Donations Tax in just over 300 words

This bulleted list tells you pretty much all you need to know

What is Donations Tax?

• Donations tax is levied at two rates:
• 20% on donations up to R30 million
• 25% on donations exceeding R30 million

Good news: The first R100 000 of donations made within a tax year is exempt from tax.  However, for companies and trusts, the exemption amount is only R10 000 within a tax year.

What constitutes a donation?

A donation occurs when you make a gratuitous disposal of property or waive a right without expecting anything in return.  This includes:

• Cash payments
• Physical assets
• Services
• Rights (corporeal or incorporeal)
• Items given away at discounted prices

Important: For a valid donation, there must be no expectation of receiving something in return – this distinguishes it from attempted bribery or business transactions.

Tax obligations and compliance

For donors:

• Submit declaration form IT144 to SARS
• Pay any applicable donations tax by the end of the month following the donation
• Only applies to South African tax residents. Non-residents do not pay donations tax in South Africa.

For recipients (donees):

• Declare gifts as ‘Amount Considered Non-Taxable’ on tax return ITR12
• May become jointly liable if donor fails to pay donations tax

Key Donations Tax exemptions

Spousal donations

• All donations between legally married spouses are tax-exempt
• Does not apply to cohabiting couples

Charitable donations

• Donations to approved Public Benefit Organizations (PBOs) are tax-deductible
• Limited to 10% of donor’s taxable income
• Requires Section 18A certificate from the PBO
• Excess amounts carry forward to the next tax year

Other exempt donations

• Donations made in terms of a will
• Bona fide maintenance contributions
• Donations to government entities
• Donations to registered political parties

Smart donation planning

To optimise your donations from a tax perspective:

• Track your annual donation total to utilise the R100 000 exemption effectively
• Obtain and keep Section 18A certificates for charitable donations
• Consider spreading large donations across tax years
• Consult with a tax practitioner for complex donations

Jonty Leon, managing partner, Leap Group.
Reinert van Rensburg, attorney and tax practitioner, Leap Group.