SARS_Draft Interpretation Note: Non-professional sport and recreation in the PBO space

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SARS_Draft Interpretation Note: Non-professional sport and recreation in the PBO space

• 29 October 2024
• SARS Issues
• South African Accounting Academy

Summary:

SARS has published a Draft Interpretation Note on non-professional sport and recreation in the Public Benefit Organisation (PBO) space for public comment. 

Article:

This Note provides guidance on the interpretation and application of Public Benefit Activity (PBA) 9 that provides for the administration, development, co-ordination or promotion of sport or recreation in which the participants take part on a non-professional basis as a pastime.

The National Sport and Recreation Act was promulgated to provide for the promotion and development of sport and recreation, and came into effect on 10 September 1999.

Sporting associations qualifying for approval and exemption from income tax can be divided into the following 2 categories:

• Recreational clubs formed for the mutual benefit of members who contribute to share the cost of providing a collective benefit, namely, the social or recreational facility. This category is beyond the scope of this Note – Refer to the SARS Tax Exemption Guide for Recreational Clubs.
• Organisations formed to carry on PBA 9 as their sole or principal object, colloquially referred to as amateur sporting associations.

The 2 categories qualify for approval under different sections of the Act, each section having its own requirements and conditions. Organisations carrying on PBA 9 may qualify for approval as a PBO under section 30, and partial exemption from the payment of income tax on certain of their receipts and accruals under section 10(1)(cN), while recreational clubs qualify for approval under section 30A, and partial exemption under section 10(1)(cO).

Whether an organisation complies with the requirements of PBA 9 will be a factual enquiry, and since the facts and circumstances pertaining to each organisation may differ, each case will be considered on its own merits.

Contents of the Guide:

1. Purpose
2. Background
3. The law
4. Application of the law
5. Meaning of sport contemplated in public benefit activity 9
6. Meaning of recreation contemplated in public benefit activity 9
7. Requirements of public benefit activity 9
8. Business undertakings or trading activities
9. Tax-deductible donations
10. Objection and appeal
11. Record-keeping
12. Conclusion

• Annexure A – The law
• Annexure B – Public benefit activity 9

Comments can be sent to SAICA and are due by Wednesday, 6 November 2024 – or to SARS by 15 November 2024.

Click here to download the 27-page Draft Interpretation Note:

https://www.sars.gov.za/wp-content/uploads/Legal/Drafts/Legal-LPrep-Draft-2024-40-Draft-IN-Public-benefit-organisations-Non-professional-sport-and-recreation-30-September-2024.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Income Tax Act is yet another piece of legislation that your clients should consider, so that they are aware of their rights and responsibilities as well as SARS’ powers.
• As an auditor and independent reviewer, you need to consider interpretations and explanations of relevant tax items, especially those that are published as Interpretation Notes by SARS.
• This Note provides guidance on the interpretation and application of the public benefit activity in paragraph 9 in Part I of the Ninth Schedule to the Income Tax Act, which is described as the administration, development, co-ordination or promotion of sport or recreation in which the participants take part on a non-professional basis as a pastime.
• As a taxpayer, you and your practice also need to comply with the Income Tax Act.

Relevance to Your Clients:

• A taxpayer should be aware of the contents of the Income Tax Act.
• Taxpayers need to consider interpretations and explanations of relevant tax items, especially those that are published as Interpretation Notes by SARS.

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