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Hover Ho'
21-07-2014, 06:28 AM
We received very good news late last week! :dance: We have finally received our tax exemption certificate but need to clarify one or two points raised in the letter. We will give feedback on those issues in the coming week. Thank you all for your patience and we can at last breathe easier and commence with the reason we're here :headbang::occasion6::occasion2::occasion9:

Crash
21-07-2014, 06:42 AM
Nice!

Mark
21-07-2014, 07:18 AM
Congrats!

Scorpius
21-07-2014, 11:06 AM
Great news

AMZ
21-07-2014, 12:12 PM
:thumbright::salute:

WBro
21-07-2014, 02:00 PM
Great news!

FH
21-07-2014, 04:15 PM
:popcorn:thank goodness.......:roll2:....my jaw......it are FINISHED!!!!!!:dance:

Aquaman
22-07-2014, 12:57 PM
Congrats to the Board for pulling this one off!
Although I take note of what HH says in regards to getting back to the reason why we`re here, the building up of a war chest to support our activities remains in my view a critical object of TB. Without adequate funding, the activities of TB would remain tight. The exemption status must surely support our cash flows as it would allow most of the TB revenue streams (not necessarily all) to be exempt from income, estate and donations taxes.

In my view, the registration of TB as a Public benefit Organisation will also go quite some ways of lending credibility to our campaign in the eyes of the public.

theRéhann
24-07-2014, 11:45 AM
Congrats to the Board for pulling this one off!
Although I take note of what HH says in regards to getting back to the reason why we`re here, the building up of a war chest to support our activities remains in my view a critical object of TB. Without adequate funding, the activities of TB would remain tight. The exemption status must surely support our cash flows as it would allow most of the TB revenue streams (not necessarily all) to be exempt from income, estate and donations taxes.

In my view, the registration of TB as a Public benefit Organisation will also go quite some ways of lending credibility to our campaign in the eyes of the public.

I agree.

Your professional opinion on something, please. I cannot remember where I heard it, or who I heard it from, so please excuse the "They said"-style...

I heard that a PBO should not hold more funds than would typically be needed to pay overheads for a month or so. Because if you have more money than that, it means you're making profit and cannot be seen as a PBO or even an NPO.

It sounds like crap to me, but can you give clarity on this, please?

Aquaman
24-07-2014, 02:22 PM
I would cautiously say that it is a lot of hogwash....
However..here comes the but, hey..:tongue3:
Permit me to give a short overview before I answer the question..

There are different SARS "compliance" criteria applicable to a PBO which only has an "exempt" status as contemplated in section 10, and those applicable to a PBO which has received a section 10 exemption certification as well as a certification in terms of section 18A. The latter one, which is the ultimate certification TB could dream of having, not only allows the revenues of TB, [whether received as membership fees, donations, bequests or from limited trading which are not in competition with registered vendors] to be exempt from tax, but also allows donors, i.e. individuals and corporates, to actually deduct their donations from their income tax. Essentially, section 18A would grant any sponsor who makes an irrevocable and unconditional donation, with a tax break up to 10% of their taxable income. So if an individual who pays tax at 40% donates say R20,000 to TB and that amount is less than 10% of his/her taxable income before medical deductions, he/she would basically get R 8,000 of his/her tax bill reduced (40%x R20,000). The "donation" in cash flow would thus only "cost" that donor R 12,000, as he/she now scored R 8000 which would otherwise have been payable to tax.

Back to the question...

SARS generally requires that a PBO spends at least 75% of its exempt revenues in any given tax year to its objects. SARS may also have conditions attached to an exemption (these things are rarely given as a blanket exemption)...for example, typically the shop stuff such as sales of vests and beanies sold to the public may still be put to tax, whereas things only sold to members, perhaps like a "marshal" vest (if applicable), would not be a taxable sale.




SARS it quite stricter with this prescription where a section 18A entity is involved. Having said that, the entity can approach the TEU of SARS with a written request to waive this (75%) condition in any tax period, e.g. where the PBO wishes to accumulate funds for a particular project or projects.

