Tax exemption types for clubs and member associations
Which SARS income tax exemption fits a South African sports club, trade association or professional body rather than a PBO, and how to bill members.
By Achekam · · 4 min read · For Non-profit businesses in South Africa
A golf club's committee decides it is time to sort out the club's tax position. Someone suggests applying to become a public benefit organisation, because that is the tax exemption everyone has heard of. Someone else points out that the club exists for its members, not the general public. They are both onto something, and the answer lies in a list most committees never read.
SARS recognises several kinds of tax-exempt organisation, not just PBOs. Sports and social clubs, industry and professional bodies, chambers of commerce, trade unions and similar member-based bodies each have their own route, with its own section of the Income Tax Act. Applying under the wrong one wastes months. This article sets out the options SARS lists and how to choose, then turns to the practical matter of billing members.
The PBO route, and why it may not fit
SARS describes a public benefit organisation, under section 10(1)(cN) read with section 30 of the Income Tax Act, as a not-for-profit entity that carries on one or more public benefit activities for the benefit of, or widely accessible to, the general public. The activities include welfare, humanitarian, education, religion, sports and cultural activities.
Sport appears on that list, which is why clubs are often steered towards PBO status. The test that matters is the phrase "for the benefit of, or widely accessible to, the general public". A sports development programme open to any child in a township may meet it. A members' club with a joining fee and a waiting list probably does not, and has a better-fitting route of its own.
The other exemption types SARS lists
Recreational clubs
SARS lists recreational clubs under section 10(1)(cO), read with section 30A. This is the route designed for sports, social and similar clubs that exist for their members' recreation: the golf club, the bowling club, the angling society.
Industry and professional bodies
SARS lists industry or professional bodies whose income comes substantially the whole from membership fees under section 10(1)(d)(iv)(bb), read with section 30B. A regional association of plumbers, or a professional institute for a particular discipline, would look here. The condition about income is important: a body that earns much of its income from training courses or events, rather than membership fees, should take advice before applying.
Other membership associations
SARS describes an "other membership association" under section 10(1)(d)(iii), read with section 30B, as a member-based entity formed to pursue a common interest, of the types listed in the Act. Those types are a mutual loan association, a fidelity or indemnity fund, a trade union, a chamber of commerce or industries, and a local publicity association. A town's chamber of business or a local tourism association would usually fall here.
Small business funding entities
SARS also lists small business funding entities that support SMMEs under section 10(1)(cQ), read with section 30C. This is a narrower category for bodies whose purpose is funding small businesses, not for clubs.
A quick guide
| Your organisation | Route SARS lists |
|---|---|
| Members' sports or social club | Recreational club, section 10(1)(cO) with section 30A |
| Trade or professional association living on subscriptions | Industry or professional body, section 10(1)(d)(iv)(bb) with section 30B |
| Chamber of commerce, trade union, local publicity association | Other membership association, section 10(1)(d)(iii) with section 30B |
| Body funding small businesses | Small business funding entity, section 10(1)(cQ) with section 30C |
| Organisation serving the general public | Public benefit organisation, section 10(1)(cN) with section 30 |
Treat the table as a starting point. The Act's wording and SARS's requirements decide, and your tax adviser should confirm the fit.
Choosing the right "Nature of Entity" on the RAV01
There is a practical trap at registration. SARS says only certain "Nature of Entity" types selected on the RAV01 form can apply for income tax exemption, and that the exemption application is not accessible if the wrong type is selected. It says a private company can only be considered under section 10(1)(cA)(ii), and it lists sole proprietors, partnerships and bodies of persons among the entity types that cannot apply at all.
So check how your club is set up before you apply. A club that is legally a voluntary association with a constitution, and is registered with SARS under that nature of entity, can proceed. One registered as something else will find the door closed until its registration is corrected.
Invoicing membership fees
Membership fees are the lifeblood of most clubs and associations, and for industry and professional bodies they are also part of the test for exemption. They deserve their own place in the books.
A club or association can sign up to Achekam as a business, choose South Africa as its country, and get its own workspace and books, with the person who signs up as administrator. It has its own double-entry ledger with a standard chart of accounts, and accounts can be added, renamed or switched off. Add a dedicated income account for membership fees, separate from bar sales, green fees, event income or sponsorship. For a professional body, that separation is what shows how much of its income comes from membership.
Annual subscriptions can then be invoiced to members. A customer invoice starts as a draft that can be changed or deleted; issuing it takes the next number in the sequence and posts it to the ledger as debtors and income, with output VAT where VAT applies. Whether membership fees attract VAT depends on the club's VAT position, which your accountant should confirm. Default payment terms are 30 days. Who should set up the chart in the first place is covered in books set up by your accountant, and keeping funds for specific purposes apart is explained in restricted funds in the chart of accounts.
Read SARS's list first
SARS's page on tax exempt institutions sets out each exemption type, its section and the entity types that may apply. Read it with your committee and adviser, check your RAV01 registration, and only then start the application.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
