(2)     The Commissioner must approve a recreational club for the purposes of section 10(1)(cO), if-

(a)     that club has submitted to the Commissioner a copy of the constitution or other written instrument in terms of which it is established and which provides that –

(i)      it is required to have at least three natural persons, who are not connected persons in relation to each other, to accept the fiduciary responsibility of that club and no single person directly or indirectly controls the decision making powers relating to that club;

[Subparagraph (i) substituted by section 42(a) of Act 60 of 2008 and by section 7(a) of Act 18 of 2023]

 

(iA)   its activities must be carried on in a non-profit manner;

(ii)     it is prohibited from directly or indirectly distributing any surplus funds to any person, other than in terms of subparagraph (iii);

(iii)    it is required on dissolution to transfer its assets and funds to-

(aa)   any other recreational club which is approved by the Commissioner in terms of this section;

(bb)   a public benefit organisation contemplated in paragraph (a)(i) of the definition of a ‘public benefit organisation’ in section 30(1) which has been approved in terms of section 30(3);

(cc)   any institution, board or body which is exempt from tax under the provisions of section 10(1)(cA)(i), which has as its sole or principal object the carrying on of any public benefit activity; or

(dd)   the government of the Republic in the national, provincial or local sphere, contemplated in section 10(1)(a);

(iv)    it may not pay any remuneration to any person which is excessive, having regard to what is generally considered reasonable in the sector and in relation to the service rendered, nor may any remuneration be determined as a percentage of any amounts received or accrued to that club;

(v)     all members must be entitled to annual or seasonal membership; and

(vi)    members are not allowed to sell their membership rights or any entitlement in terms thereof;

(b)     the club undertakes to submit to the Commissioner a copy of any amendment to the constitution or other written instrument under which it is established;

[Paragraph (b) amended by section 7(b) of Act 18 of 2023]

(c)     the Commissioner is satisfied that the club is or was not knowingly a party to, or does not knowingly permit, or has not knowingly permitted, itself to be used as part of any transaction, operation or scheme of which the sole or main purpose is or was the reduction, postponement or avoidance of liability for any tax, duty or levy which, but for such transaction, operation or scheme, would have been or would have become payable by any person under this Act or any other Act administered by the Commissioner; and

[Paragraph (c) amended by section 7(c) of Act 18 of 2023]

(d)     the Commissioner is satisfied that the club does not have a person acting in a fiduciary capacity, who is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.

[Paragraph (d) added by section 7(d) of Act 18 of 2023]

(3)     Where the constitution or other written instrument under which the club is established does not comply with the provisions of paragraph (a) of subsection (2), it shall be deemed to so comply if a person responsible in a fiduciary position for the funds and assets of such club furnishes the Commissioner with a written undertaking by such club that such club will be administered in compliance with the provisions of this section.

(4)

(a)     Subject to paragraph (b), where a club applies for approval, the Commissioner may approve that club for purposes of this section with retrospective effect, if the Commissioner is satisfied that that club during the period prior to its application complied with the requirements of a “recreational club” as defined in subsection (1).

(b)     For the purposes of paragraph (a), where the club—

(i)      has complied with all its obligations under chapters 4, 10 and 11 of the Tax Administration Act, the Commissioner may not extend approval to the years of assessment in respect of which an assessment may in terms of section 99(1) of that Act not be made; or

(ii)     has not complied with all its obligations under chapters 4, 10 and 11 of the Tax Administration Act, the Commissioner may not extend approval to the years of assessment in respect of which an assessment could in terms of section 99(1) of that Act, not have been made had the income tax returns relating to those years of assessment been submitted in accordance with section 25(1) of that Act.

[Sub­section (4) substituted by section 26(1)(a) of Act 8 of 2007, by section 42(1) of Act 17 of 2009 and by section 36 of Act 34 of 2019]

(5)     Where the Commissioner is –

(a)     satisfied that any recreational club approved under subsection (2) has during any year of assessment in any material respect; or

(b)     during any year of assessment satisfied that any such recreational club has on a continuous or repetitive basis,

failed to comply with the provisions of this section, or the constitution or other written instrument under which it was established to the extent that it relates to the provisions of this section, the Commissioner shall notify the recreational club that he or she intends to withdraw the approval of that recreational club if no corrective steps are taken by that club within a period stated in that notice.

(6)     If no corrective steps are taken by a recreational club as contemplated in subsection (5), the Commissioner must withdraw approval of that club with effect from the commencement of the year of assessment contemplated in subsection (5),

(7)     If the Commissioner has withdrawn the approval of a recreational club, that club must within six months after the date of that withdrawal (or such longer period as the Commissioner may allow) transfer or take reasonable steps to transfer its remaining assets to any recreational club, public benefit organisation, institution, board or body or the government, as contemplated in subsection (2)(a)(iii).

(7A)  As part of its dissolution the club must transfer its assets to a recreational club, public benefit organisation, institution, board or body or the government, as contemplated in subsection (2)(a)(iii).

(8)     If the recreational club fails to transfer, or to take reasonable steps to transfer, its assets as contemplated in subsection (7) or (7A), an amount equal to the market value of those assets which have not been transferred less an amount equal to the bona fide liabilities of that recreational club must for purposes of this Act be deemed to be an amount of taxable income which accrued to that recreational club during the year of assessment in which approval was withdrawn or the dissolution took place.

(9)     Any person who is in a fiduciary capacity responsible for the management or control of the income and assets of any approved recreational club and who intentionally fails to comply with any provision of this section or of the constitution, or other written instrument under which such recreational club is established to the extent that it relates to the provisions of this section, shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 24 months.

(10)   A person may not act in a fiduciary capacity if that person is disqualified in terms of section 6 of the Trust Property Control Act, 1988 (Act 57 of 1988), section 25A of the Nonprofit Organisations Act, 1997 (Act 71 of 1997), or section 69 of the Companies Act.

[Subsection (10) inserted by section 7(e) of Act 18 of 2023]

(11)   A person who fails to comply with the provisions of subsection (9A) shall be guilty of an offence and liable, on conviction, to a fine or to imprisonment for a period not exceeding 24 months.

[Subsection (11) inserted by section 7(e) of Act 18 of 2023]

[Section 30A inserted by section 25(1) of Act 20 of 2006 with effect from 1 April, 2007 and applicable in respect of any year of assessment commencing on or after that date]