BPR 338 deals with the tax treatment of payments made to a Public Benefit Organisation (PBO) at a fundraising event, under section 30 of the Income Tax Act. The ruling is essentially an interpretation of section 18A of the Act and seeks to clarify the situation for PBOs and funders.
In terms of the transaction, the Applicant (a resident company registered as a PBO) will host an event for the explicit purpose of fundraising, but this event will be managed by a third-party events management company.
As is commonplace, persons attending the events will make payments to participate in activities taking place at the event, as well as make donations. The events management company manages an electronic system that will enable funders and donors to make payments at the event. This system is accessible through various roaming electronic touchscreen devices, developed for the distinct purpose of distinguishing between donations and payments for activities.
By the end of the evening, each attendee is required to settle their required payments in respect of the relevant transactions they entered into, with one single card payment. The system then determines which attendee is entitled to a section 18A certificate, as well as the amount to be reflected on the receipt. Only donations made by attendees are reflected on the section 18A receipt.
One condition and assumption of this ruling is that the payment tracking system must, as closely as practicable, conform to the one proposed and its intended function, accounting for the donations of money separately from payments, must be easily verifiable.
The ruling made by SARS is that donations made and identified as such by the applicant’s payment tracking system at the fundraising event will constitute bona fide donations made to a PBO under section 18A of the Act, and as such, the applicant may issue the donors with section 18A receipts in respect thereof.
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