SARS Interpretation Note 139: Taxation of amounts paid to pastors and missionaries

What IN 139 covers

Legislative basis

IN 139 is issued under the Income Tax Act No. 58 of 1962 (as amended) (“IT Act”), with specific reference to the definition of “gross income” in section 1(1) thereof. Paragraph (c) of this definition includes any amount received or accrued “in respect of services rendered or to be rendered”.

While such amounts are generally received or accrued in terms of an employment relationship, IN 139 makes it clear that an employment relationship is not a prerequisite for an amount to be taxable. The decisive question is why the amount was paid, rather than how it is labelled or structured.

Honoraria, stipends and donations

SARS explicitly states in IN 139 that the description attached to a payment is not a determinative factor in determining its income tax treatment. Amounts received by or accrued to pastors or missionaries may be taxable even where they are:

• Described as honoraria, love offerings or donations;
• Voluntary and not contractually enforceable;
• Paid irregularly or on a once‑off basis;
• Received directly from congregants or supporters; or
• Channelled through a church or religious organisation acting as a conduit.

Where the payment of such amounts is made because the individual performs religious or related services, SARS regards it as being received “in respect of services rendered”, and therefore constituting gross income for tax purposes.

Donations: Payer versus recipient perspective

IN 139 reinforces an important distinction that is frequently misunderstood: A payment may constitute a donation in the hands of the payer, but still constitute taxable income in the hands of the recipient.

The motive or generosity of the donor does not determine the tax treatment of the amount received by the pastor or missionary. SARS instead focuses on the link between the payment and the services performed.

Facts‑and‑circumstances analysis

IN 139 adopts a substance over form approach and lists a number of factors that must be considered, including:

• The capacity in which the amount was received;
• Whether such payments are a common incident of the individual’s calling or vocation;
• Whether the amount can be traced to gratitude for services rendered;
• The role played by any religious organisation in administering or channelling funds; and
• The frequency, nature and purpose of the payments.

While no single factor is decisive, SARS acknowledges that, in most pastoral and missionary arrangements, these indicators will point towards the amounts constituting gross income.

Impact on churches and religious organisations

Churches and similar religious bodies should carefully consider their payment structures. Depending on the facts, SARS may regard regular or structured payments to pastors as remuneration, potentially triggering:

• PAYE withholding obligations;
• Increased scrutiny of “conduit” arrangements; and
• A need to review governance frameworks, payroll practices and tax compliance.

The takeaway

IN 139 does not introduce new law, but it does formalise SARS’ interpretation on the tax treatment of these amounts, and signals a stronger enforcement stance. This certainly places a limit on scope for dispute. It confirms and entrenches SARS’ position that such amounts are, in most cases, taxable income, notwithstanding their voluntary nature or the absence of a formal employment relationship.

Pastors, missionaries and religious organisations should proactively review existing arrangements and receipts, assess compliance risks and seek appropriate professional advice.

Authors

Jean-Jacques Blignaut

Greg Boy