TAX-DEDUCTIBLE DONATIONS

DEDUCTIONS DEDUCTABLE D

Amendments to the Income Tax Act mean that taxpayers now need to ensure that their donations are made to organisations that meet the SA Revenue

Service’s requirements if they want to claim a tax Deduction.

 

A deduction will be allowed in the calculation of the taxable income in respect of a donation made to a Public Benefit Organisation (PBO).

 

Individuals - Limited to 10% (2007 : 5%) of taxable income before the

deduction of donations and medical expenses.

 

Companies - Limited to 10% (2007 : 5%) of taxable income before the

deduction of donations.

 

TAX-DEDUCTIBLE DONATIONS

 

A claim for a tax deduction for any donation must be supported by a receipt issued by the recipient of that donation. It is advised that the following details must be reflected on the receipt:

  • __ The reference number of the PBO as issued by SARS
  • __ The name of the PBO
  • __ The date of the receipt of the donation
  • __ The name and address of the donor
  • __ The value of the donation or nature of the donation if not in cash
  • __ A certification that the receipt is issued for the purpose of section 18A.

 

 

 

A Public Benefit Organisation (PBO) is any welfare, religious or cultural body, private school, bursary fund or charitable trust that has been approved by SARS.

 

The relevant institution

  • to which the bona fide donation of cash or property in kind is made, must be an approved PBO in terms of section 30 of the Income Tax Act. Such an organisation must carry on any public benefit activity that includes certain activities under the following headings:
  • __ Welfare and humanitarian
  • __ Health care
  • __ Education and development
  • __ Conservation, environment and animal welfare
  • __ Land and housing.

The relevant institution :

  • Must be a trust, an association or a Section 21 company;
  • Pursue only approved public benefit activities on a non-profit basis and primarily within South Africa;
  • Be of a “public character”;
  • Submit to the Commissioner of Revenue a copy of the constitution, or other written instrument under which the organisation has been established and which meets the requirements of section 30 of the Income Tax Act.;
  • Register as an non-profit organisation (NPO) in terms of the Non-Profit Organisations Act, 1997 (unless the Commissioner of Revenue waives this requirement);
  • Comply with any reporting requirements set by the Commissioner of Revenue;
  • Not pay “excessive” remuneration to any employee, office bearer or member; and
  • Stay within limitations on business activities.

To apply An organisation should submit to the South African Revenue Service (SARS):

  • A letter of undertaking (Form EI 2, available from our download page) indicating their intention to comply with the new exemption requirements;
  • An application (Form EI 1, available from our download page);
  • Supporting documentation — including the organisation’s constitution or their founding document and most recent financial statement — as indicated in the application form.