Abstract
The South African tax regime imposes income tax on all persons (natural or juristic)
that receive or are entitled to receive gross income, which then results in taxable
income. Certain specific provisions in the South African Income Tax Act No. 58 of 1962
(the Act) contain exemptions from tax on income received by or accrued to them under
special circumstances. One of these specific exemptions relates to taxpayers who are
recognised as public benefit organisations. Religious organisations may meet the
definition and recognition criteria of a public benefit organisation and thus may be
entitled to such exemptions. However, over the past decade, there has been concerns
regarding some religious organisations’ non-compliance with income tax laws (which
are often due to the misconceptions about the perceived income tax exemptions
applicable to them) which has motivated a need to revisit the laws that govern religious
organisations in South Africa.
Considering the above, this study examined the income tax laws that govern religious
organisations in South Africa. An international comparison with two tax jurisdictions
with similar taxing regimes to South Africa was performed to identify key similarities
and differences in the way religious organisations are regulated. The international
comparison also provided insights on principles that may be adopted in South Africa.
The results from the study were that the Act and South African Revenue Services’
guiding documents contain a detailed outline of the definition and recognition criteria
for religious organisations seeking Public Benefit Organisation status, and thus income
tax exemptions.
A key tax reform recommended in this study was to relook the income tax exemption
provisions pertaining to trading activities or business undertakings. Given the need for
religious organisations (and many other public benefit organisations) to become more
self-sufficient, it is recommended that all income generated by religious public benefit
organisations be exempt from income tax, provided such income is used to advance
the stated purpose of advancing religion. Another recommendation is the
establishment of an independent regulatory body for religious and other public benefit
organisations to relieve SARS from this policing burden.