ngoLAW Update April 2019

Welcome to our first newsletter. These updates aim to deliver useful insights and information on legal, governance and compliance matters relevant to the NGO sector, and to connect you with resources and events. This first issue introduces some new (and newish) team members and contains the first in our NGO Agony Aunties series: “Ask ngoLAW”. Please let us know what you think of it, and feel free to send it to others who may benefit.

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ngoLAW meets the new year with some new team members: Lisa D’Eramo (second from right) joined us in March 2018, so is not that new- Lisa is the engine room of our efficient CIPC department.

Lize Vermeulen and Bandile Khwela (far left and second from left) joined us at the end of 2018, and are young attorneys with a focus on serving the non-profit sector.

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Dear ngoLAW : Why do we need PBO (tax exempt) status?

Question: I hope that registration as a non-profit company will meet any funders’ requirements. From your experience is it necessary to register as a PBO as well?

ngoLAW answer:

NPC registration (or trust/voluntary association founding) is only the first step to meeting the requirements of funders and stakeholders as a non-profit. Potential donors will require that your organisation also has PBO status (tax exemption), and you will want to have PBO status in place for a number of reasons including the following:

  • Donors which are themselves tax-exempt are only permitted to donate to tax-exempt entities;
  • If you are not tax-exempt, then donations tax at 20% can be levied by SARS on donations made to your organisation;
  • Tax exempt (PBO) status is a standard requirement of donors, just for the credibility it confers- donors know that you have jumped through the SARS hoops, and are complying with their requirements;
  • Tax exemption brings with it not only exemption from tax to be paid on earned income, but other advantages, like potential skills development levy exemption, exemption from estate duty for those who leave you money in their wills, exemption from transfer duty if the organisation ever buys a property, etc; and
  • Depending on the sort of work done by your organisation, it may also be able to obtain 18A status, which gives your local donors a tax deduction, which can be a useful way of incentivising giving.

In each newsletter we will answer a question commonly asked by our clients. If you have any puzzling issues, please click on the button to email your question to us. Past questions and answers  will also be available on our website.

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Defined: Fiduciary Duty

This is the general duty of trust which rests on anyone acting not for themselves but for another. Directors, trustees, committee members and employees of organisations are required to act with the level of care and diligence which could reasonably be expected of someone taking care of the affairs/money/property of another. This duty is owed to the organisation and also to its beneficiaries.

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