A public benefit organisation, or PBO, is a non-profit entity SARS has approved to carry on public benefit activities. Its approved status carries tax advantages both for the organisation and for those who donate to it.
What it means
The relevance to payroll is donations. A PBO approved under section 18A can issue a receipt that lets the donor deduct the donation from taxable income, capped at 10% of taxable income. Where an employee donates through the payroll, the employer can take the deduction into account in the PAYE calculation, provided the PBO is section 18A approved.
Where it fits in
When payroll runs an employee donation to a PBO, it applies the section 18A deduction against the PAYE base within the cap, and the amount is reported under the relevant IRP5 source code. The PBO's approval status is what makes the deduction valid.
Key rules
- A SARS-approved non-profit carrying on public benefit activities.
- A section 18A PBO can issue receipts that make donations tax-deductible.
- Donations are deductible up to 10% of taxable income.
- Payroll giving to a section 18A PBO can be reflected in the PAYE calculation.
