Summary TAXN7311 - LU 3 EXEMPTIONS

LU3 - EXEMPTIONS

 S10 and S10 A of ITA.
 Falls into 2 categories:
o Category 1: entities which are exempt from tax - These entities can be completely exempt
from the payment of any tax on their income (e.g. government) or they can be partially
exempt depending on the types of income that they earn.
o Category 2: Income which is exempt from tax. This income can be totally exempt (e.g. local
dividends) or partially exempt (e.g. interest earned by natural persons)

GOVERNMENT, PUBLIC BENEFIT ORGANISATIONS, FUNDS, PUBLIC INSTITUTIONS, CLUBS AND
SOCIETIES – S10 (1)(A) – (D)

 Exempt i.t.o s10:
o Receipts and accruals of the government in the local, provincial or national sphere – S10(1)
(a)
 Receipts and accruals of :
o The government of any other country
o Any foreign government agency appointed by that government to administer its
responsibilities and functions i.t.o a development assistance agreement.
o Any multinational organisation providing donor funding i.t.o an official development
assistance agreement – s10(1)(bA)
 The receipts and accruals of the:
o African Development Bank
o World Bank including the International Bank for Reconstruction and Development and
International Development Association.
o International Monetary fund
o African Import and Export bank
o European Investment Bank
o New Development Bank –s10(1)(bB)
 The pensions of:
o Any South African ex-president or ex-vice president or their surviving spouses paid by reason
of having occupied such post.
 The salary of :
o Foreign diplomats and their foreign domestic or private servants.
o Certain foreign subjects temporarily employed in the republic – s10(1)(c)(v)
 The receipts and accruals of any institution, board or body established by or under law and which as
its sole or principal object;
o Conducts scientific , technical or industrial research;
o Provides necessary or useful commodities, amenities or services to the state (including any
provincial administration) or members of the general public; or
o Carries on activities (including the rendering of financial assistance by way of loans or
otherwise) designed to promote commerce, industry or agriculture, or any branch thereof.

Not an automatic exemption and SARS must approve the tax-exempt status of the institution, board or body –
S10 (1) (cA).

The Commissioner may withdraw his approval of the tax-exempt status of an institution, board, body or
company with effect from the commencement of a year of assessment where he is satisfied that it complies
with the provisions thereof.

,  The receipts and accruals of any political party registered under the 1996 Electoral Commissions Act –
S10 (1) (cE).
 The receipts and accruals of non-residents acting as owners or characters of ships or aircraft in SA if
their home country provides reciprocal relief to SA residents – s10 (1) (cG).
 The receipts and accruals of any PBO approved by the commissioner of SARS i.t.o s30(3) are exempt
to the extent that:
o Receipts and accruals are not from business or trading activities; or
o Receipts or accruals are from certain integral, occasional, or approved business or trading
activities and that they do not exceed 5% of total receipts and accruals; or R200 000 (2011:
R150 000) per annum – S10(1)(cN).

Where only a portion of PBO’s trading income is exempt from tax, the remained thereof is subject to tax at a
rate of 28% (the standard company tax rate).

 The receipts and accruals of any recreational club approved by the Commissioner i.t.o S30A are
exempt if derived:
o In the form of membership or subscription fees paid by the members;
o In the form of payments by members i.r.o social or recreational services;
o From fund-raising activities which are of an occasional nature and undertaken substantially
with assistance of voluntary basis or;
o From any other source to the extent that they do not exceed the greater of:
 5% of total membership or subscription fees; or
 R120 000
o The taxable portion of the clubs income will be taxed at 28%
 The receipts and accruals of a Small Business Funding Entity are exempt from 1 March 2015:
o Amounts received or accrued otherwise than from any business undertaking or trading
activity;
o Receipts and accruals from certain integral activities directly related to the sole/ principal
object of the entity, which are substantially related to the recovery of cost and do not result
in unfair competition against taxable entities;
o Receipts and accruals carried out substantially by unpaid volunteers
o Receipts and accruals from certain activities approved by Minister of Finance;
o Receipts and accruals from other business undertakings or trading activities that do not
exceed the greater of:
 5% of total receipts and accruals of the entity for that year of assessment; or
 R200 000 – s (10) (1) (CQ).
 The receipts and accruals of S30B of the Act:
o Pension fund, provident fund, annuity fund
o Benefit fund, trade union, chamber of commerce or industries, local publicity association,
mutual loan association, fidelity or indemnity fund; and
o Any company, society or association of persons established to promote the common
interests of persons (who are its members) carrying on a particular kind of business,
profession or occupation – s10 (1) (d).

LEVIES – S10 (1)(E) (EXEMPTED)

Received by body corporates, share block companies and any other association of persons formed solely for
the purpose of managing the collective interest common to all of its members, including the collection of levies
and administration of the expenditure i.r.o the common property. In addition, any other income earned by
these entities are exempt up to R50 000.