So there is some truth in the hearsay statement that an NPO/PBO cannot just willy-nilly build up reserves....it can however as a general rule built up its capital reserves with the 25% portion..

I trust that I`ve not again thoroughly confused the issue....

Hover Ho'
25-07-2014, 06:03 AM
:dance: At last I understood what you said :CoB:

One question I need to put to you/our auditors, is because we've been waiting almost half the financial year for the decision, we haven't spent any real money and therefore have "reserves" which may or may not be spent by financial year end and thus would we get a "let" on that 75% for this year?

Just on another note, we're looking at a date for the one last outstanding matter to be finalised - the acceptance of last year's financials and then the acceptance of the MoI at the same time. Watch this space!

theRéhann
25-07-2014, 06:48 AM
I would cautiously say that it is a lot of hogwash....
However..here comes the but, hey..:tongue3:

...SARS generally requires that a PBO spends at least 75% of its exempt revenues in any given tax year to its objects. SARS may also have conditions attached to an exemption (these things are rarely given as a blanket exemption)...

...So there is some truth in the hearsay statement that an NPO/PBO cannot just willy-nilly build up reserves....it can however as a general rule built up its capital reserves with the 25% portion..

I trust that I`ve not again thoroughly confused the issue....

Maybe that was what I heard "them" say at the time, it does sound familiar.

Thanks :salute:

Aquaman
25-07-2014, 08:00 AM
:dance: At last I understood what you said :CoB: 73690

One question I need to put to you/our auditors, is because we've been waiting almost half the financial year for the decision, we haven't spent any real money and therefore have "reserves" which may or may not be spent by financial year end and thus would we get a "let" on that 75% for this year? I guess you would. I don`t think this is such a big issue. The exemption certificate should have a date. That is the effective date of the "exemption". I believe the Act allows the Commissioner to give a retroactive exemption in some cases. I don't know yet under which particular sections of the Act TB has received its exemptions. I understand it received a section 30 PBO status, which means SARS would then also have given an income tax exemption under section 10 (1) (cN), as well as exemption from donations tax, exemption from estate duty and possibly exemption from SDL`s too. The real question is whether TB also received an 18A status. If applicable, there are two distinct exemptions there, being 18A(1)(a) and/or (1)(b). (a) refers to Part II, 9th Schedule activities which the entity itself conducts. (b) refers an entity which predominantly makes donations to other exempt Part II entities from the donations it receives. TB essentially does not do (b), but (a). The 75% condition in the Act relates to (b), i.e onward donations must reach 75% of donations received. If I recall correctly, this condition is found in 18A(2A) (b) (i) of the Act and requires a different format of certificate that is issued to donors under 18A(2A)(a). Section 10(1)(cN) and 18A (1)(a) does not pertinently include this condition, if I remember correctly. (I can check if you want?) Thus my previous comment that the 75% rule is a general rule of thumb only, should be tested against the provisions of the Act and more so against the particular exemptions received.
The worst mistake a PBO can make is to assume what the Act says. Let`s see the actual conditions of exemption and if you wish, I could comment my views on it. I would as a general rule advise that TB develops an internal policy in regards to dealing with its incomes, taxable or exempt as the case may be.

Just on another note, we're looking at a date for the one last outstanding matter to be finalised - the acceptance of last year's financials and then the acceptance of the MoI at the same time. Watch this space!

Stranger
25-07-2014, 08:21 AM
Thanks for the information, makes sense to me.

Aquaman
25-07-2014, 08:43 AM
Okay, I just received a copy of the tax exemption certificate and will peruse it over the weekend.
Think Bike has indeed received both an exemption from taxes and...drumroll.......also a Section 18A(1)(a) status.
Essentially, this means that persons who give donations to TB can now qualify to deduct that amount from their taxable income.

The board has done exceptionally well with this application and I must commend you on your efforts!!

SmartTart
25-07-2014, 09:49 AM
The board has done exceptionally well with this application and I must commend you on your efforts!!

