Page 42 - SAIT Compendium 2016 Volume2

Approval of entity INCOME TAX ACT: REGULATIONS ANd NOTICES Approval of entity
REGULATIONS IN TERMS OF SECTION 10 (1) (d) (iii) AND (iv) OF THE ACT, TO PRESCRIBE CONDITIONS ON WHICH THE COMMISSIONER MAY APPROVE AN ENTITY FOR PURPOSES OF THAT SECTION
[Heading corrected by GN R1275 of 28 November 2008.]
Promulgated under
GN R1236 in GG 31614 of 21 November 2008
(as corrected by GN R1275 in GG 31647 of 28 November 2008)
By virtue of the power vested in me by section 10 (1) (d) of the Income Tax Act, 1962 (Act 58 of 1962), I, Trevor Andrew Manuel, Minister of Finance, hereby prescribe in the Schedule hereto, the conditions on which the Commissioner may approve an entity for purposes of exempting the receipts and accruals of that entity from normal tax in terms of that
section.
1 De nitions
SCHEDULE
In these Regulations, unless the context otherwise indicates, any word or expression to which a meaning has been assigned in the Income Tax Act, 1962, bears the meaning assigned thereto and—
‘entity’ means any—
(a) mutual loan association, delity or indemnity fund, trade union, chamber of commerce or industry (or an association
of such chambers) or local publicity association contemplated in section 10 (1) (d) (iii) of that Act; and
(b) company, society or other association of persons contemplated in section 10 (1) (d) (iv) of that Act with the sole or principal object to function as a representative body for persons that carry on a particular business, profession or
occupation;
‘member’ in the case of a delity or indemnity fund includes a contributor to that fund; and
‘mutual loan association’ means an association with the sole or principal object to function as a voluntary savings
association where participants make regular contributions into a common pool managed by the members for the mutual nancial bene t of such members.
2 Conditions
The Commissioner must approve an entity for purposes of section 10 (1) (d) (iii) or (iv) of the Income Tax Act, 1962, if—
(a) (b)
that entity has submitted to the Commissioner a copy of the constitution or written instrument under which it has been established;
in terms of the constitution or written instrument contemplated in paragraph (a)—
(i) it must have a committee, board of management or similar governing body consisting of at least three persons, who are not connected persons in relation to each other to accept the duciary responsibility for that entity;
(ii) no single person may directly or indirectly control the decision making powers relating to that entity;
(iii) it may not directly or indirectly distribute any of its funds or assets to any person other than in the course of
furthering its objectives, unless expressly otherwise provided for in these Regulations;
(iv) it is required to utilise substantially the whole of its funds for the sole or principal object for which it has been
established;
(v) no member may directly or indirectly have any personal or private interest in that entity;
(vi) substantially the whole of its activities must be directed to the furtherance of its sole or principal object and not for the speci c bene t of an individual member or minority group;
(vii) it may not have a share or other interest in any business, profession or occupation which is carried on by its members;
(viii) it must not pay any remuneration, as de ned in the Fourth Schedule of the Income Tax Act, 1962 (Act 58 of 1962) to any employee, of ce bearer, member or other person which is excessive, having regard to what is generally considered reasonable in the sector and in relation to the service rendered;
(ix) substantially the whole of its funding must be from its annual or other long-term members or from an appropriation by the government, a provincial administration or a municipality;
(x) it must upon its winding-up or liquidation or within six months from the withdrawal of its exemption (or such longer period as the Commissioner may allow), transfer its assets remaining after the satisfaction of its liabilities to—
(aa) another entity with similar objects and which is approved in terms of section 10 (1) (d) (iii) or (iv) of the
Income Tax Act, 1962;
(bb) a public bene t organisation approved in terms of section 30 of that Act;
(cc) any department of state or administration in the national or provincial or local sphere of government of the
Republic, contemplated in section 10 (1) (a) or (b) of that Act which is required to use those assets solely
for purposes of carrying on one or more public bene t activities; or
(dd) an institution, board or body approved in terms of section 10 (1) (cA) (i) of that Act; and
that entity has submitted to the Commissioner a written undertaking to the effect that—
(i) the persons contemplated in paragraph 2 (b) (i) will submit any amendment of the constitution or written
instrument of the entity to the Commissioner within 30 days of its amendment;
(ii) the entity will comply with such reporting requirements as may be determined by the Commissioner from time
to time;
(iii) upon its winding-up or liquidation or within six months from the withdrawal of its exemption (or such longer
period as the Commissioner may allow), it will transfer its remaining assets in accordance with the provisions of paragraph 2 (b) (ix); and
(c)
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SAIT CompendIum oF TAx LegISLATIon VoLume 2