A non-profit company is incorporated at CIPC for a public benefit or other object relating to a cultural, social or communal interest. Its income and property cannot be distributed to its incorporators, members or directors except as reasonable compensation for services, and on winding up its remaining assets must go to another entity with similar objects. It requires at least three incorporators and three directors. Registering an NPC does not make it tax exempt — that requires a separate application to SARS.
The gap between those last two sentences is where most South African non-profits get into difficulty.
NPC vs (Pty) Ltd
| Non-profit company (NPC) | Private company ((Pty) Ltd) | |
|---|---|---|
| Purpose | Public benefit, or a cultural, social or communal object | Any lawful purpose, generally profit |
| Owners | No shareholders. May have members, or none | Shareholders |
| Can profits be distributed? | No — not to incorporators, members or directors | Yes, as dividends |
| Minimum incorporators | 3 | 1 |
| Minimum directors | 3 | 1 |
| Name ends with | NPC | (Pty) Ltd |
| On winding up | Remaining assets pass to a similar entity | Distributed to shareholders |
| Annual returns to CIPC | Yes | Yes |
"Non-profit" does not mean the entity cannot make a surplus. It can, and a well-run one should. What it cannot do is distribute that surplus to the people who control it. The surplus must be applied to the objects.
It also does not mean nobody gets paid. An NPC can employ people, including its directors, and pay reasonable market-related remuneration for actual services rendered. What it cannot do is distribute profit — the distinction is between paying someone for work and giving them a share of the surplus.
The mistake that costs the most: NPC ≠ tax exempt
This is the single most important thing to understand, and it catches a large proportion of newly registered NPCs.
Registering an NPC at CIPC is a company law step. It creates the entity and defines what it is for.
Tax exemption is a separate application to SARS, to the Tax Exempt Unit, for approval as a Public Benefit Organisation under the Income Tax Act. Approval requires that the entity carries on approved public benefit activities, meets the requirements of the Act, and adopts a founding document containing specific provisions SARS requires.
Until that approval is granted, the NPC is a taxpayer like any other. It has an income tax number, must file returns, and its receipts can be taxable.
Section 18A is a third, further step. PBO approval does not automatically allow you to issue tax-deductible donation receipts. Section 18A approval is separate, available only for specified activities, and it is what donors actually care about.
Three separate approvals, in sequence:
| Step | Who | What it gives you |
|---|---|---|
| 1. NPC registration | CIPC | The legal entity |
| 2. PBO approval | SARS Tax Exempt Unit | Tax exemption on qualifying receipts |
| 3. Section 18A approval | SARS | The ability to issue tax-deductible donation receipts |
Registering an NPC and then telling donors their contributions are tax deductible, without section 18A approval, is a serious problem — for you and for them, because their deduction will be disallowed.
A fourth registration exists and is often conflated: NPO registration with the Department of Social Development, under the Nonprofit Organisations Act. That is voluntary, separate from CIPC and SARS, and many funders and government departments require it. Three different registrations, three different bodies, three different numbers.
What an NPC still has to do
The compliance burden is not lighter than a company's. In several respects it is heavier.
Annual returns to CIPC in the anniversary month, with beneficial ownership. An NPC that does not file gets deregistered exactly like any other company — with the added complication that a deregistered NPC cannot receive funding, and funders notice. See what is your company's anniversary date.
Annual financial statements, and the audit or independent review requirement determined by the public interest score in the ordinary way. See what is the Financial Accountability Supplement.
Income tax returns, whether or not PBO approval has been granted.
Payroll obligations — PAYE, UIF, SDL — where it has employees. NPCs are not exempt from payroll taxes on the salaries they pay.
VAT, on the same basis as any other enterprise where it makes taxable supplies over the threshold. This one is genuinely complex for NPCs, because grant funding, donations and trading income are treated differently. Take advice.
Reporting to funders and to the Department of Social Development where NPO registration is held.
Directors carry the same duties under the Companies Act as directors of any company — fiduciary duties and a duty of care and skill, personally enforceable. Volunteer status is not a defence. See a director's duties under the Companies Act.