Thanks! It was a long slog that finally paid off. :salute: But a big thanks must go out to all of those ex and old TBers who helped get all the historical info together that we needed :thumbright:

Pyro
25-07-2014, 11:48 AM
Good work guys and gals.

Stranger
25-07-2014, 12:08 PM
Much respect, puts us in a position to offer sponsors a tax benefit and I am assuming the correct exemptions for Lotto bucks.

Ping any pro fund raisers out there.

AMZ
25-07-2014, 12:14 PM
Reminder: Financials needs to be signed off soonest and submitted to the Department of Social Development or WHAM, there goes our Department of Social Development NPO status.

Aquaman
25-07-2014, 12:18 PM
Much respect, puts us in a position to offer sponsors a tax benefit and I am assuming the correct exemptions for Lotto bucks.

Ping any pro fund raisers out there.





National Lottery Distribution Trust Fund








National Lotteries Board

South Africa



National Lottery


Home Applicants and beneficiaries How to apply for funding

How to apply for funding
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Watch the NLB website, the print media and major radio stations for adverts calling for applications for National Lottery Distribution Trust Fund (NLDTF) grants in the sector that is relevant to your organisation.

Calls for applications are also announced during the broadcasts of the Lotto draw.


•Distributing agencies for the various sectors make their calls at different times.
•Each agency tries to make one call a year, but extra calls can be made.
•You can only make an application when a call for applications has gone out.



Application documents


Obtain the necessary documents from the NLB. These are:
•The prescribed application form. This changes from time to time and so you must use the form that is current at the time of the call for applications.
•Guidelines applicable to the current round of applications.

You can download the documents from the website (they are only available when a call for applications has been published), or obtain them from the NLB offices in Pretoria, Polokwane and East London.



Project motivation, plan and budget


Use the guidelines to prepare the following documents that will accompany the application form and comprise the heart of your application:
•A project motivation that explains the importance of the initiative for which you are seeking funds.
•A detailed business plan for the project.
•A detailed and realistic budget for the project.



Supporting documents


The application must include the following supporting documents:
•Registration certificate as a non-profit organisation, Section 21 company, public benefit trust, or school registered with the Department of Education.
•The organisation's constitution, articles and memorandum of association, or deed of trust.
•Most recent annual financial statements, signed and dated by a registered accounting officer. ◦Organisations that have not previously received NLDTF funding are required to submit two years' annual financial statements signed by an independent accounting officer.
◦Organisations previously allocated NLDTF funding need only to submit financial statements for one year, but these must be audited.

•Signed auditor's report or, for first time applicants, a signed accounting officer's report.



Additional documents

Where an application is related to the development or renovation of a heritage site, you must submit approval from the relevant provincial or national authority.

Where an application includes the building or upgrading of infrastructure, you must provide proof of ownership of the land and/or building or proof of tenure.

Where an application involves the purchase of assets or equipment, quotations must be provided for these items.

Please read the guidelines carefully and ensure that all the required information is submitted.

In addition, you should try and get your application in as early as possible.


In addition, TB should perhaps investigate the process how to stand in line for Government Grants?

Vixen
26-07-2014, 11:28 AM
HI all
We will be calling an SGM to get the financials signed off by the members. We will give the mandatory 14 days notice.
A separate thread will be opened for this notification in the next few days.

Thank you to Andre, Safron and Rehann who started this process back in March 2012. It took their persistence to get it 95% done. Thank you also to everyone else who contributed their advice and assistance during this long involved process!

Aquaman
01-08-2014, 04:28 PM
Dear Board,

Here`s a few of my thoughts:
I`m not going to comment on the particulars of the letter TB received from SARS.

