In the 2018 budget speech, the Finance Minister proposed a significant number of changes to address the revenue shortfall that the fiscus was facing.

One of these proposals was to increase donations tax from 20% to 25% for any donations made by a resident in excess of R30 million. This change has been approved and comes into effect from 1 March 2018.

A donation is defined as any gratuitous disposal of property including any gratuitous waiver or renunciation of a right.

Donations tax will be levied on the value of any property disposed of under any donation by any resident, subject to certain exemptions.

The fundamental concept being introduced in the latest amendment is the reference to cumulative donations made by the taxpayer.

Section 56 of the Income Tax Act identifies certain donations that are exempt from donations tax, for example donations to a Public Benefit Organisation (PBO) or to a spouse. However, exempt donations are still donations as defined. This means that a taxpayer would have to declare to SARS the value of all donations made.

As a result of this amendment, the cumulative value of all donations will have to be maintained with effect from 1 March 2018 so as to determine when the cumulative R30 million threshold has been exceeded. At that point, any further taxable donations will be subject to donations tax at a rate of 25% as opposed to 20%.

Should you believe that this may be applicable to you, it is important to discuss this with your tax advisor.                                

Engela Crocker

Associate: Tax, Johannesburg

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