBO status and Section 18A
NPO registration with DSD does not itself establish SARS tax exemption. SARS PBO approval involves the requirements of section 30 and the tax treatment in section 10(1)(cN). Section 18A approval concerns eligibility to issue receipts for qualifying tax-deductible donations, within its approved scope.
The SARS PBO overview explains these distinctions. Keep copies of each registration and approval together, labelled by purpose, rather than using “registered NPO” as a substitute for a tax approval.
Do all activities qualify in the same way?
Do not assume they do. Describe what the organisation actually does, who benefits and how its resources are used. Compare those activities with the approval sought and the conditions in any existing approval. Changes in activities should prompt a review of the position.
Prepare a coherent application file
SARS’s income tax exemption application guidance sets out the current process, including income tax registration, representative details, eFiling and supporting documents. Use that source for the current checklist rather than relying on an old form kept in a shared folder.
Assemble the founding document, relevant registration evidence, bank confirmation, responsible persons’ information and financial statements where required. Check that the documents describe the same entity and that signed versions are legible and complete.
Explain the organisation’s activities clearly
Prepare a concise factual description of programmes, beneficiaries, funding and delivery arrangements. Avoid copying a broad list of public benefit activities that the organisation does not actually undertake. The description should be consistent with the founding document and available operational evidence.
Resolve inconsistencies before submission
A different entity name across documents, an unsigned constitution or an unclear representative mandate can create avoidable queries. Keep an issues list with the document owner and the action needed. Where a founding-document amendment is necessary, follow the organisation’s proper approval process and preserve the adopted version.
If the constitution, MOI or trust deed needs attention, use our governing-document review guide for PBO and Section 18A preparation to organise the current version, amendments and proposed changes.
Keep an application record
Retain the submitted pack, submission acknowledgement, SARS queries, responses and final decision. Record the dates and person responsible for follow-up. This makes later reviews easier when office bearers or staff change.
Read the approval letter before changing receipts or communications
Identify the approved scope, effective dates and conditions. Update internal procedures and donor-facing wording to reflect the actual decision. Do not assume that an application in progress gives the organisation the same position as an approved application.
Have the finance and fundraising teams work from one agreed reference file. A website statement, receipt template and proposal document should not give different descriptions of the organisation’s approval.
Separate genuine donations from other transactions
Before using a Section 18A receipt, establish whether the transaction qualifies and falls within the approved scope. Keep receipt decisions connected to the underlying donor and transaction records. Uncertainty about a payment should be resolved before issuing a receipt, rather than corrected only when preparing data submissions.
Maintain the approval with a recurring review
Approval is the beginning of an ongoing process. Keep changes in governing documents, activities, office bearers and contact details visible to the person responsible for tax compliance. Track required returns and follow up missing submissions.
For organisations with Section 18A approval, connect receipt controls with the SARS Section 18A and IT3(d) reporting requirements. Check current receipt and data specifications for the relevant period instead of assuming last year’s template is still sufficient.
Use TPCSA’s existing PBO compliance review guide for related ongoing checks. Reliable financial controls and clear record ownership help the organisation maintain a usable approval and reporting file.
Specialist tax experience
Ridhwaan Khan CA(SA), TPCSA’s Director of Tax, has experience advising tax-exempt organisations and working on educational frameworks for Section 18A receipts and IT3(d) reporting. Bring the organisation’s documents and current approval position to the team for an informed scope discussion.