Nexus of Tax Law and Non-Profit Organizations: Incentives and challenges in compliance with tax laws by Public Benefit Organizations in South Africa: a scoping review

Nompilo Sithole; Masibulele Phesa; Mabutho Sibanda

doi:10.36096/ijbes.v6i6.667

Authors

Nompilo Sithole School of Accounting, Economics and Finance; University of Kwazulu-Natal, Durban, Westville https://orcid.org/0009-0006-1416-805X
Masibulele Phesa School of Accounting, Economics and Finance; University of Kwazulu-Natal, Durban, Westville https://orcid.org/0000-0001-5209-8255
Mabutho Sibanda School of Accounting, Economics and Finance; University of Kwazulu-Natal, Durban, Westville

DOI:

https://doi.org/10.36096/ijbes.v6i6.667

Keywords:

Non-Profit Organisation,, Public Benefit Organisation, Tax incentives, Tax Challenges

Abstract

This study examines the tax incentives and challenges faced by Non-Profit Organisations (NPOs) in South Africa, with a focus on those registered as Public Benefit Organisations (PBOs). NPOs play a vital role in addressing socio-economic issues, and serving vulnerable communities. While these organizations operate for non-profit purposes, the tax incentives provided by the government are crucial for their financial sustainability. Therefore, establishing a supportive tax framework is essential to promote their growth and operational capacity. A scoping review methodology was employed, analyzing literature on tax incentives and compliance challenges faced by South African NPOs from 2010 to 2023. Key provisions include income tax exemptions under Section 10(1)(cN), capital gains tax exclusions, and Section 18A tax-deductible donations. The study also explored the legal framework governing tax-exempt status and trading activities. Findings show that while tax incentives provide significant benefits, NPOs face challenges in maintaining compliance, such as complex regulations, limited financial resources, and a lack of expertise. Many struggle with differentiating between exempt and taxable activities. Strategies to address these issues include simplifying tax processes, enhancing financial management education, and improving communication between SARS and NPOs. Introducing user-friendly tax reporting systems and tailored support could further boost compliance and ensure NPOs maximize available benefits. These insights are valuable for policymakers and tax authorities seeking to strengthen the regulatory framework and support the growth of NPOs in South Africa.

Downloads

Download data is not yet available.

References

Arksey, H., & O'Malley, L. (2005). Scoping studies: towards a methodological framework. International journal of social research methodology, 8(1), 19-32. DOI: https://doi.org/10.1080/1364557032000119616

Banda, N. V. (2021). Tax exemptions to public benefit organisations: reform in respect of South African churches

Barnard, I. (2017a). The challenges of value-added tax compliance provisions for non-profit organisations: an explorative study University of Pretoria].

Barnard, I. (2017b). The Challenges of Value-Added Tax Compliance Provisions for Non-Profit Organisations: An Explorative Study. University of Pretoria (South Africa).

Boell, S. K., & Cecez-Kecmanovic, D. (2014). A hermeneutic approach for conducting literature reviews and literature searches. Communications of the Association for information Systems, 34(1), 12. DOI: https://doi.org/10.17705/1CAIS.03412

Bolleyer, N. (2018). The state and civil society: Regulating interest groups, parties, and public benefit organizations in contemporary democracies. Oxford University Press. DOI: https://doi.org/10.1093/oso/9780198758587.001.0001

Boyle, M.-E., & Boguslaw, J. (2007). Business, poverty and corporate citizenship: Naming the issues and framing solutions. Journal of Corporate Citizenship(26), 101-120. DOI: https://doi.org/10.9774/GLEAF.4700.2007.su.00013

Breen, O. B., Dunn, A., & Sidel, M. (2019). Riding the regulatory wave: reflections on recent explorations of the statutory and nonstatutory nonprofit regulatory cycles in 16 jurisdictions. Nonprofit and Voluntary Sector Quarterly, 48(4), 691-715. DOI: https://doi.org/10.1177/0899764019837602

Brewis, T., & Wyngaard, R. (2006). Non-Profit organizations in South Africa: Reaping the benefits of the income tax campaign. Int'l J. Not-for-Profit L., 9, 18.

Committee, T. D. T. (2018). THE PUBLIC BENEFIT ORGANISATION AND THE TAX SYSTEM [Report]. https://www.taxcom.org.za/docs/20180329%20Final%20DTC%20PBO%20Report%20to%20the%20Minister.pdf

Concar, D., & com Correspondent, E. Eco News Releases.

Dada, S., Flores, C., Bastable, K., & Schlosser, R. W. (2021). The effects of augmentative and alternative communication interventions on the receptive language skills of children with developmental disabilities: A scoping review. International Journal of Speech-Language Pathology, 23(3), 247-257. DOI: https://doi.org/10.1080/17549507.2020.1797165

Díaz-Perdomo, Y., Álvarez-González, L. I., & Sanzo-Pérez, M. J. (2021). A way to boost the impact of business on 2030 United Nations sustainable development goals: co-creation With non-profits for social innovation. Frontiers in Psychology, 12, 719907. DOI: https://doi.org/10.3389/fpsyg.2021.719907

Flores, C. A. (2017). The effect of augmentative and alternative communication on the receptive language skills of children with developmental disabilities: A scoping review. PQDT-Global.

