Keeping a PBO's approval in good order
The yearly duties of an approved South African PBO: tax returns, founding document changes, address updates, records, SDL, VAT and 18A receipts.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
The approval letter from SARS arrives, the board celebrates, and the file goes into a drawer. Some years later a new treasurer discovers that no tax returns were filed, the constitution was amended twice without telling SARS, and the organisation moved premises without updating its address. The exemption the founders worked hard for is now at risk.
Approval as a public benefit organisation is not a one-off certificate. It carries duties every year, and a firm that looks after a PBO is often the only party that remembers them. This article lists the duties, explains the related payroll, VAT and donation-receipt questions, and suggests a way to track them so nothing depends on memory.
The four standing duties
SARS says an approved PBO must:
- submit annual income tax returns;
- send SARS all amendments to its founding document;
- report a change of address within 21 business days;
- keep records for five years from the date the return is submitted.
Each one is simple. The trouble is that they are triggered by different events: a calendar date, a board resolution, a move, and the filing itself. A firm that only sees the client at year-end will miss the middle two.
Annual returns
An exempt organisation still files. The return is how SARS sees that the organisation continues to operate within its approval. Agree with the board who prepares it, from which statements, and by when, and record the submission once it is made.
Amendments to the founding document
Boards amend constitutions for practical reasons: to change the number of trustees, rename the organisation or update meeting procedures. Each amendment has to go to SARS. Ask at every engagement whether the founding document has changed since the last one, and ask for the signed resolution if it has.
Change of address
Twenty-one business days is about a month. Organisations that move premises rarely think of SARS during the move. A standing request to the client, "tell us when your address changes", is cheaper than discovering it from returned post.
Five years of records
SARS's record-keeping page says a person who has submitted a return must keep records for five years from the date the return was submitted. For a PBO, that includes the donation records, grant agreements and minutes that show its funds were applied to its approved activities.
Payroll: the SDL question
Many PBOs employ staff. SARS says a public benefit organisation exempt from income tax under section 10(1)(cN) that only carries on certain educational, welfare, humanitarian, health care or religious activities, and holds an exemption letter from SARS's Tax Exemption Unit, is exempt from the skills development levy.
That exemption is narrow. It depends on the kind of activities and on holding the letter. If the organisation's payroll is not levying SDL, confirm the letter is on file; if it is levying SDL, consider whether it qualifies for the exemption and has simply never applied.
VAT: welfare organisation or ordinary vendor
SARS says an approved PBO may be classified as a welfare organisation under the VAT Act, which brings it into the VAT system without the normal registration requirements, while other PBOs may have to register if their taxable supplies meet the registration requirements.
So a PBO's VAT position is a decision, not a default. One that sells goods or services, such as a charity shop or a training centre charging fees, needs its position reviewed as its activities grow. VAT for PBOs registered as welfare organisations covers that option in more depth.
Donation receipts are a separate approval
SARS says only organisations granted section 18A approval by its Tax Exempt Institutions unit may issue tax-deductible donation receipts, and only for donations used for approved public benefit activities. PBO approval on its own does not allow the organisation to issue receipts donors can deduct.
Where the client does hold section 18A approval, it takes on reporting duties for those receipts as well; see IT3(d) returns for section 18A receipts.
Tracking it in Achekam
The duties above suit a structured checklist better than a diary note. In Achekam, each work item lists the procedures to perform and the documents required. A step is marked done only with a written response and its documents, or set aside with a reason, and steps are never deleted.
A yearly PBO compliance work item might carry these procedures:
| Procedure | Evidence that closes it |
|---|---|
| Income tax return submitted | Submission confirmation |
| Founding document unchanged, or amendment sent to SARS | Board confirmation, or the amendment and proof of sending |
| Address unchanged, or change reported | Confirmation, or proof of the update |
| SDL position confirmed | Exemption letter, or payroll set-up |
| VAT position reviewed | Note of the decision |
| Section 18A receipts and returns reviewed, if approved | Receipt register and submission confirmations |
Because steps cannot be deleted, a skipped step shows as set aside with a reason rather than disappearing, which is what a later reviewer needs. For the annual statements themselves, Achekam's statement templates include one for non-profits, with wording written for South African practice; the founding document requirements explain why those statements matter from the very first application.
SARS's starting point for exempt organisations
SARS's Tax Exempt Institutions page explains how nonprofits apply for exemption as PBOs, how section 18A receipts work and what ongoing compliance involves. Use it to brief each new treasurer, and set up the yearly work item the week the approval letter arrives.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
