[Question] NPO or Section 21 company

[AnnekeL]

I hope someone can help me. We want to collect money for a sick friend that needs very expensive medication and does not have the money. I am not sure does this have to be registered or can we just open a seperate bank account with two administrators (to avoid fraud) or do you have to register as a section 21 company. Iwould like to do this the easiest and cheapest way. Can anybody advise me?

[Dave A]

does this have to be registered

In the main it is the donors who are keen to see that the money is being used as it should. As donations are taxed (where applicable) in the hands of the donor, SARS is not particularly interested in the nature of the receiving entity as far as I know.

If you are receiving multiple smaller donations, there really should be no major problems unless the donor is looking for a receipt or something along the lines of credits for social responsibility.

[Marq]

Do it as a sole business type arrangement. The bank account is styled Anneke trading as Raising funds for sick friend. This keeps it separate from you. Money goes in that you raise and the expenses are payments for the treatments. Net effect zero for tax - if you have a balance over and treatment is finished - donate that onto another cause. Close account and move on.

[AnnekeL]

Thanks for that, so we will not make it more complicated than it is!

[Frankincense]

...as far I know you can only claim donation exemption from your donations if the institution to which you are donating is registered with SARS like SPCA/Salvation Army etc. for donors wanting exemptions....so even if you provide invoices what what, if you are not on the list of approved charitable bodies, they ain't go get no exemption deductions but will see an invoice......

Hope the person get's well....


Because the scam of setting up bogus (or at least dubious) charities and religious organisations in order to gain tax-exempt status....

Tax exemption provisions tightened
Following the Ninth Report of the Katz Commission, the tax exemption provisions of the Act were considerably tightened. In particular, there is now no automatic exemption for churches, charities, schools and section 21 companies. Instead, section 30 has introduced and tightly defined the concept of a "public benefit organisation". Only an organisation that meets the statutory criteria of a "public benefit organisation" and which has, in addition, been approved by the Commissioner will have tax exempt status. This new tax regime takes effect as from 15 July 2001.
Organisations that are not currently exempt from tax can apply for approval as public benefit organisations, and (says the SARS Guide) "the Commissioner may approve an exemption with retrospective effect, if application is made before the last day of the first year of assessment of the organisation or before 31 December 2004, whichever is the later".