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Corporate social investments and tax

Sonja FrankDo you wish to make a corporate social investment (such as a bursary scheme for underprivileged persons), but don’t know whether it will qualify for a tax deduction?

In terms of Section 76B to 76S of the Income Tax Act, a taxpayer now has the option to request SARS for an Advance Tax Ruling regarding the interpretation of the Income Tax Act, with reference to a particular set of facts and circumstances. From time to time, SARS publishes these rulings on its website.

In Binding Class Ruling (BCR) number 002, the taxpayer wanted to comply with the BEE Codes of Good Practice by spending at least 1% of his net profit after tax on future Corporate Social Investment (CSI) programmes. The expenditure involved the provision of bursaries to needy recipients from underprivileged backgrounds, to be used for fees for the beneficiaries’ school and tertiary education. Recipients of the bursaries might not necessarily be employees of the taxpayer.

SARS ruled that all expenditure to be incurred in respect of the CSI programme for purposes of earning BEE scorecard points, would be deductible.

Public Benefit Organisations

Section 30(3B) of the Income Tax Act states that a Public Benefit Organisation (PBO) only has until the end of its first year of assessment to apply for PBO status in terms of the Income Tax Act. For PBOs who have failed to do so, the Draft Taxation Laws Amendment Bill of 2009 may be the answer.

In terms of the draft bill, the Commissioner will be given discretionary powers to retroactively approve the tax exempt status of a PBO. In order to obtain this relief, the Commissioner must be satisfied that there was substantial compliance with the terms and conditions of existing exemption requirements. Should the draft bill be enacted, this amendment will be effective on or after 1 January 2010.

For more information please contact Sonja Frank at the Stellenbosch office, tel. 021 882 8140 or e-mail