Cape Town – The South African Revenue Service (SARS) will be engaging with religious institutions on its plans to investigate tax non-compliance in the religious sector.
This is according to a statement issued by SARS on Friday. SARS reached the decision after a preliminary investigation, as well as taking into account a meeting with the CRL Rights Commission and general reports which suggested certain religious organisations and leaders are not complying with tax laws.
However, the tax authority noted that there were religious institutions which are compliant.
SARS plans to raise awareness about the relevant tax obligations of these institutions, the tax authority said.
According to the Income Tax Act, religious institutions may apply for an exemption. But once the tax exemption is granted there are requirements that need to be complied with, according to SARS. These include conducting activities in a non-profit manner with an altruistic or philanthropic intent.
Additionally, the activity should not directly or indirectly promote “economic self-interest” of a person, other than by a “reasonable remuneration” paid for the services rendered.
Religious institutions are prohibited from directly or indirectly distributing funds to any person other than in performing their religious activity, according to SARS.
“SARS is also concerned that proper taxes on trading activities that are unrelated to religious activities as well as Pay As You Earn (PAYE) on remuneration and other benefits are not being paid in terms of legislation,” the statement read.
SARS has also found that a number of religious institutions are issuing tax deductible receipts for donations towards religious activities. “This is not permitted in terms of the Income Tax Act,” SARS said.
SARS called for the entities to use the SARS Voluntary Disclosure Programme to regulate their taxes.