Public Benefit Organisations

On occasion, we are privileged enough to deal with organisations that truly do some good in the world. Those that give their time and resources for the benefit of others. All for no personal gain, profit or recognition. Public Benefit Organisations (“PBO”) are champions of humanity in a world of those stepping over the down-trodden.

Thing is, the good intentions of PBO’s are often thwarted by the actions of others, whether through lack of interest or administrative difficulties.

Case review

One of our clients, a multinational PBO, has experienced the administrative difficulties mentioned. This relates to the Value-Added Tax (“VAT”) position afforded to PBO’s. Without going into extraneous detail, the short story is that the PBO was owed refunds by SARS spanning a 4-year time period. These were not paid to the taxpayer due to constant verification requests that, while the PBO made their best attempts to comply, were insufficient in the eyes of the Commissioner.

Despite what you may be thinking, its not SARS who are at fault here. At least not entirely. The fact is, the PBO didn’t necessarily comply with the burden of proof requirements imposed on it by the Tax Administration Act. Thus, ensued what can only be described as a long and losing battle. It should be added that the PBO did place its faith in a tax practitioner who ultimately did not apply the correct principles to have the matter resolved. The PBO was left somewhat high and dry.

Our steps

The PBO approached us once the situation had become a little more than dire. Fortunately, members of our team are experienced in this matter and were able to provide a solution to the PBO. Not a simple strategy no, but a tried and tested method that ultimately lead to the result our client was so desperate to achieve.

Our strategy allowed the PBO to receive back refunds from SARS amounting into the tens of millions. No small amount of money by any stretch of the imagination. Not only was the PBO able to sleep soundly knowing that their funds were back where they belonged, but they were able to continue their good work through an availability of resources.

What should you do.

The advice here is relatively straight forward. As a PBO making use of the benefits afforded to you by the Income Tax Act, make sure your documents are in order. While its easy to blame SARS for tax hold-ups, frustrations and funds being withheld, fairly often SARS is not to blame.

SARS is bound by the same laws we are and has to follow the same processes we do in order for tax affairs to be effectively administrated. Yes, the argument can be made that SARS doesn’t always follow procedure to the letter, but that is closer to the exception than the rule. The responsibly however rests upon taxpayers to keep their affairs in order and make sure their submissions to SARS are accurate.

PBO’s need to have special regard for their affairs. Given the fraud that exists within the VAT sphere, SARS are particularly stringent on VAT refunds due to taxpayers. Rightfully so. When you understand this, you understand the need to have your house in order.

With VAT, and especially larger refunds due, it is not simply enough to hope that your documentary evidence for the refund is sufficient. You need to be sure. You need to know. If you don’t know and you aren’t sure, its best to use those experienced in the field. Afterall, 4 years is a long time to resolve something that could be correctly sorted in just 30 days.