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PBO’s Brace Yourselves! SARS Deadline Looms for IT3(d) Reporting Due 31st May 2024– Are You Prepared?

IT3 reporting refers to what is known as “third party data reporting” and involves third parties such as banks, medical aid schemes, employers, and fund administrators who by law, must send to SARS certain prescribed data called “third party data”.

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Roxshanna du Toit
Independent Trust & Fiduciary Services Expert

This data is usually sent to SARS in the format of tax certificates which SARS in turn uses in their assessment of various taxpayers. There are different types of tax certificates that are submitted to SARS depending on the third party. Medical aid schemes will submit medical aid tax certificates, fund administrators will submit IT3(b), IT3(c) and IT3(s) tax certificates and employers will submit IRP5 tax certificates. The annual third-party data submission season opens in April and closes 31st May each year. In some cases, third parties are required to submit certificates to SARS bi-annually.

Section 18A approved PBO’s have now been added to the list of third parties required to submit third party data to SARS through the submission of IT3(d) tax certificates.

Why is IT3(d) reporting here?

To understand the presence of IT3(d) reporting, it’s necessary to rewind the clock. In October 2021, the Financial Action Task Force (FATF), being the global money laundering and terrorist financing watchdog concluded their mutual valuation conducted on South Africa. The report evaluated South Africa’s anti-money laundering and counter-terrorism financing laws and found gaps. Amongst the recommendations given by the FATF, two were that South Africa needed enhanced beneficial ownership transparency and improved ability in detecting illegal flows of money. Despite best efforts to prevent the grey listing of South Africa, through the signing of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, 2022 in December 2022, by the President, the FATF proceeded to grey list the country on 24th February 2023.

PBO’s have not been spared from the cross hairs of all these developments and on 9 April 2024 SARS reiterated the responsibility of PBO’s in their Tax-Exempt Institutions Connect Issue 4.

Within this edition, SARS mentioned the forthcoming release of a report titled FATF SA NPO TF SRA scheduled for April 18th and 19th 2024. This report will unveil survey findings evaluating the inherent risk of South African NPO’s being exploited for terrorist financing (TF) with its second part outlining measures stakeholders can take to prevent such exploitation.

IT3(d) reporting has therefore been introduced as a mechanism by SARS in preventing money laundering and terrorist financing through PBO entities.  

What does this mean for Section 18A approved PBO’s?

This year will mark the first time that Section 18A PBO’s are required to participate in third party data reporting through the submissions of IT3(d) tax certificates to SARS. All Section 18A approved PBO’s that have issued Section 18A tax deductible receipts to their donors from 1 March 2023 to 29 February 2024 will be liable for this reporting. If a PBO has not issued any S18A receipts for this period, they must still submit a NIL IT3(d) declaration to SARS. The deadline for these submissions is 31st May 2024.

It is essential that PBO’s make sure that this deadline is taken with the same seriousness as employers take on their IRP5 reconciliations, which share the same deadline date.

Failure to comply puts their special S18A approval with SARS at risk, as the PBO is no longer SARS compliant. These are serious consequences for any PBO as their SARS approval is critical for their continued tax exemption status. It is therefore essential for PBO’s and their tax practitioners to ensure that they understand the process, gather the required information, and make timely submissions of their IT3(d) tax certificates.

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Professor Deborah Tickle

FROM THE DAVIS TAX COMMITEE
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