Critical tax deadline fast approaching – a first for South Africa

Section 18A-approved Public Benefit Organisations (PBOs) must start sending the South African Revenue Service (SARS) third-party data.

According to Independent Trust & Fiduciary Services expert, Roxshanna du Toit, IT3 reporting sees third parties, such as medical aid schemes, employers and banks, sending SARS certain prescribed data called “third party data.”

The data is sent to SARS in the form of tax certificates, which SARS then uses in their assessments of various taxpayers.

These certificates differ per industry, with medical aid schemes submitting medical aid tax certifications, while employers will submit IRP5 tax certificates.

The annual third-party data submission season starts in April and closes on 31 May each year. In some cases, third parties must submit certificates bi-annually.

Section 18A-approved PBOs have now been added to the list of third parties required to submit third-party data to SARS through the submission of IT3(d) tax certificates.

For taxpayers, donations made to section 18A-approved organisations are one of the ways that South Africans can lower their tax bill – limited to 10% of a taxpayer’s income.

Understanding the change

In October 2021, the Financial Action Task Force (FATF) found major gaps in South Africa’s anti-money laundering and counter-terrorism financing laws.

One of the FATF’s recommendations was that South Africa enhance beneficial ownership transparency and improve its ability to detect illegal flows of money.

Although South Africa signed the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act in December 2022, the nation was still greylisted in early 2023, making it harder for financial institutions to conduct international business.

With the nation’s push to get off the greylist, PBOs have not been spared by SARS.

“IT3(d) reporting has therefore been introduced as a mechanism by SARS in preventing money laundering and terrorist financing through PBO entities,” said Du Toit.

Thus, Section 18A PBOs will be required to submit IT3(d) tax certificates to SARS by the end of May.

All Section 18A-approved PBOs that issued Section 18A tax-deductible receipts to their donors from 1 March 2023 to 29 February 2024 will be responsible for this reporting.

“If a PBO has not issued any S18A receipts for this period, they must still submit a NIL IT3(d) declaration to SARS, said Du Toit.

“Failure to comply puts their special S18A approval with SARS at risk, as the PBO is no longer SARS compliant.”

“These are serious consequences for any PBO as their SARS approval is critical for their continued tax exemption status.”

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