Tax and SARS knowledge base
Does a homeowners association need SARS tax exemption?
Must a homeowners association register and apply for SARS income-tax exemption?
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Direct answer
Yes. A homeowners association formed as an association of persons must register for income tax and apply to SARS for approval before relying on the exemption in Section 10(1)(e)(i)(cc). Without approval, SARS states that the association is fully taxable.
Once approved, it must still submit an annual return and keep records for at least five years. This approval requirement differs from the treatment of a body corporate or share block company.
What this means in practice
Do not assume that calling receipts levies makes them exempt. Confirm the entity's legal form and the terms of SARS's approval. Estate, residents' and property associations may operate similarly but still need the correct registration and application.
Approved status also does not make every receipt exempt. Levy income and other receipts must be classified, and non-levy income can be subject to limits and normal tax.
Step-by-step
- Confirm that the entity is an association of persons rather than a statutory body corporate.
- Register the association for income tax and appoint its representative.
- Review the constitution for qualifying objects, member controls and use of funds.
- Prepare the SARS exemption application and supporting documents.
- Continue normal tax compliance until written approval is received.
- After approval, separate levy income from interest, rentals, services and other receipts in the accounts.
- File the annual return and retain the approval letter and supporting schedules.
Documents and records to keep
- Constitution, amendments and member resolutions.
- Income-tax registration and representative details.
- SARS application and approval letter.
- Levy rolls, bank statements and income classifications.
- Annual return, assessment and correspondence.
Important limits and exceptions
Registration with another authority does not replace SARS approval. A body corporate established under the sectional-title legislation follows a different exemption route and should not use an HOA application merely because it manages common property.
When to get tailored advice
Get advice if the association earns rental or advertising income, provides paid services, has large investments, manages mixed-use property or cannot locate its SARS approval.