I would, however, like to make a few suggestions:

- I would strongly advise the board to open a separate banking account to transact for all section 18A donations only. Please do not get this wrong guys!! Any mix up between income/expenses related to Part 1 (not covered in section 18A) and domestic Part II activities (section18A) can result in SARS having a severe fit. This fit can even result in SARS cancelling the 18A certificate and putting the income to tax, with huge penalties under the TAA.
- A section 18A certificate invoice system with follow-on numbers which otherwise also complies STRICTLY with SARS requirements are to be developed.(similar to invoice book). Any cancelled numbers must be accounted for.
- Draft a section 18A procedure for all board members present and future for them to understand the when`s and how`s and under which conditions certificates are to be issued and especially when not authorised. A particular board member or member of TB who has an accounting/compliance background should preferably drive this/assist with this.
- NB!! Remember that section 18A gives a donor a tax deduction in the tax year the certificate is actually issued, i.e the date of the actual issuing of the certificate and not when he/she/it pays the money(donation) over to TB. This may sound quite easy. It is not. Let`s take an example: Co A donates R 20,000 to TB on 27th February 2015 and TB receives the money on same date. It only "issues" a tax certificate some 2 weeks later on say 12 March 2015 to Co A, i.e certificate is dated 12 March 2015. The FYE of donor and TB are both the last day of Febr. TB will receive the money exempt from tax in its 2/2015 tax period, by virtue of section 10(1)(CN), and NOT by virtue of section 18A. The donor, however, may only DEDUCT the R20,000 a year later in its 2/2016 tax period, because date of issue was not prior to end of tax year 28/2/2015, but rather 2 weeks later in a NEXT TAX YEAR. The date when the monies are paid over to TB has no bearing whatsoever on the legitimacy of the donor`s claim, only the date of the tax certificate has legitimacy. Donor A, when he finds out that his tax break is now deferred to a next tax year due to no fault of his own, may experience a seizure.
- Please note it is possible that donations received in a tax year may well differ from the stats reflected for section 18A certificates issued. Nothing legally wrong with this. The external auditors should be wide awake, as should the board be. Many auditors mistakenly issue the tax return compliance certificate based on donations received, and not on certificates issued. Then the proverbial "poef" may hit the fan.
- External auditors MUST issue a certificate of section 18A compliance every year and this must accompany the financial statements of TB. There are stricter time limits for the tax returns of section 18A taxpayers and TB must not get this wrong. SARS would NOT accept a substantial late rendition of tax returns as was the case with TB in the recent past.
-Remember that SARS will particularly be interested in the 1st year of the 18A status. This is usually the period where some things can go wrong due mainly to the ignorance of the taxpayer in regards to the complexities of the exemption.Please, I`m not inferring anything will go wrong, I`m just commenting from experience.
Enough for now. There are some other thoughts, but they are kind of hanger-ons of above.:wink2:

colyvon
01-08-2014, 06:09 PM
Thank you for the above info Aquaman, we will indeed take note.

Road Rage
03-08-2014, 07:37 AM
We received very good news late last week! :dance: We have finally received our tax exemption certificate but need to clarify one or two points raised in the letter. We will give feedback on those issues in the coming week. Thank you all for your patience and we can at last breathe easier and commence with the reason we're here :headbang::occasion6::occasion2::occasion9:

Oh Jolly Good but you should have just asked, I would have lent you my one :CoB:

SmartTart
04-08-2014, 08:28 AM
Dear Board,

Here`s a few of my thoughts:
I`m not going to comment on the particulars of the letter TB received from SARS.

I would, however, like to make a few suggestions:

I have some questions for my own clarity based on your valid input here:


- I would strongly advise the board to open a separate banking account to transact for all section 18A donations only. Please do not get this wrong guys!! Any mix up between income/expenses related to Part 1 (not covered in section 18A) and domestic Part II activities (section18A) can result in SARS having a severe fit. This fit can even result in SARS cancelling the 18A certificate and putting the income to tax, with huge penalties under the TAA.

