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The Ins and Outs of Donations Tax

Have you been the lucky recipient of a gift or donation from a generous family member or friend? Perhaps they struck it lucky on the Lotto and decided to share their winnings with you!

Or maybe you're the giving type and have donated cash, shares or even property to someone you felt deserved a little boost.

Irrespective of whether you're the giver or receiver of a donation or gift, it's good to understand donations from a tax perspective, and how to declare these to SARS.

Ready to find out?

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What to Declare to SARS for Donations Tax

If You're the Donee (The Recipient of the Donation):

If you've received a donation or gift then it's 100% tax free in your hands. There's no tax consequence for you as a beneficiary!

You must, however, remember to declare it in your Tax Return (ITR12) as an “Amount Considered Non-Taxable.” This is to ensure that you're declaring all your income to SARS, including the non-taxable portion.

There's one exception for the donee though. If the donor fails to pay the Donations Tax on time, the donor and donee become equally responsible for the tax. You certainly don't want to be paying taxes for a gift, so if you're ever on the receiving end, be sure to highlight the potential tax consequences to the donor.

If You're the Donor (The Giver of the Donation):

If you've been the generous giver, you're liable for Donations Tax, which is levied at a flat rate of 20% on the value of the donation or gift. It may sound harsh, but there's some good news. Donation Tax only kicks in once you've donated more than R100 000 in a single tax year. In other words, you may make multiple donations in a tax year, and as long as the total value of the donations doesn't exceed R100 000, there'll be zero Donations Tax payable.

Donations Tax is only levied on the value of the donation (or sum of all donations) which exceeds the R100 000 threshold.

Let's look at an example.

Peter has had a great year. His business is doing well and he would like to share some of his good fortune with his friends and family. (Lucky them!)

First he gives his friend a cash cheque for R20 000. Then he decides to give his boat that's just gathering dust at home to his son. It's valued at R50 000. Finally, he sends his niece, who's busy planning her wedding, a gift of R40 000 to help with the expenses.

What will Peter have to pay in Donations Tax? We first need to calculate the total value of his donations for the tax year.

R20 000 to his friend
+ R50 000 to his son
+ R40 000 to his niece
Total donations = R110 000.

Remember that the Donations Tax threshold is R100 000, so Peter is only liable for 20% tax on the exceeding amount, which in this case is R10 000.

Therefore, Peter will pay Donations Tax of 20% X R10 000 = R2 000.

Exemptions to Donation Tax

Spouses may make donations to one another, for any amount, and these will be exempt from Donations Tax. Similarly, donations to approved Public Benefit Organisation are also exempt. Therefore, these types of donations don’t count towards the donor’s R100 000 limit for the year.

Donations Tax doesn't apply to non-residents. If your aunt living in the UK donates some of her hard-earned pounds to you (i.e. from funds she has earned while working overseas) she won't be liable for any Donations Tax in South Africa.

Paying Donations Tax 

After making a donation, the donor needs to fill in a IT144 form and send it to SARS. It's important to note that Donations Tax must be paid by the end of the month following the month during which the donation was made. Payment can be made via eFiling. 

Donations Tax on Rate on Properties

From 1 March 2018, donations tax is levied at a rate of 20% on the value of property donated which falls below R30 million, and at a rate of 25% on the value exceeding R30 million (section 64(1)). Take note of the following –
  • in determining the R30 million threshold, the aggregate value of the property donated commences from 1 March 2018 to the date of the current donation. Any donations made prior to 1 March 2018 must not be taken into account;
  • the aggregate value of property to determine the R30 million threshold is calculated after deducting any exemptions (s56);
  • where the donor has exceeded the R30 million threshold, all subsequent donations will be taxed at the rate of 25%.

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