Frequently Asked Questions

SARS has introduced the IT3(d) third-party data submission requirement for all PBOs (Public Benefit Organisations). The Pitfall: Failing to digitally report every tax-deductible receipt to SARS in real-time or via the new bulk filing system. The Risk: SARS can strip your PBO status. If this happens, the donations you received become taxable income, and your donors can no longer claim tax deductions—effectively killing your corporate fundraising. Automated Donor Data Management The Fix: Transition from manual PDF receipts to a Digital Donor Database that can export CSV files formatted specifically for the SARS eFiling bulk upload. The Action: Ensure every donation record includes the donor’s Tax Number or ID/Registration Number. Without these "Mandatory Fields," your 18A certificates are legally invalid in 2026. Pro-Tip: Communicate this change to donors early; tell them it is a "Regulatory Requirement" to protect their tax benefits.

The Department of Social Development (DSD) has intensified mass deregistrations to satisfy FATF (Financial Action Task Force) requirements. The Pitfall: Treating the NPO Annual Narrative and Financial Report as "optional" or something to do "when there is time." The Risk: Permanent deregistration. Once deregistered, you lose your legal status, your bank account may be frozen, and you cannot apply for government or lottery grants. 2026 Reality: If you haven't filed since 2024, you are likely already on a "Phased Deregistration" list. The "Compliance Calendar" System The Fix: Do not wait for the DSD to send a notice. Appoint a specific board member or staffer as the Compliance Officer. The Action: Create a digital calendar with hard deadlines for the Narrative Report and Annual Financial Statements (AFS) exactly 6 months after your financial year-end. Pro-Tip: Use a "Cloud-Based Document Vault" to store your NPO Certificate, Constitution, and Board Minutes so they are ready for any snap audit or funding application.

If your NPO has had zero income or financial activity during the past financial year, you are still legally required to submit reports to the Department of Social Development (DSD). The NPO Act makes no distinction between "active" and "dormant" organizations—compliance is based on your registration status, not your bank balance. Failure to report will result in the NPO being flagged as non-compliant and eventually deregistered. Submit a Narrative Report: You must still complete the standard Narrative Report (Form NPO 1). What to say: Since you had no funds, your "Activities" section will likely reflect that programs were on hold or limited to non-monetary volunteer actions. The Goal: Show the DSD that the board is still meeting and the organization still exists, even if it hasn't launched projects yet. The Financial Requirement: The Affidavit Route Since you have no income or expenditure, you won't have a traditional audit or a full Accounting Officer’s report. In this specific case, the DSD allows for an alternative: The Zero-Income Affidavit: You must draft a sworn affidavit (signed by the Chairperson and a Commissioner of Oaths) stating that the organization received R0.00 in income and incurred R0.00 in expenses for the financial year. 12 Months of Bank Statements: You should provide bank statements for the full 12-month period. Even if they only show "Zero" or minor monthly service fees, they serve as proof of your financial status. Financial Reporting Form for Unfunded NPOs: The DSD provides a simplified "Financial Reporting Form" specifically for unfunded organizations. You can use this in place of a complex balance sheet. You Can Download a free copy of affadavit Template here. https://www.elizayo-collab.org/collaboration/npogovernance SARS Compliance Even with zero income, if you have a PBO (Public Benefit Organisation) status or an Income Tax number, you must still file a Zero Tax Return. SARS requires all registered entities to file. If you ignore this, you risk losing your tax-exempt status, which is very difficult to get back once you do start receiving funds. Summary Checklist for Zero-Income Compliance

Transitioning from "zero-income" to an active, funded NPO is an exciting milestone, but it significantly increases your "Compliance Footprint." In South Africa, as soon as R1 enters your account or you hire your first staff member, several new legal gears begin to turn. DSD Reporting: From Affidavits to Audits The biggest change is how you report to the Department of Social Development. The Accounting Officer’s Report: You can no longer use a simple affidavit. You must appoint a registered Accounting Officer (or Auditor, depending on your income threshold) to compile your Annual Financial Statements (AFS). Narrative Expansion: Your report must now detail exactly how funds were spent on your projects (e.g., the Legacy Pathway or Project Sanctuary). Deadline: Still 9 months after your financial year-end, but the complexity of the filing is much higher. SARS: The "Donor Trust" Phase If you are active and funded, SARS becomes a high-stakes partner. IT12EI (Income Tax): You now report actual income and expenditure. Even though you are tax-exempt as a PBO, you must prove that 100% of the funds were used for your approved Public Benefit Activities. Mandatory IT3(d) Submissions: Since you are now receiving donations, you must submit your donor data to SARS twice a year (May and October). This allows your donors to see their tax certificates pre-populated on their own eFiling. VAT Registration: If your income from "taxable supplies" (e.g., selling training manuals or consulting services) exceeds R1 million in 12 months, you must register for VAT. Employment & Labour (The "People" Factor) Once you hire staff to run your programs: UIF (Unemployment Insurance): You must register as an employer. You deduct 1% from the employee and contribute 1% as the NPO (Total 2%). PAYE (Pay As You Earn): If an employee earns above the tax threshold, you must deduct tax and pay it to SARS monthly via an EMP201 return. COIDA (Injury on Duty): You must pay an annual assessment fee to the Compensation Fund. In 2026, the minimum assessment fee is R1,621 (unless you are a very small/domestic-scale employer).

The distinction between registration and tax exemption is a fundamental aspect of the non-profit sector's regulatory framework. Registration as a Non-Profit Organisation (NPO) through the Department of Social Development or as a Non-Profit Company (NPC) through the CIPC establishes an entity's legal identity and regulatory standing, but it does not grant automatic tax relief An entity is only deemed exempt from paying tax on its receipts and accruals once it has applied for and received a formal Public Benefit Organisation (PBO) approval letter from the SARS Tax Exemption Unit Within the realm of tax-exempt status, there is a further distinction known as the Section 18A factor While every organization with Section 18A approval must be a PBO, not all PBOs are Section 18A approved The primary difference lies in who receives the tax benefit: PBO status exempts the organization itself from paying Income Tax, whereas Section 18A status allows donors to deduct their contributions from their own taxable income, up to a limit of 10% To qualify for Section 18A status, an organization's activities must specifically fall under Part II of the Ninth Schedule of the Income Tax Act This means that while some organizations, such as those focused on religion, sports, or general culture, may qualify for basic PBO tax exemption, they are generally ineligible for Section 18A approval Furthermore, Section 18A status carries significant compliance and reporting obligations that became stricter in March 2026 Approved entities must now issue receipts containing mandatory donor data—including Tax Reference Numbers and physical addresses—and are legally required to submit bi-annual IT3(d) third-party data files to SARS. These submissions are vital because they allow SARS to pre-populate donor tax returns, ensuring that supporters receive their promised tax deductions Finally, all entities seeking these statuses must ensure their founding documents contain SARS-compliant "standard clauses" and that at least three unrelated persons take fiduciary responsibility for the organization