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

Last updated: 2026-03-19

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 R2.3 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.

Key Requirements

Key requirements
Requirement
Income tax exemption if PBO status approved (approved activities only)
Taxable at 27% on non-exempt trading income above basic exemption
VAT registration if turnover exceeds R2.3 million
No dividends tax (NPCs cannot distribute profits)
Section 18A receipts for donor deductions (if approved)
Annual IT12EI filing for PBOs; ITR14 for non-PBO NPCs

Important Deadlines

Important deadlines
Deadline
IT12EI/ITR14: per SARS filing schedule
VAT returns: 25th of month following period end
Section 18A receipts: issued to donors at time of donation

Fees & Costs

Fees and costs
ItemAmount
PBO tax compliance (accountant)R3,000–R15,000
Section 18A administrationR1,000–R5,000

Non-Compliance Penalties

Non-compliance penalties
Penalty
Loss of PBO status: retrospective tax liability plus penalties
Conducting activities outside approved PBO objects: taxation of that income
Late filing: same administrative penalties as other companies
Failure to issue Section 18A receipts properly: donor deductions disallowed

Frequently Asked Questions

Is an NPC automatically tax-exempt?
No. An NPC must apply for PBO status from SARS and be approved for specific public benefit activities (listed in Part 1 of the Ninth Schedule to the Income Tax Act). Without PBO status, the NPC pays 27% tax like any other company.
Can an NPC trade commercially and keep its PBO status?
Limited commercial trading is allowed. SARS provides a basic exemption of the greater of 5% of total receipts or R200,000 for trading income not related to the PBO purpose. Beyond this, the trading income is taxable. If commercial trading becomes the NPC's primary activity, SARS may revoke PBO status entirely.
What is Section 18A approval?
Section 18A allows approved PBOs to issue tax deduction certificates to donors. Donors can then deduct their donations from taxable income (up to 10% of taxable income). This is a powerful fundraising tool as it effectively reduces the cost of donating for taxpayers.

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