Public Benefit Organisations (PBO’s) as described in Section 30 of the Income Tax Act No. 58 of 1962 (“the Act”), are organisations which by their very nature conduct activities with altruistic and philanthropic intent, in a non-profit manner.
Compliance with the Act ensures that PBO’s are able to be tax exempt, however they must apply for such exemption every year with the Tax Exemption Unit at SARS.
SARS has created a form in which PBO’s that conduct activities in respect of scholarships, bursaries and awards for study research must confirm compliance with the provisions of the form in order to keep their “exempt” status.
The form, titled, “EI 3”, provides a number of requirements that the directors of the PBO must undertake to comply with, a full list is set out below:
- All scholarships, bursaries or awards granted by the organisation will be bona fide and be granted to an individual on grounds of objective merit or need.
- No scholarship, bursary or award granted will be –
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- revocable, otherwise than for reasons of a material failure to conform to the designated purposes and conditions of the scholarship, bursary or award;
- subject to conditions which would enable the donor of the funds of the scholarship, bursary or award or any connected person in relation to the donor, to derive some direct benefit from the application of the scholarship, bursary or award; or
- granted to any person who is or will become an employee of the donor of the funds of the scholarship, bursary or award or the organisation (or any associated institution in relation to the donor or organisation) or any relative of the person, unless circumstances indicate that the scholarship, bursary or award would have been granted to the person or his or her relative, even if that person had not been an employee of the donor, organisation or associated institution.
- All decisions regarding the granting of scholarships, bursaries and awards will be made by a duly constituted committee consisting of at least three persons who are not connected persons in relation to the donors or the person to whom the scholarship, bursary or award is granted.
- All scholarships, bursaries and awards granted in respect of overseas study, research or teaching will be subject to an undertaking by the person to whom the scholarship, bursary or award is granted –
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- to apply the knowledge obtained from the study, research or teaching immediately after completion thereof, in the Republic for a period of at least the period that the study, research or training was funded by the organisation; or
- to refund the full amount of the scholarship, bursary or award should he or she decide not to apply the knowledge in the Republic.
This form merely sets out an undertaking by the PBO to comply with the above requirements, and it should be completed and returned to SARS and the Tax Exemption Unit in order to ensure that the affected PBO obtains a tax exempt status.
