Public Benefit Organisations (PBOs) could soon benefit from a more affordable way to comply with the South African Revenue Service (Sars)’ requirement to certify that all section 18A donations for which receipts were issued in a tax year, were indeed utilised for public benefit activities.

This follows a proposal by National Treasury to amend the Tax Administration Laws Amendment Bill (TALAB) by substituting the current requirement for an “audit certificate” with a "certificate of examination". Such a certificate confirms that all donations received or accrued to the PBO in that year of assessment for which section 18A (the section in the Income Tax Act providing for the tax deductibility of donations made to any approved organisation, agency or department) receipts were issued, were solely utilised for activities of a benevolent nature.

Accounting professionals say the proposed change, included in the 2025 Draft TALAB, will offer much-needed relief to especially smaller non-profits that often struggle with the high cost of annual audits. The draft amendments, published on 16 August 2025, are open for written comments until 12 September 2025.

Treasury Acknowledges Clarity is Needed

National Treasury has noted that the move is intended to clarify the meaning of audit certificate as there is some uncertainty in the sector about how this term should be interpreted and whether it should bear reference to terminology contained in the Auditing Profession Act (2005). 

In the 2025 Budget Review, Treasury also referred to section 18A of the Income Tax Act which provides that a claim for a deduction for a donation made to a PBO is only allowed if supported by a receipt issued by the organisation containing specific prescribed information.

It states that an organisation conducting mixed section 18A and non-section 18A activities must obtain and retain an audit certificate confirming that all donations for which receipts were issued were used solely to undertake activities covered by section 18A of the act.

Current Requirement Burdens Smaller PBOs

The existing tax framework requiring an audit certificate from PBOs, places a financial burden on many smaller PBOs that cannot afford the cost of a full audit.

In contrast, the proposed certificate of examination entails a less costly form of verification but still provides assurance that the donations for which receipts were issued, were used for the required activities.

It Will Bring Welcome Relief

A certificate of examination may be issued by a registered auditor, but this is not mandatory. It could also take the form of an independent review or a report of factual findings, both of which can be prepared by a qualified independent professional accountant at a lower cost.

This will open the door for other independent professionals (e.g. chartered accountants) to issue the certificate, subject to the requirements that Sars will prescribe by public notice.

Sars is expected to issue guidance on what the certificate of examination must include, the type of report required and who will be authorised to issue it.

Written by Tax Consulting SA