Have you recently received a present or a donation from a wealthy family member or a friend? Or, maybe you've just donated money to support a child in need? Either way, if you’re the giver or receiver of a donation or gift, you should know that SARS needs to be notified of these donations, plus you should understand how to declare them from a tax perspective. Let's have a look at some of the questions we’ve received to our Helpdesk on the topic.
1. I made donations to registered Public Benefit Organisations for the past 5 years but did not claim the donations in my tax returns. Can I claim all of these donations in my current tax return?
No – you will have to resubmit those prior year tax returns and claim each donation in the specific tax year it was made. You can’t claim them all in one return if they apply to multiple tax years. You can do this by requesting a correction on eFiling.
2. I am a Swiss foreign national residing in South Africa. My mother, who lives in Switzerland, wants to make a monetary donation to me equivalent to R1 700 000.
Both my mother and I have never been South African citizens. She has always resided in Switzerland and never spent more than 90 days per calendar year in South Africa. I lived in Switzerland until 2013 and then moved to South Africa where I am still living.
Do I need to fill in the IT144 form and am I liable for donations tax? Do I need to declare it in my tax return?
There should be no tax liability for you on the money you receive. You will however, be liable to pay tax on whatever you use the money for. For example, if you purchase a property and rent it out, you will be required to pay tax on the rental income. Should you use the funds to start up a business, the profit you make in the business will be subject to tax. If you choose to invest the funds, you will need to pay tax on the interest that you earn.
The IT144 is applicable to South African taxpayers who donate more than R100 000 per tax year. This does not apply to you or your mother so neither of you will be liable to pay donations tax. However, you do need to complete your annual income tax return and declare the amount that you received from your mother in the non-taxable income section.
3. I received a donation from my friend of R50 000, where do I declare this on my tax return?
You need to declare it under the non-taxable income section on your return.
4. I have an uncle living in the UK who is therefore a non-resident in South Africa. He used to live in South Africa however, and still has a South African bank account. He wants to send me money from his South African bank account as a gift. He earned this money in South Africa. Am I correct that there is no donation tax on this because he is non-resident?
Unfortunately, your uncle (the donor) will be liable for donation tax. There's no tax consequence for you as a beneficiary (donee). There's one exception for the donee however - if the donor fails to pay the Donations Tax on time, the donor and donee become equally responsible for the tax. 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.
5. I donated R30 000 to my domestic worker to pay for his daughters’ education. Can I claim this donation as an expense on my tax return?
Unfortunately, donations are only tax deductible if they are made to a registered Public Benefit Organisation (PBO) and they are able to supply you with a Section 18A tax certificate.
6. Does a donation received increase one’s taxable income or only when it exceeds the R100 000 maximum per year? I might be without a salary for 6 months, and will have money (donations) transferred from my parents account to mine to help support me during these 6 months.
In your case, if your parents are providing you financial support, then this would not seen by SARS as a donation.
Should your parents however, try to transfer their funds by buying you large assets such as a car or a house, there may be resultant donations tax liability.
7. How much tax needs to be paid on a donation of R200 000 and who is liable for the tax?
If a donation more than R100 000 a tax year is made by an individual (donor) for non-charitable purposes, then he/she will pay 20% of the amount above R100 000 in donations tax. Receipt of donations is not taxable unless the tax is not paid by the donor, in which case the donee become equally responsible for the tax. For more on donations tax, please read here.