When an NPC is the right structure
Where the purpose is genuinely public benefit and you intend to seek PBO and section 18A approval to unlock donor funding.
Where you need to receive grants, from government, corporates or foundations — most require an NPC or NPO registration as a threshold condition.
Where corporate social investment funding is the target. Companies making CSI contributions need section 18A receipts and B-BBEE recognition, which drives them towards approved entities.
Where the founders genuinely accept they cannot own it. This is the one to be honest about. Nobody owns an NPC. There are no shares to sell, no value to realise, and on winding up the assets go elsewhere. Founders who expect to build equity should not be using this structure.
When it is the wrong structure:
You want to run a business that does good and retain the value you build. That is a (Pty) Ltd, possibly with a strong social mission
You want the tax advantages without the constraints. They come together
You are one person. An NPC needs three incorporators and three directors, and a board that exists only on paper is a governance problem waiting to happen
Practical advice for a new NPC
Get the founding document right at registration. SARS requires specific provisions in the MOI for PBO approval. Adopting an MOI that does not contain them means amending it later — a special resolution and a CIPC filing before you can even apply. Draft it for the PBO application from the start.
Apply for PBO and section 18A early. Approval takes time, and funders will ask.
Keep the three registrations straight and know which number a funder is actually asking for.
Separate restricted and unrestricted funds in your accounting from day one. Grant funding that must be spent on a specific project is not general income, and funders audit this.
Get the board functioning properly. Minutes, resolutions, conflict of interest disclosures. See what statutory records must a company keep.
Frequently asked questions
What is a non-profit company in South Africa? A company incorporated at CIPC for a public benefit or an object relating to a cultural, social or communal interest, whose income and property cannot be distributed to its incorporators, members or directors except as reasonable compensation for services. It requires at least three incorporators and three directors, and its name ends with NPC.
Is an NPC automatically tax exempt? No. Registering an NPC at CIPC creates the legal entity only. Tax exemption requires a separate application to the SARS Tax Exempt Unit for approval as a Public Benefit Organisation, and the ability to issue tax-deductible donation receipts requires further section 18A approval.
What is the difference between an NPC and an NPO? An NPC is a company registered at CIPC under the Companies Act. NPO registration is with the Department of Social Development under the Nonprofit Organisations Act and is voluntary. They are separate registrations with separate numbers, and many funders require both.
Can directors of an NPC be paid? Yes, reasonable market-related remuneration for actual services rendered. What an NPC cannot do is distribute its surplus to incorporators, members or directors — the distinction is between paying for work and sharing profit.
Can an NPC make a profit? Yes, and a well-run one should generate a surplus. The surplus must be applied to the entity's objects rather than distributed to the people who control it.
Does an NPC file annual returns with CIPC? Yes, every year in its anniversary month, together with beneficial ownership. An NPC that does not file is referred for deregistration like any other company, and a deregistered NPC cannot receive funding.
Who owns a non-profit company? Nobody. There are no shares, no equity to realise, and on winding up the remaining assets must pass to another entity with similar objects. Founders expecting to build value they can sell should not use this structure.
Do NPCs pay PAYE and UIF? Yes. NPCs are not exempt from payroll taxes on salaries they pay, regardless of PBO status.
Register it, then do the two SARS applications
The CIPC registration is the easy step and the one everyone completes. The PBO and section 18A approvals are what actually unlock funding, and they are where new non-profits stall.
Smartbook registers NPCs with an MOI drafted for the PBO application, handles the SARS Tax Exempt Unit submissions, and keeps the CIPC filings current.
Register a non-profit company →
Last reviewed: 29 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. PBO approval, section 18A status and the VAT treatment of grants and donations are technical areas — take advice on your specific circumstances. CIPC and SARS requirements change from time to time. General guidance, not legal or tax advice.
Primary sources: CIPC · Companies Act 71 of 2008 · SARS — Tax Exempt Institutions · Income Tax Act 58 of 1962 · Department of Social Development