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Thread: Tax exemption certificate received - at last!

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    Sarel van der Merwe Hover Ho''s Avatar
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    Default Tax exemption certificate received - at last!

    We received very good news late last week! 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
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    Nice!
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    Congrats!

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    Great news
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    Great news!

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    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.
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    Quote Originally Posted by Aquaman View Post
    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?
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    I would cautiously say that it is a lot of hogwash....
    However..here comes the but, hey..
    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....
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    At last I understood what you said

    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!
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    Quote Originally Posted by Aquaman View Post
    I would cautiously say that it is a lot of hogwash....
    However..here comes the but, hey..

    ...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
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    Quote Originally Posted by Hover Ho' View Post
    At last I understood what you said Name:  jimages.jpg
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    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!
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    Thanks for the information, makes sense to me.
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    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!!
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    Quote Originally Posted by Aquaman View Post

    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. 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
    I never try anything, I just do it >;

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    Good work guys and gals.
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    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.
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    Nuon Fangirl

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    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.

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    Quote Originally Posted by Stranger View Post
    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?
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