Donations Tax and Exemptions

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Donations Tax and Exemptions

Donations tax is tax payable at a flat rate on the value of property disposed of by donation (sections 54 to 64 of the Income Tax Act, 1962). Donations tax is levied at a flat rate of 20% on the value of the property donated. However, the amount of donations exceeding R30 million is taxed at a rate of 25%.

 

A donation is widely defined and includes property disposed of for an inadequate consideration (section58).

Exemptions

Section 56(1) contains a list of exempt donations which include amongst others donations between spouses and donations to approved public benefit organisations.

Current Annual exemptions

A donation will be exempt if the total value of donations for a year of assessment does not exceed:

  • The first R100 000 of property donated in each year by an individual is exempt from donations tax.
  • In the case of a taxpayer who is not an individual, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total. In other words, these are casual gifts by companies and trusts: R10 000 (section 56(2)(a)).
  • Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
  • Donations by individuals: R100 000 (from 2008 to 2017 years of assessment) (section 56(2) (a) and (b)).

Also qualifying for exemption is so much of any bona fide contribution made by the donor towards the maintenance of any person. While not limited to a specific amount, this exemption is limited to what the Commissioner considers reasonable (section 56(2)(c)).

Deductions

Deductions in respect of donations to certain public benefit organisations are limited to 10% of taxable income (excluding retirement fund lump sums and severance benefits). The amount of donations exceeding 10% of the taxable income is treated as a donation to qualifying public benefit organisations in the following tax year.

Who is it for?

Donations tax applies to any individual, company or trust that is a resident as defined in section 1 of the Income Tax Act, 1962.

 

Non-residents are not liable for donations tax.

 

The person making the donation (donor) is liable for the tax but if the donor fails to pay the tax within the set period the donor and donee are jointly and severally liable for the tax (section 59).

 

Public companies and public benefit organisations amongst others are exempt from donations tax (section 56(1) (h) and (n)).

What steps must I take?

After making a donation you should fill in form IT144(Declaration by donor / donee) and submit it to your nearest SARS branch with your proof of payment.

When should it be paid?

Donations tax must be paid by the end of the month following the month during which the donation takes effect or such longer period as SARS may allow (section 60(1)).

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