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The classifications NPC, PBO, NGO and NPO as well as EI all refer to entities that are not intended to make profits for their shareholders, but the acronyms certainly cause a lot of confusion. Here’s what they mean and how they relate to each other.

The term Non Profit Company (NPC) came with the new Companies Act of 2018. It replaced what were know as s21 companies, which were formed under section 21 of the old Act. It is a company registered with CIPC and its essential features are

  • There must be at least three independent incorporators
  • It must be formed to perform some altruistic function
  • It is not allowed to declare dividends either in kind or in specie. This means that upon being wound up, its assets must be passed on to a similar NPC and cannot be distributed to its members.
  • Its members or directors may draw reasonable remuneration for services rendered
  • Its company name ends with NPC (not Pty Ltd)
  • Its rules are contained in its Memorandum of Incorporation, a standardised document contained in the Companies Act

A Non-Government Organisation (NGO) is like a Non Profit Company that is not registered as a company at CIPC. This would typically be a church, a sports club, charity or the like.

  • There are no universal rules regarding its founders
  • Its rules are contained in its Constitution

A Public Benefit Organisation (PBO) is either a NPC or a NGO which has registered under s30 of the Income Tax Act at SARS as a PBO, in order to do which it must satisfy these conditions

  • There must be at least three independent incorporators
  • It must be formed to perform a qualifying altruistic function accessible to members of the general public
  • Its members or directors may draw reasonable remuneration for services rendered

Having been registered, it benefits in the following ways

  • It will have also registered at SARS as an Exempt Institution (EI) so is exempt from Income Tax
  • Any donations made to the PBO may be treated as tax deductible expenses by the donor. This is an important incentive to donate.

A Non Profit Organisation (NPO) is either a NPC or NGO which has registered with the Department of Social Development, in order to do which it must satisfy these conditions

  • There must be at least three independent incorporators
  • It must be formed to perform a qualifying altruistic function accessible to members of the general public
  • Its members or directors may draw reasonable remuneration for services rendered

Having been registered, it benefits in the following way

  • It may now apply for donations from certain entities, such as the National Lottery and the Department itself
  • Interestingly, if a NGO registers as a NPO at the department, their certificate states NGO and not NPO.

Here’s a summary

NonProfit

 

21 comments

  1. Good day

    If I understand correctly any purpose for public benefit can be registered as an NPC and then later also apply to register as an NPO at the Department of Social Development? Isn’t it better to rather register as an NPO from the beginning?

    Can schools, churches etc. register as NPC?

    Thank you.

    1. Hi Claudette,
      My apologies for the late response. I have been hospitalised.
      To answer your second question first. Yes, our school is a NPC
      The entity must either be registered as an NPC or have a constituion making it an NGO, in order to register as a NPO.

  2. I would like to ask if it is compulsory to have three incorporators when applying for an NGO company.

    1. Hi Fanie,

      If it is a Non Profit Company registered with CIPC, yes it is compulsory.
      If it is an NGO, which is not registered then no, it is not.
      If, however, you want to register the NGO as a Non Profit Organisation with the Department of Social Development, or with SARS as a Public Benefit Organisation, then it is compulsory.

    2. Hi Judith,
      If it is a Non Profit Company registered with CIPC then yes it is compulsory.
      If it is an NGO, not registered anywhere, then it is not compulsory.
      If the NGO wants to register as a Non Profit organisation with the Department of Social Development or with SARS as a Public Beneift Organisation, then it is necessary.

  3. Michelle seth

    Does an ngo or npo registered with cipc and dsd require a share register?

    1. Hi Michelle,
      You mean an NPC (Non Profit Company). If shares are issued, then there must be a share register. If no shares are issued (which is an option), then there can be no share register.
      A share register is a simple document (ours are Excel spreadsheets), and it is filed on the server at the registered office.

  4. Hello,my clinic is registered as a private clinic,now I need funding should I change it to npc or ngo for us to be funded.
    2.when you retire or die as a founder what happens to the company whether npc or ngo do I write my daughter my son as a beneficiary
    Thank you

    1. Hi Zodwa,
      You can chose between NGO and NPC. The difference is that an NGO is governed by its Constitution which you would have to draw up, whilst a NPC is governed by its Memorandum of Incorporation, of which there is standard at CIPC. You would then have to register it as a Public Benefit Organisation at SARS so that donors can deduct their donation from their taxable income, thereby gaining a tax benefit. We can do all of this except drafting a constitution, so you would need to contact me for a quotation once you have decided which way you want to go.
      You cannot make your children beneficiaries. These are “Public” benefit organisations, not family benefit organisations. I think you need to have a chat with me on Zoom or Google Meet. You can book no charge meetings here https://harbourassociates.youcanbook.me/

