To continue our series of blog articles focusing on types of tax, we turn our attention to Donations tax.

Most of us know the saying “It is better to give than to receive”. While that is true, it probably wasn’t taking into account the tax implications of giving which many are unaware of.

If you are reading this article then chances are that you are in the fortunate position of either receiving or giving a donation and this article will highlight the tax implications on both sides.

Tax implications of donations in South Africa

There are various tax implications for both the donor (person/company giving the donation) and the donee (person/company receiving the donation).

If you are receiving a donation (Donee)

If you have received a gift, you are not technically liable to pay any tax. You must however declare the donation to SARS as part of your non-taxable income.

There is however one important caveat. If the donor is liable for Donations tax and doesn’t settle their tax, you become jointly and severally liable to pay this tax. It is therefore your responsibility to check that the donor has settled any donations tax that they may be liable for.

If you are giving a donation (donor)

As an individual

In your personal capacity, you have a limit of R100 000 per year where you can make donations tax free. Anything over R100 000 is taxed at a flat rate of 20%. This means that if you made donations of R200 000 in a single year, you would be taxed 20% of R100 000, making you liable to pay SARS R20 000 in tax.

The payment to SARS must be initiated on or before the end of the month following the month in which the donation took place.

As a company:

If you are a company or trust, you are liable for Donations tax if your annual casual gifts exceed R10 000.

Exemptions:

Donations between spouses or to public companies and Public Benefit Organisations are exempt from Donations tax. If you are not a resident of South Africa, you are also not liable for Donations tax.

If your business is making donations for significant amounts or if you are an individual who has a question about Donations tax, we recommend you speak to a tax consultant. At Dirmeik Consulting you can expect expert advice and friendly service. Call us today:
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881