Category: Tax A Lert | EI1 SARS Tax Exempt Institutions Apply for Income Tax Exemption
Tax Exempt Institutions: A Practical Overview
Tax exemption status offers significant financial benefits to qualifying organizations. Whether you're running a Public Benefit Organisation (PBO), Recreational Club, or Home Owners Association, understanding the process and requirements for tax exemption is key. This article provides a clear, actionable guide on the latest updates and steps to apply for income tax exemption in South Africa.
What’s New?
- New EI1 Application Form: SARS has introduced an enhanced required form to simplify the application process.
- Guides and annexures have been released to help organizations complete the form accurately.
- Deadline Alert: SARS will only accept the old EI1 form until 28 February 2025.
Who Can Apply for Tax Exemption?
The following entities can apply for tax exemption status:
- Public Benefit Organisations (PBOs): NPCs, trusts, or formal associations based in South Africa.
- Recreational Clubs: Formally constituted societies or NPCs for recreational purposes.
- Membership Associations and Professional Bodies.
- Small Business Funding Entities.
- Home Owners Associations.
- Public Institutions established by law (excluding companies and trusts).
- Companies wholly owned by public institutions.
Automatic Exemption Categories
Some entities are automatically exempt under the Income Tax Act, as outlined below:
| Entity Type | Section in Income Tax Act |
|---|---|
| Government Entities | Section 10(1)(a) |
| UN Specialized Agencies | Section 10(1)(bA) |
| Multinational Banks | Section 10(1)(bB) |
| Pension and Retirement Funds | Section 10(1)(d)(i)-(ii) |
| Political Parties | Section 10(1)(cE) |
How to Apply for Income Tax Exemption
Follow these steps to apply for tax-exempt status:
- Register for Income Tax if you are not already registered.
- Download and complete the new EI1 Application Form from the SARS website.
- Gather the following required supporting documents:
Supporting Documents Quick Checklist
| Document | Entities Applicable |
|---|---|
| Founding Documents | All entities |
| Annual Financial Statements | All entities |
| Certified ID Copies | Directors/Trustees |
| Proof of Physical Address | All entities |
Detailed Supporting Documents for Income Tax Exemption
Registration
| Document | PBO or NPO | Home Owners Association | Government Institutions | Recreational Clubs | Membership Associations | Professional Bodies | Small Business Funding Entities | Private Companies - Government Institution Owned | Government and Specialised UN Agencies |
|---|---|---|---|---|---|---|---|---|---|
| EI1 | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Founding Documents | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ||
| Explanation of Objectives and Activities | ✔ | ✔ | |||||||
| Proof of Registration of Relevant Authorities¹ | ✔ | ||||||||
| Annual Financial Statements | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Bank Statement | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| ID - Certified Copy | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Proof of Physical Address² | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
¹ Relevant Authorities: Depatment of Education, Trade Union Registration with LRS, etc)
² Proof of Address of the representative will also be required if the individual is not registered for tax purposes. A CRA01 (Confirmation of Entity Residential/Business Address) Form will need to be completed where applicable.
Change of Office Bearers, Trustees, or Directors
| Document | PBO or NPO | Home Owners Association | Government Institutions | Recreational Clubs | Membership Associations | Professional Bodies | Small Business Funding Entities | Private Companies - Government Institution Owned | Government and Specialised UN Agencies |
|---|---|---|---|---|---|---|---|---|---|
| EI1 | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Bank Statement | ✔ | ✔ | |||||||
| ID - Certified Copy | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Proof of Physical Address² | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Signed Representative Appointment Letter | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
² Proof of Address of the representative will also be required if the individual is not registered for tax purposes. A CRA01 (Confirmation of Entity Residential/Business Address) Form will need to be completed where applicable.
Change of Entity Name
³
| Document | PBO or NPO | Home Owners Association | Government Institutions | Recreational Clubs | Membership Associations | Professional Bodies | Small Business Funding Entities | Private Companies - Government Institution Owned | Government and Specialised UN Agencies |
|---|---|---|---|---|---|---|---|---|---|
| Copy of Founding Documents | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| ID - Certified Copy | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
| Letter of Name Change Request | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
³ In order for taxpayers to change the entity name, a “compliant” status is a prerequisite.
S18A Application Documents
| Document | PBO or NPO | Home Owners Association | Government Institutions | Recreational Clubs | Membership Associations | Professional Bodies | Small Business Funding Entities | Private Companies - Government Institution Owned | Government and Specialised UN Agencies |
|---|---|---|---|---|---|---|---|---|---|
| EI1 | ✔ | ✔ | ✔ | ||||||
| Letter Requesting S18A Approval | ✔ | ✔ | ✔ |
Once your documents are ready:
- Book an online appointment with SARS.
- Upload your completed forms and supporting documents using the SARS Online Query System (SOQS).
- Follow up using your case reference number by emailing teu@sars.gov.za.
Why Tax Exemption Matters
Tax exemption reduces your organization’s tax burden, enabling you to reinvest in your core mission. However, this status is not automatic. Even registered Non-Profit Companies (NPCs) and Non-Profit Organizations (NPOs) must apply and receive approval from SARS.
Once approved:
- Your organization will receive a tax exemption approval letter.
- You will be allocated a unique exemption reference number.
Key Takeaways
- Familiarize yourself with the new EI1 form and supporting guides.
- Prepare all necessary supporting documents.
- Book an appointment with SARS to submit your application.
- Transition to the new EI1 form before 28 February 2025.
Helpful Resources
- Full List of Application Documentation Per Exemption Category
- Income Tax Exemption Application Checklist
- Income Tax Exemption Leaflet
EI1 Application Form
EI1 Guide
DISCLAIMER
Nothing in this article and/or post should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure accuracy, Tax A Sured (Pty) Ltd does not accept any responsibility for consequences of decisions taken based on this article and/or post. It remains your own responsibility to consult the relevant primary resources when taking a decision.
