Tax Obligations for Non-Profit Companies (NPC) in South Africa

An NPC's tax obligations depend entirely on whether it has been granted Public Benefit Organisation (PBO) status by SARS. An NPC with approved PBO status is exempt from income tax on receipts and accruals from approved public benefit activities. However, an NPC without PBO status is taxed exactly like a PTY Ltd — at 27% corporate income tax on taxable income.

Even NPCs with PBO status are not entirely tax-free. If the NPC conducts trading activities that are not directly related to its approved public benefit purpose, the trading income may be taxable. SARS provides a "basic exemption" of the greater of 5% of total receipts or R200,000 — trading income within this threshold is exempt even if not related to the PBO's purpose.

VAT applies to NPCs in the same way as to other entities: mandatory registration if turnover exceeds R1 million. However, NPCs may face complications with VAT input claims on donated goods or services, and certain NPC activities may be exempt from VAT (such as educational services). Section 18A approval allows the NPC to issue tax deduction certificates to donors.