Section 10(1)(e)(i) of the Income Tax Act (the Act) provides for the exemption from income tax in respect of the levy income received by or accrued to any body corporate, established in terms of the Sectional Titles Act, from its members.
Section 10(1)(e)(ii) of the Act provides for the exemption from income tax in respect of the levy income received by or accrued to a share block company established in terms of the Share Blocks Control Act, from its shareholders.
The Commissioner of the South African Revenue Service (SARS) does not have a discretion in approving the exemptions in terms of sections 10(1)(e)(i) and (ii) of the Act.
The exemption in respect of a body corporate and a share block company in terms of sections 10(1)(e)(i) and (ii) must therefore be approved by the relevant SARS Branch Office in which area such entity is located.
A body corporate and share block company must register as a taxpayer by completing the prescribed application form IT77C.
The relevant SARS Branch Office will annually on receipt of the income tax return apply the provisions of sections 10(1)(e)(i) and (ii) of the Act, accordingly.
It is important to note that the Part F of the application form EI 1 does not make provision for exemption from income tax in respect of sections 10(1)(e)(i) and (ii) of the Act and therefore the application form EI 1 must not be completed.
It remains the practice of the Commissioner SARS to deal with these entities in accordance with paragraph 5.1 of Practice Note No. 8 dated 26 March 2001.