[LISTEN] What kind of tax are religious institutions required to pay?

The South African Revenue Services says while it is not targeting spiritual leaders and churches are exempt from tax, they are subject to tax on their trading income and salaries which is not happening in some cases.

Acting Commissioner of SARS, Mark Kingon says a study conducted a year ago reveals how a number of churches are 'incorrectly declaring'.

He explains how a religious institution can however qualify as a public benefit organisation (PBO) with benefits.

Tithes which are donations, that would be exempt from tax in the hands of the church, but as soon as the church uses those tithes to pay a salary to one of the workers within the religious entity, that becomes taxable for pay-as- you-earn purposes. There are other benefits, where they purchase a property that is utilised for the purpose of their public benefit organisation, whether it be a religious entity, they don't have to pay transfer duty on that.

Mark Kingon, Acting commissioner - SARS

The tithes are exempt and that is always going to be the problem in any entity that receives cash donations. If we are in doubt, we will probably do a capital reconciliation - in other words, a lifestyle audit. Those are the types of checks and balances we would have in place.

Mark Kingon, Acting commissioner - SARS

He explains the requirements for a PBO.

Obviously it has got to be an entity that is there for the public benefit and the one check and balance is that key people who take responsibility for the affairs of the entity, need to be unconnected persons. In other words I can't have my wife and my son and myself the main people responsible for the entity.

Mark Kingon, Acting commissioner - SARS

The process is quite easy. We have got thousands of churches and other religious entities registered with Sars.

Mark Kingon, Acting commissioner - SARS

Click on the link below to hear more from Kingon...


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