The Revenue Laws Amendment Act No. 20 of 2006 introduced new legislation relating to social and recreational clubs which came into effect on 1 April 2007.
Section 10(1)(cO) of the Income Tax Act (the Act) provides exemption from income tax in respect of certain receipts and accruals of social and recreational clubs and section 30A covers the conditions for approval.
In order to qualify for exemption in terms of section 10(1)(cO) of the Act, the club must be approved by the Commissioner for the South African Revenue Service (SARS) and comply with the provisions of section 30A of the Act.
All clubs whether or not they have been previously exempted by the Commissioner SARS must reapply for approval as a recreational club by completing the application form EI 1.
Where the founding document of the club does not comply with the requirements of section 30A, the three unconnected persons acting in fiduciary capacity, must submit a written undertaking EI 2C in accordance the provisions of section 30A(3) of the Act that the club will comply with the provisions of the Act.
The club will be required to amend the founding document within a prescribed period to comply with the provisions of section 30A of the Act.
Clubs were given a transitional period in order to apply for partial exemption in terms of the provisions of section 30A(4), this deadline date was 31 March 2009. This date has, however, been extended to no later than 30 September 2010.
For more information please refer to the Tax Guide for Recreational Clubs (draft).