TB receives money from 4 sources - membership, donations/sponsorships, sale of branded items (which SARS refer to as accessories) and marshalling service (all varieties).
Question 1 - donations & sponsorship: TB has always differentiated the 2 as follows - donations can be used as the campaign sees fit where as a cash sponsorship is earmarked by the donor for a specific task or item. If I understand you correctly, we need to run 2 accounts, one for membership, marshalling and sales and the second only for donations, where would cash sponsorships go? (the certificate says that a bona fida donation offers no quid pro quo so I assume this cannot go into the "donation account"?


- A section 18A certificate invoice system with follow-on numbers which otherwise also complies STRICTLY with SARS requirements are to be developed.(similar to invoice book). Any cancelled numbers must be accounted for.
Can this be a manually driven "print as required" template invoice, or must it handwritten in an invoice book?


- Draft a section 18A procedure for all board members present and future for them to understand the when`s and how`s and under which conditions certificates are to be issued and especially when not authorised. A particular board member or member of TB who has an accounting/compliance background should preferably drive this/assist with this.
Can you assist with this?


- NB!! Remember that section 18A gives a donor a tax deduction in the tax year the certificate is actually issued, i.e the date of the actual issuing of the certificate and not when he/she/it pays the money(donation) over to TB. This may sound quite easy. It is not. Let`s take an example: Co A donates R 20,000 to TB on 27th February 2015 and TB receives the money on same date. It only "issues" a tax certificate some 2 weeks later on say 12 March 2015 to Co A, i.e certificate is dated 12 March 2015. The FYE of donor and TB are both the last day of Febr. TB will receive the money exempt from tax in its 2/2015 tax period, by virtue of section 10(1)(CN), and NOT by virtue of section 18A. The donor, however, may only DEDUCT the R20,000 a year later in its 2/2016 tax period, because date of issue was not prior to end of tax year 28/2/2015, but rather 2 weeks later in a NEXT TAX YEAR. The date when the monies are paid over to TB has no bearing whatsoever on the legitimacy of the donor`s claim, only the date of the tax certificate has legitimacy. Donor A, when he finds out that his tax break is now deferred to a next tax year due to no fault of his own, may experience a seizure.
:thumbright:


- Please note it is possible that donations received in a tax year may well differ from the stats reflected for section 18A certificates issued. Nothing legally wrong with this. The external auditors should be wide awake, as should the board be. Many auditors mistakenly issue the tax return compliance certificate based on donations received, and not on certificates issued. Then the proverbial "poef" may hit the fan.
:thumbright:


- External auditors MUST issue a certificate of section 18A compliance every year and this must accompany the financial statements of TB. There are stricter time limits for the tax returns of section 18A taxpayers and TB must not get this wrong. SARS would NOT accept a substantial late rendition of tax returns as was the case with TB in the recent past.
:thumbright:


-Remember that SARS will particularly be interested in the 1st year of the 18A status. This is usually the period where some things can go wrong due mainly to the ignorance of the taxpayer in regards to the complexities of the exemption.Please, I`m not inferring anything will go wrong, I`m just commenting from experience.

Could you make time on a monthly or maybe bi monthly basis to check how this is running at TB?

Aquaman
06-08-2014, 02:48 PM
TB receives money from 4 sources - membership, donations/sponsorships, sale of branded items (which SARS refer to as accessories) and marshalling service (all varieties).
Question 1 - donations & sponsorship: TB has always differentiated the 2 as follows - donations can be used as the campaign sees fit where as a cash sponsorship is earmarked by the donor for a specific task or item. If I understand you correctly, we need to run 2 accounts, one for membership, marshalling and sales and the second only for donations, where would cash sponsorships go? (the certificate says that a bona fida donation offers no quid pro quo so I assume this cannot go into the "donation account"?
The important question to be answered here is what are the Schedule 9 Part II activities of TB that qualify for an 18A donation? I presume they are in 1(k), being “The protection of the safety of the general public”? Please confirm.