Greenhalgh, T., & Peacock, R. (2005). Effectiveness and efficiency of search methods in systematic reviews of complex evidence: audit of primary sources. Bmj, 331(7524), 1064-1065. DOI: https://doi.org/10.1136/bmj.38636.593461.68

Heeger, P. J. (2017). A critical analysis of the taxation applicable to South African sports organisations University of Cape Town].

Kamdar, M. (2013). Getting to grips with income tax and NGOs: tax professional. Tax Professional, 2013(3), 18-19.

Kunene, T. F. (2022). An evaluation of the possibility to abuse the PBO tax exemptions by religious organisations in South Africa North-West University (South Africa)].

Lee-Ann, S. (2014). A Note on Recent Income Tax Developments Impacting Charitable Organisations in South Africa. Mediterranean Journal of Social Sciences, 5(20), 676. DOI: https://doi.org/10.5901/mjss.2014.v5n20p676

Lestrade, I. E. (2022). The tax implications of profit share accrual for public benefit organisations in South Africa

Matenda, F. R., Sibanda, M., Chikodza, E., & Gumbo, V. (2021). Bankruptcy prediction for private firms in developing economies: a scoping review and guidance for future research. Management Review Quarterly, 1-40. DOI: https://doi.org/10.1007/s11301-021-00216-x

Matshona, Z., Sibanda, M., & Phesa, M. (2024). Tax Knowledge and Tax Behaviour of Individual Taxpayers in South Africa: A Scoping Review. International Journal of Economics and Financial Issues, 14(5), 299-316. DOI: https://doi.org/10.32479/ijefi.16149

Munn, Z., Peters, M. D., Stern, C., Tufanaru, C., McArthur, A., & Aromataris, E. (2018). Systematic review or scoping review? Guidance for authors when choosing between a systematic or scoping review approach. BMC medical research methodology, 18, 1-7. DOI: https://doi.org/10.1186/s12874-018-0611-x

Ngwara, K. (2020). An exploratory study of the experiences of refugees receiving assistance from Non-Profit Organisations (NPOs) in the City of Cape Town Metropolitean Area.

Omeri, L. K. (2014). Factors influencing financial sustainability of non-governmental organizations: a survey of NGOs in Nakuru County

Pham, M. T., Raji?, A., Greig, J. D., Sargeant, J. M., Papadopoulos, A., & McEwen, S. A. (2014). A scoping review of scoping reviews: advancing the approach and enhancing the consistency. Research synthesis methods, 5(4), 371-385. DOI: https://doi.org/10.1002/jrsm.1123

Pita, C., Pierce, G. J., Theodossiou, I., & Macpherson, K. (2011). An overview of commercial fishers’ attitudes towards marine protected areas. Hydrobiologia, 670, 289-306. DOI: https://doi.org/10.1007/s10750-011-0665-9

Rice, J. (2018). A critical analysis of the law that governs the taxation of public benefit organisations (PBOs): a case study of South Africa and Zimbabwe

Robina Galatas, A. (2018). A Scoping Review Mapping the Effects of Environmental Factors on Obesity Comparative Analysis of Mexico and the United States.

SARS. (2022a). Basic Guide to Section 18A Approval. 4th Issue(4th). https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-IT17-Basic-Guide-to-Section-18A-Approval.pdf

SARS. (2022b). Public Benefit Organisations. https://www.sars.gov.za/businesses-and-employers/tax-exempt-institutions/public-benefit-organisations/

SARS, L. C. (2017). Tax Exemption Guide for Public

Benefit Organisations in South Africa. Legal Counsel Income Tax, 5th issue(5). https://www.kaapkerkadmin.co.za/doks/PBO_2017.pdf

Skhosana, R. M. (2020). The dilemma faced by NPOs in retaining social workers: A call to revisit the retention strategy. Social Work, 56(2), 109-124. DOI: https://doi.org/10.15270/56-2-815

Sucharew, H., & Macaluso, M. (2019). Methods for research evidence synthesis: The scoping review approach. Journal of hospital medicine, 14(7), 416-418. DOI: https://doi.org/10.12788/jhm.3248

Voitkane, S., & Jakusonoka, I. (2019). Assessment of the financial performance transparency of public benefit organisations. Economics and Culture, 16(1), 46-57. DOI: https://doi.org/10.2478/jec-2019-0006

Warneke, D. (2014). Increased compliance burden on the cards for PBOs: public benefit organisations. Tax Breaks, 2014(347), 2-3.

Weber, T. O., Fooken, J., & Herrmann, B. (2014). Behavioural economics and taxation. European Commission Taxation Papers.

Williams, R. (2014). Securing tax exemption for the income of a public school and the tax deductibility of donations to the school: navigating the maze of South Africa's Income Tax Act: analysis. SA Mercantile Law Journal, 26(2), 498-514.

Wyngaard, R. (2011). Tax Benefits for Approved Public Benefit Organisations. In.