How Much Cash Can You Legally Keep at Home in South Africa?

This resource is meant to make it easier for grantmakers and their advisors to quickly and meaningfully access potentially relevant materials; it is not intended to offer legal advice. We acknowledge that local law interpretations differ and that legal and regulatory circumstances are frequently dynamic when it comes to these NGO law resources. Please note that errors in these resources or the translations that go with them are not the responsibility of the Council on Foundations or ICNL.

Please contact Lily Liu at the International Center for Not-for-Profit Law with any corrections you feel should be made if you think any information in this NGO law resource is inaccurate. Please get in touch with Brian Kastner with any additional inquiries regarding the accuracy of non-legal resources in Country Notes.

This section includes translations of pertinent legislative provisions for a foundation or advisor conducting an equivalency determination of a foreign grantee under IRS Revenue Procedure 92-94, as well as an explanation of the legal framework governing nonprofit organizations (also known as non-governmental organizations or NGOs) in South Africa.

The International Center for Not-for-Profit Law (ICNL) prepared these reports. Please direct corrections and comments to Lily Liu.

B. Deductibility of Donations

A donation, either in cash or in kind, made by an individual or business to a PBO that carries out specific public benefit activities may be subtracted from their taxable income. These entities are occasionally denoted as “Donor-Deductible Public Benefit Organizations.” In order to be eligible for this deduction, the donation must be accompanied by a receipt from the PBO and cannot exceed 10% of the taxpayer’s taxable income in any given fiscal year.

The public benefit activities approved by the Minister of Finance for purposes of Section 18A are set out in Part II of the Ninth Schedule of the Income Tax Act. A variety of activities are approved, and they fall under the following headings:

• Welfare and Humanitarian
• Health Care
• Education and Development
• Conservation, Environment and Animal Welfare
• Land and Housing (Income Tax Act Schedule Nine Sections 2(1)-2(5))

Specific Questions Regarding Local Law

Voluntary Associations

A voluntary association’s founding documents would contain specific prohibitions against private inurement. Generally speaking, members of voluntary associations’ governing boards have a fiduciary duty under common law to behave honestly and refrain from having conflicts of interest when interacting with the organization.

Trusts

A trustee’s remuneration may be regulated by the instrument establishing the trust. If the instrument is silent on the issue, the Trust Property Control Act allows for trustees to receive reasonable remuneration when executing their official duties (TPCA Section 22). In the event of a dispute, the Master (a court official appointed under Section 2 of the Administration of Estates Act) will set the amount. An auditor or accounting officer of the trusts accounts must report any apparent material irregularities in the accounts to the trustee (TPCA Section 15). The Trust Property Control Act requires trustees to “act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another” (TPCA Section 9(1)). A trustees improper accounting in administering the trust violates this fiduciary duty and constitutes grounds for removal (TPCA Section 20(2)(e)).

Non-Profit Companies

A non-profit organization is not permitted to transfer any assets or pay any portion of its income to any incorporator, director, or member of the company, directly or indirectly, regardless of how the income or asset was obtained. This is stated in paragraph 3 of Schedule 1 to the Companies Act. The following situations are exempt from this prohibition: payment payable under a genuine agreement; reasonable compensation for goods delivered or services rendered; reimbursement for costs incurred to further the company’s goals; payment in respect of that person’s rights to further a stated goal of the company; and payment in respect of any legally binding obligations. [6].

Registered Non-Profit Organisations

In order to register under the NPO Act, a non-profit organisation must state in its founding document (or the legislation under which it has been established must specify) that its income and property are not distributable to its members, officers, or trustees, except as reasonable compensation for services rendered (NPO Act/1997 Section 12(2)(c)).

Approved Public Benefit Organisations

To obtain approval from the Commissioner as a PBO under Section 30 of the Income Tax Act, an organisation cannot conduct any activity intended directly or indirectly to promote the economic self-interest of any fiduciary or employee of the organisation, other than through reasonable remuneration. In addition, the organisation must not distribute any of its funds to any person, other than in the course of undertaking a public benefit activity; and it must use its funds solely for the objective for which it has been established (Income Tax Act Section (30)(3)(b)(ii)).

