Donations tax explained

A look at the tax implications of donations made and donations received

Any donation event involves two parties - namely one that is making the donation (the donor) and the other that is receiving the donation (the donee).

Depending on which party you are in the donation transaction, there are different responsibilities with regards to the same donation transaction.

When you are the donor

You would be responsible for making the declaration to SARS and paying any donations tax.

Donations tax is not a tax on income, but a tax on the transfer of assets. There are a number of reasons why people would make donations, but regardless of the reason, if you are giving something away for no consideration, it would be classified as a donation and donations tax may be applicable.

Donations tax is levied at different tiers:

• Any donations made from 1 March 2018 up to the aggregate value of R30 million, will be taxed at 20%.
• Any donations made from 1 March 2018 that in aggregate exceeds R30 million, will be taxed at 25%.

It is important to note that any exempt donations made should be excluded from the calculation of the “aggregate value” to determine the donations tax rate.

When a taxable donation is made, it is important to complete the Donation Declaration Form – IT144. This form, together with the proof of payment, has to be submitted to SARS.

The donations tax is payable by the end of the month following the month during which you have made the donation. For example, if a donation is made on 14 April 2024, then the donations tax becomes due and payable by 31 May 2024.

It should be noted that Donations tax cannot be paid via a direct electronic funds transfer to SARS. Payment of the tax can be effected by means of an “Additional payment” instruction that is created in e-filing. This will push a payment instruction through to the bank account captured. The donor would then still have to release the payment in their online banking product before the due date to ensure the payment reaches SARS.

If you made a donation to a qualifying Public Beneficiary Organisation (“PBO”), it would be an exempt donation and thus not subject to donations tax. If the PBO issues a Section 18A donations tax certificate, the donor would be eligible to claim a donation deduction in their annual tax return subject to certain limitations.

We are anticipating that these donations will be pre-populated in the donor’s annual tax return in future as all PBO’s have to submit these donation details to SARS each year, but only time will tell if this will happen in practice.

If you are interested in the PBO submission requirements, you can read a previous article on the Deadline for submission of IT3(d) returns.

When you are the donee

When you are an individual that receives a donation, you also have responsibilities.

You have to declare the fact that you have received a donation in your annual tax return under the Non Taxable Amounts section. This donation received is exempt from Income Tax as it is a receipt of a capital nature, however, you still have an obligation to declare the donation received to SARS.

The donee could also be held responsible for the payment of the donations tax in the event that the donor failed to pay the donations tax over to SARS. If this is the case, the donee would have to follow the above mentioned steps to load the payment instruction to effect the payment of the donations tax to SARS. The donee is then at liberty to recover the donations tax from the donor.

As you can see, no good deed goes unpunished. There are requirements to adhere to in order to ensure that you remain compliant when party to a donation transaction.