Bank Account: It is not a legal requirement to keep a separate bank account. It is however a practical solution and could assist the board to track the causal connection between section 18A incomes and expenditures, and it should assist the auditors with their yearend audit. Having said that, in real life when dealing with compliance issues things are always more complicated. Please note that the section 18A status granted to TB is limited to its own activities in RSA and does not extend to onwards – donations to other PBO/NPC`s. The 18A monies can be expended towards any of the activities of TB, not necessary to be earmarked for a specific project/s, as long as the activities are Schedule 9Part II activities.

Let`s start with the easier items and work our way up to the more complicated stuff.

Membership fees- Not revenue derived from donations. These would be exempt income. Expenses can thus not be deducted from this item. Members get no tax benefit.

Sale of branded items to members and the "public": I respectfully disagree with SARS that all revenues under this item are automatically taxable. The exemption clearly states that where such trading revenues are merely occasional to other exempt revenues received, that these would be exempt. What is occasional (exempt) trading income? The Act states it should not exceed the greater of 5% of all receipts or R 200,000 per tax year. On the other hand, deductions can be set off against a taxable income stream. Rather put all these items to book as taxable revenues, and at year end the board can revisit them to make a final decision with external auditors or approach the TEU for advice.

"Casual donations"- These would typically be donations received at events for stickers, "drop-the-gear" or the benevolent "here`s a few bucks" type of donations. They are exempt donations and could also be section 18A donations, depending on what TB does with the revenue (i.e expended to Part II activities or not). If TB mixes it into its other incomes, how does TB prove it was expended wholly to Schedule 9, Part II activities? Also, lots of admin involved for 20 bucks a shot? Rather let the proposed “protocol” show the way; e.g that only qualifying donations from say R500 will receive an 18A tax certificate. Issue a tax receipt (certificate) on the spot, or admin will kill this thing.

"Formal donations" - These would typically be "no questions asked” type donations that would qualify as 18A donations, e.g. a person donates R 1,000 towards specific project such as “TB Sani ride” to promote road safety, or display the banner days, etc, or as a “just do what you think best” type donation. The income is tax free for TB, even if only parts thereof get expended. Commercial sponsorship must not be involved, such as “safeguard club 100 help-my-trap guys for Rx” . (see sponsorships below) Issue 18A receipt and a tax benefit for donor.

“Sponsorships” – Typically, if there is some form of a quid pro quo involved, such as dual-branding of gazebo by donor or a condition of use, then this will not be an 18A donation. These are best seen as outright corporate sponsorships (essentially its advertising by a donor) to promote its own business interests and sponsor should rather deduct its donation cost i.t.o. section 11 (a). If however a donor unconditionally donates a TB branded gazebo “for life”, even with his name “donated/supported by .....” discreetly on it, this should qualify for 18A. TB to tread lightly here.

"Other conditional donations ": E.g raffle tickets, or competitions such as win-a-GS for R500 bucks entry, etc. Refer to SARS attachment to letter. These are not 18A donations. One can only guess how many exempt entities do this unlawfully under 18A.

Marshaling fees/Scrutineering fees: Is this done with or without "compensation" ? This issue requires additional scrutiny.

Aquaman
06-08-2014, 02:59 PM
Can this be a manually driven "print as required" template invoice, or must it handwritten in an invoice book?

Any manner of system would do, as long as the certificate complies strictly with SARS prescription. No need for a physical invoice "booklet", but the system must be able to generate follow on numbers, such is the case for VAT invoices. The letter from SARS will assist as to content of each certificate/receipt.

Aquaman
06-08-2014, 03:19 PM
Could you make time on a monthly or maybe bi monthly basis to check how this is running at TB?
I`d rather not again become actively involved, but thanks for asking.

THE MOOSE
06-08-2014, 03:45 PM
Thanks Aquaman.......

Wild Woody
06-08-2014, 03:50 PM
As before I have offered the services of a money market account through Investec

Crash
06-08-2014, 04:51 PM
As before I have offered the services of a money market account through Investec
Forgive my ignorance... How would a money market account help TB - who's supposed to be non-profit, and therefore not try to stockpile cash, but rather use whatever resources come in - on road safety initiatives... or keep them 'short term' for an earmarked project.