Voluntary Associations

A voluntary association’s founding documents will state whether or not it forbids its members, governing board members, or staff from possessing a proprietary interest in the organization’s assets.

Trusts

The Trust Property Control Act provides that trust property may not form part of the personal estate of a trustee, unless the trustee is also a beneficiary entitled to the property under the trust instrument (TPCA Section 12). The trust documents identify the beneficiaries of the trust.

Non-Profit Companies

A non-profit organization’s stated goals as outlined in its Memorandum of Incorporation (Companies Act Schedule 1 para. 2) must be pursued with all of its resources and income. When a non-profit organization winds down or dissolves, it is required to distribute its entire net worth to one or more non-profit organizations, “registered external non-profit companies” operating in South Africa, non-profit trusts, or volunteer associations with goals comparable to its primary purpose. After the company’s debts and liabilities are paid, no director or member, living or dead, is entitled to any portion of the net worth of the business (Companies Act Schedule 1 para 4).

Registered Non-Profit Organisations

The founding document of a non-profit organisation registered under the NPO Act must provide that the members or office-bearers have no rights to the assets of the organisation solely by virtue of being members or office-bearers (NPO Act/1997 Section 12(2)(f)).

Approved Public Benefit Organisations

To qualify as a PBO under Section 30 of the Income Tax Act, an organisation cannot accept any donation that is revocable at the donor’s request. Moreover, the donor may not impose conditions that could enable the donor or any person related to the donor to benefit, directly or indirectly, from the application of such donation (Income Tax Act Section (30)(3)(b)(v)). In addition, the organisation must apply its funds solely to the objectives for which it was formed (Income Tax Act Section (30)(3)(b)(ii)).

Voluntary Associations

The founding documents of a universitas or an informal voluntary association may contain provisions governing the transfer of assets upon dissolution.

Trusts

In limited situations, the trustee, or a person the court finds to have a sufficient interest in the trust property, can petition the court to alter trust provisions or to terminate the trust altogether. These situations include: where the terms of the trust hamper the achievement of the founder’s objective, prejudice the interests of trust beneficiaries, or are against the public interest (TPCA Section 13). No provision in the Trust Property Control Act explicitly addresses the treatment of assets upon termination of a trust. The trust deed, however, must address the issue if the trust is a registered non-profit organisation or an approved PBO.

Non-Profit Companies

As previously mentioned, a non-profit organization is required to distribute its whole net worth to one or more non-profit organizations, “external non-profit companies” operating in South Africa, non-profit trusts, or voluntary associations with goals comparable to its primary purpose upon winding up or dissolving. The non-profit company’s Memorandum of Incorporation, its directors, if any, or its members, if none, can identify the transferee(s). If none of these parties can identify the transferee(s), a court of law will do so. After the company’s debts and liabilities are paid, no director or member, living or dead, is entitled to any portion of the net worth of the business (Companies Act Schedule 1 para 4).

Registered Non-Profit Organisations

To register under the NPO Act, the organisation must stipulate in its founding document that any assets remaining upon dissolution or winding up will be transferred to another non-profit organisation with similar objectives (NPO Act/1997 Section 12(2)(o)). Failure to transfer the assets to such an organisation may result in a fine, imprisonment, or both for the person responsible (NPO Act/1997 Section 30).

Approved Public Benefit Organisations

In order to obtain approval from the Commissioner as a PBO under the Income Tax Act, Section 30, an organisation must provide in its founding document that any assets remaining upon dissolution or winding up must be transferred to: (1) a similar public benefit organisation approved under Section 30; (2) an institution, board, or body which is exempt from tax under the provisions of Section 10(1)(cA)(i) of the Income Tax Act which has as its principal objective any public benefit activity; or (3) a department of the state (Income Tax Act Section (30)(3)(b)(iii)). If these and other conditions are not contained in the organisation’s founding document, three fiduciaries of the organisation must sign a written undertaking confirming that the organisation will comply with the relevant provisions of Section 30 of the Income Tax Act (Income Tax Act Section (30)(4)). As a matter of practice, approved PBOs are required to amend their founding documents to include those three conditions.

Voluntary Associations

If a voluntary organization follows its founding documents and doesn’t operate for profit, it is free to pursue any legal endeavors in the service of a just cause.

