A donation is a gratuitous disposal of property (or gratuitous waiver or renunciation of a right) and can be cash or made in kind. A donation will qualify as a deduction from a taxpayer’s income, limited to 10% of that taxpayer’s taxable income if made to specific approved categories of donees.
These categories include:
- Approved section 18A public benefit organisations (“PBO”);
- Institutions, boards or bodies (other than companies) established to conduct research, provide necessary or useful services to the State or the general public, or promote commerce, and which conduct a public benefit activity;
- PBOs which fund other PBOs or government departments;
- Specialised agencies overseas which conduct a public benefit activity in South Africa (for example, the United Nations Children’s Fund);
- Approved government departments where the funds will be used for certain public benefit activities.
The donation must be genuine and must actually be paid or transferred during the year of assessment to a donee which falls within one of the above categories.
A claim for a donation will only be allowed if it is supported by a receipt issued by the approved donee reflecting the following details:
- The reference number of the donee (issued by SARS);
- The date of the receipt of the donation;
- The name and address of the donee;
- The name and address of the donor;
- The amount of the donation or the nature of the donation (if not in cash);
- A certificate that the receipt is issued to enable the taxpayer to claim a tax deduction and that the donation has or will only be used for its approved purpose.
The Minister of Finance is empowered to prescribe additional requirements before a donation will be allowed as a deduction. For this reason, it is essential to consult your tax experts on the specific requirements at the time of claiming the deduction.