Tax And Employment Obligations
An NPO is not automatically exempt from taxes in South Africa. Organisations need to apply for approval as a public benefit organisation (PBO) in order to gain income tax exemption. If you are unclear about PBO status, and the related requirements, please do attend the upcoming training on 21 April in Cape Town. Please contact Ziyo for more details – email@example.com.
Please note that there are no special concessions available to NPO’s or PBO’s when it comes to an employer’s tax obligations – those obligations kick in as soon as an NPO has one or more employees:
- An NPO (or any person) that pays staff (no matter what form that payment takes) is obliged to register as an employer and meet all its obligations as an employer in respect of its employees.
- These obligations include the deduction of PAYE (employee’s tax) as per current legislation; this includes part-time employees, from whom 25% PAYE is deducted.
- UIF (Unemployment Insurance), COIDA (Compensation for Occupational Injuries and Disease) and SDL (Skills Development Levies) also all apply according to the rules for each, although there are exemptions from SDL for some PBO’s.
- PAYE, UIF, SDL and COIDA are not, however, payable on payments to genuine independent contractors.
The nature of the relationship between the organisation and an individual being paid determines if it is one of employer/employee or not. You cannot alter the nature of the relationship:
- by referring to an individual as a “consultant” or “independent contractor”, even in the contract with them;
- by writing into a contract of employment that a person is responsible for their own taxes; or
- by accepting an invoice from that individual to the organisation.
You need to examine the relationship and then make an informed decision as to whether or not the individual is an employee.
Obligations as an employer are also determined by other laws, such as the Labour Relations Act (LRA), Basic Conditions of Employment Act (BCEA), Employment Equity Act (EEA), Occupational Health and Safety Act (OHSA) and more, so it is important to be clear on the provisions of this legislation too. Do not be caught short of meeting these important obligations, many of which are in place to protect employees from unfair labour practice and ensure fairness.
Ziyo will share more important information on issues related to employment and human resources in our newsletters and workshops later in the year.