A guide to the new tax regime for Recreational clubs
Hitherto, section 10(1)(d)(iv)(aa) of the Income Tax Act 58 of 1962 has granted an exemption from tax to any company, society or association “established to provide social and recreational amenities or facilities for the members”. These words are wide enough to cover social, cultural and sporting clubs, irrespective of their legal structure, in other words, irrespective of whether they are incorporated as section 21 companies, trusts or unincorporated associations.
- Many clubs now engage in business activities
- SARS believes that clubs have exploited their tax-exempt status
- A new tax dispensation for recreational clubs
- Trading or business income of a club, derived from providing amenities to its members
- The scope of the exemption
- The roll-over of capital gains
- The new tax dispensation is not a disaster
- The compliance burden imposed by the new tax rules
- The administrative and accounting compliance burden
- Will club subscriptions have to rise as a result of the new tax rules?
- Consequences of non-compliance
- The way forward.