What is a non-profit body?
For VAT purposes, a non-profit body is any society, association, or organisation (whether incorporated or not) that is not carried on for profit or gain of any member, and whose rules do not allow the distribution of money, or other property, to any of its members, proprietor or shareholders.
Most charitable organisations, sports clubs, service organisations, professional groups, churches, social clubs, school committees, and Parents & Teachers Associations are non-profit bodies for the purpose of Value Added Tax.
When is a Non-profit organisation taxable for VAT purposes?
Whether a non-profit organisation is taxable or not depends on:
- the particular supply it makes.
- whether its supply is considered to be to the disadvantage of a registered person.
Whether a non-profit organisation is carrying on an activity in competition and to the disadvantage of a taxable activity, will depend on the following factors:
- the nature and type of goods and services being supplied.
- the value of supplies.
- whether the consideration received is less than the cost of making those supplies.
- the value of any unconditional gifts received both in kind and money, and
- whether the making of the supplies is being subsidised by the unconditional gifts received.
Subject to the above factors, a non-profit organisation will be considered to be carrying on a taxable activity if it engages in the following on a continuous and regular basis and the gross turnover exceeds FJ$100,000. For years prior to 2012, its FJ$50,000.
- the right of admission or membership of a club, association through subscription fees etc.
- charging for the admission of persons to any premises.
- the leasing or hiring of any real/personal property.
- the operation of a commercial oriented venture that involves the supply of goods and services at a price.
- the supply of advertising services by way of a fee/sponsorship and
- the right to participate in any event carried on/organised by that non-profit organisation, for a fee/charge.
What is a charitable organisation?
A charitable organisation can be any institution, body of persons or irrevocable trust of a public character established solely for the relief of the poverty or distress of the public.
- non-profit body.
- the funds owned by the organisation will not be available to any member for personal use.
- the assets of the organisation will not be available to any member for personal use upon cessation.
- the assets will be distributed to other charitable organisations upon closure.
Is a charitable organisation exempt from tax?
An organisation that has been registered under the Charitable Trusts Act or any other Act by its members is automatically exempt from paying income tax.
Do charitable organisations apply for exemption?
To qualify for exemption from income tax, application in writing must be made to the Chief Executive Officer. The application must be submitted with the taxpayer registration form in the case of new charitable organisations that have not registered with FRCS.
The instructions for completing the registration form state that all necessary information relating to the establishment of the business must be provided.
The contents of the Articles of Association, Memorandum of Association or Trust objectives will enable the Chief Executive Officer to make a decision on whether or not the income of the organisation would be subject to income tax.
How do I register?
Every person liable to taxation under the provisions of the Income Tax Act or who becomes liable to register under the provisions of the Value Added Tax (VAT) Act must complete a registration form within 21 days from the commencement of the taxable activity as specified in the legislation.
For income tax purposes, employers must register within thirty (30) days of the commencement of any trade, business, profession or vocation.
For VAT purposes, Section 22 (3) of the VAT Act requires every person who becomes liable to register to do so within twenty-one (21) days.
Once an application for VAT registration is received, the Chief Executive Officer must consider whether a person is eligible to be registered. This involves considering the person’s eligibility in terms of Section 22 of the VAT Decree.
To assist in the prevention of fraudulent VAT registration, an identity check must be completed therefore applicants must provide:
- original documents relating to the formation of the business such as certificate of registration from the Registrar of Companies office, memorandum of association or articles of association.
- the name of the authorised officer and contact details such as telephone number.
- the exact location of the business premises.
Anyone who carries on a taxable activity with a gross turnover that is more than FJ$100,000 in twelve (12) months must register.
Once the Chief Executive Officer is satisfied that an entity who has applied for registration is eligible to be registered, the entity is then ‘REGISTERED‘ and will be notified accordingly.
Tax treatment for Charities/Non-profit organizations
Income from charities and non-profit organizations are usually exempted from income tax in view of their nature of business or service. This shall only apply if the income derived from such business is not distributed for the personal gain of any of the members, proprietors or shareholders.
Some of them act as government agencies to help government in providing social services.
However, charities and non-profit organizations which operate along commercial lines and those that are directly engaged in competition with other similar organizations may not be exempted from income tax.
Tax treatment for donations to approved charitable institutions
In accordance with section 24 of the Income tax act 2015, “Subject to this section, a person is allowed a deduction for a cash donation made in a tax year to an approved academic or charitable institution.”
An approved charitable institution means a charitable institution approved by the CEO in accordance with the regulations. For more information on requirements to apply for approved status, please email policy section on email – firstname.lastname@example.org