Trusts

As long as trustees stay inside the parameters of the trust deed and their fiduciary duty to the beneficiaries of the trust, they are free to conduct any lawful activity.

Non-Profit Companies

According to Companies Act Schedule 1 para. 1, non-profit organizations are permitted to engage in activities that advance the general welfare, are related to one or more cultural or social endeavors, or are focused on collective or group interests.

Registered Non-Profit Organisations

The NPO Act does not address permissible activities. Given that a registered non-profit organization is typically a trust or a non-profit corporation, guidance on acceptable activities is provided by the laws governing those legal forms as well as the Tax Laws. A voluntary associations founding documents will specify its activities.

Approved Public Benefit Organisations

The Tax Act provides a list of more than sixty activities that are considered public benefits (for additional discussion, refer to Section IV on Public Benefit Status).

Voluntary Associations

As long as generating profit is not an association’s primary goal, it is permitted to engage in subsidiary operations.

Trusts

Trusts are generally flexible structures that can be used for a variety of purposes. The Trust Property Control Act allows for the trust instrument to designate the objective or beneficiaries, but it does not specify limitations to such objectives or beneficiaries (TPCA Section 1). If a trust has a charitable primary purpose, the fact that it has a non-charitable subsidiary purpose will not invalidate it.

Non-Profit Companies

Non-profit organizations are free to engage in any kind of trade, business, or endeavor that is related to or consistent with their declared goals, such as e. the advancement of societal welfare, one or more artistic or cultural endeavors, or collective or group interests (Companies Act Schedule 1 para. 2(a)).

Approved Public Benefit Organisations

The law explicitly limits the extent to which the economic activities of organisations approved as a PBO under Section 10(1)(cN) of the Income Tax Act will be tax exempt. The receipts and accruals from such undertakings or activities shall be exempt from normal tax only if one of the following criteria applies:

A) The project or activity satisfies each and every one of the following criteria:

• It is essential and closely linked to the public benefit organization’s only goal;
• The majority of its earnings are allocated towards covering its expenses; and
• There is no unjust competition with respect to taxable entities as a result.

B) The project or activity is sporadic in nature and primarily carried out by volunteers without pay.

C) The project or activity is authorized by the Finance Minister through a notice published in the Gazette, considering the subsequent considerations:

• The scope and benevolent nature of the undertaking or activity;
• the clear relationship between the project or activity and the public benefit organization’s primary goal;
• The profitability of the undertaking or activity; and
• The potential for economic distortion if the project or activity is carried out by a tax-exempt organization

D) The project or activity does not meet any of the aforementioned requirements, and the money it brings in is not more than the sum of the following:

• five percent of the total income and accruals received by public benefit organizations in the applicable assessment year; or
• 200,000 South African Rand (Income Tax Act §10(1)(cN), as amended).

PBOs are permitted to invest their money, with the possible common law limitations applying.

The Income Tax Act restricts PBOs from using their resources to directly or indirectly support, advance, or oppose any political party (Income Tax Act Section 30(3)(h)). South African law does not restrict the political activities of organisations that are not approved as PBOs, however. Moreover, the law does not clearly restrict lobbying by any organisations.

The Constitution of the Republic of South Africa (1997) provides that neither the State nor any person may unfairly discriminate against anyone on the basis of race (among other grounds) (Constitution Sections 9(3) and (4)). Section 29 of the Constitution establishes an individual’s right to receive a basic education and to further his/her education (Constitution Section 29(1)). The right to receive a public education in the language of one’s choice, where reasonably practicable, is also guaranteed (Constitution Section 29(2)). The Constitution further provides that everyone has the right to establish and maintain independent educational institutions, so long as those institutions do not discriminate on the basis of race (Constitution Section 29(3)(a)).

Act No. 69, Promoting Equality and Preventing Unfair Discrimination 4 of 2000 states that it is illegal for anyone to unfairly discriminate against someone based only on their race. This prohibition extends to a number of activities that are defined by the law, such as engaging in any activity that is meant to promote or has the effect of promoting racial exclusivity. Additionally, the Act offers an example list of unfair practices in particular industries. It states that it is unfair practice to reject someone’s application for membership in a club or association on any of the prohibited grounds, including race. This provision applies to clubs, sports, and associations.

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