  5. Jean-Paul Stuyck

    Hi Derek,
    I represent the Velddrif Sakekamer in Velddrif and we would like to register our organisation and be compliant with the necessary bodies. As per your explanation above we should be registered as a PBO so that our donors can claim their donations from income tax correct? Then we will need to also register as a Exempt Institute with SARS so that our income is exempt from income tax. So if I understand you correctly we do not need to register with an other body? Unless we want to get government funding then we could register as a NPO with the department of Social Development? Do we need to register as a NPC if we do not want to? My thinking is that we would like our constitution be our guidelines and not the companies act or any other body if that is possible.
    Please advise if we / I am on the correct path.
    Thank you JP Stuyck

    1. Hi Jean-Paul,
      You are 100% spot on.
      Your NGO need not register as a NPC.
      The registration as an EI is done simultaneously with the registration as a PBO and the qualifying criteria are the same.

  6. Thank you for the information. I want to register the Foundation where my focus will be to assist the elderly people. Where do I fall? NPO or NPC or must I register with both CIPC and Social Development

    1. Hi Bongi,
      You can choose between an NGO (not registered at CIPC) and an NPC (registered at CIPC). You need to read the article more carefully and especially study the diagram.
      Having decided whether NGO or NPC you then chose whether or not to register at Social Development as an NPO. This is optional.
      You will have to register with SARS, either as a regular taxpayer or, if you qualify, as an Exempt Institution and a Public Benefit Organisation. The qualifying requirements are set out in the article.
      The whole process is quite expensive
      NPC R9 620 or
      NGO You have to draw up a constitution.

      NPO R6 500

      Ordinary taxpayer R2 800 or
      EI and PBO R6 500

  7. Hi

    My question relates to a (smallish) church. It is registered in terms of the NPO Act of 1997 and submits its annual reports, narratives etc. But it is not registered with SARS. My questions are:
    1. As it stands now, is the church liable for tax on its income, and if this church donates a property to another church, is it subject to donations tax? (given it does not have a specific PBO exemption that may cover donations tax)
    2. Can the church register with SARS to be exempt from tax, without registering as a PBO (and all the administration that goes with it)? (the intention is not to attract funds by offering the S18A benefit therefore PBO is not required unless it IS to be exempt from tax)

    Kind regards

    1. Hi Riaan,
      1. Yes it is subject to Income Tax. If the other church is registered as a PBO then no Donations Tax and the donation is a deductible expense. If not, then Donations Tax is payable by the donor. It has nothing to do with whether your church is registered as a PBO.
      2. Your church can register separately as an Exempt Institution at SARS, but may as well register as a PBO as there is no administration that goes with it. Either way, our fee is R6 500.

      1. Thank you Derek

        So to confirm it seems like the donor church will be subject to donations tax even if it (the donor) was itself a PBO, or a tax exempt institution? Therefore, status as a tax exempt institution or PBO is driven by the receipts being tax exempt, and for the donor party there may only be some relief in terms of S18A (depending on receiver being a PBO)?
        Thanks again

        1. Hi again Riaan, Yes to the first sentence. An Exempt Institution does not pay tax on income. Nobody pays tax on donations received. The only reason for registering as a PBO is to encourage donors, as they do not pay Donations Tax and can deduct the donation from their taxable income. A PBO is not exempt from Income Tax (except that it will almost certainly also be an EI). If you think about it, it would defy logic for a PBO or an EI to be exempt from Donations Tax, because, if it were, it could make tax free donations to you or anybody else and you would receive them free of tax.

  8. Hi,

    Our organisation is registered with the Department of Social Development as a NPO. Apart from registering at SARS as EI and PBO, is it necessary to register with cipc as a NPC?

    Thanks,

  9. Ntsiki Sitoe

    Hi,

    thanks for the information about the NON PROFIT COMPANIES , i want to ask about our NPC we are registered with CIPC do we need to register as well to Social Development ? and how about SARS . Actual i need to understand the compliance for our NPC to receive donation and registered with SETAs

    1. Hi Ntsiki,
      These are the other registrations and their effect –
      1) Register at SARS as an Exempt Institution (EI) – then income is not taxable
      2) Simultaneously register at SARS as a Public Benefit Organisation (PBO) – then donors can deduct their donations from their taxable income.
      3) Register with the Department of Social Development as a Non-Profit Organisation (NPO)- only necessary if required by your donors or if applying for lottery grants.
      We can do all of these for you.

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