Delecia Venter | Tax Director, PKF Port Elizabeth

DONATIONS TAX – WHEN GENEROSITY CAN BE COSTLY

South African tax residents who made any gifts, loan arrangements, or transferred assets below market value are urged to assess their Donations Tax obligations.

Donations Tax is most often overlooked but has a significant tax implication.

Donations Tax is levied on any voluntary gift given freely out of generosity by a donor without expecting anything in exchange. Donations are considered to include any gratuitous waiver or renunciation of a right and include deemed donations triggered under Section 7C with regards to loans made to trusts or companies or where assets are disposed of below market value.

Non-residents are not subject to Donations Tax.

DONATIONS TAX RATE

As of 1 March 2018, Donations Tax will be levied as follows:

• 20% on cumulative donations up to R30 million; and

• 25% on subsequent donations in excess of R30 million.

Essentially, each donation made as of 01 March 2018, is added up. Where the total value of the donations, after deducting any exemptions, exceeds R30 million, the portion of the donation in excess of R30 million will be taxed at 25%.

Prior to 1 March 2018, Donations Tax was levied at a flat rate of 20% on each donation made on a non-cumulative basis.

EXEMPTIONS APPLICABLE

Certain donations are exempt from Donations Tax (not an exhaustive list):

• Individuals have an annual exemption of R100,000.

• Donations between spouses are completely exempt.

• Where the donor is not an individual, the exemption is limited to R10,000 annually.

• Donations made to an approved Public Benefit Organisation.

• Donations that qualify for a Section 18A tax-deductible certificate.

WHO IS LIABLE FOR DONATIONS TAX?

The donor is liable for Donations Tax. The Donations Tax is payable at the end of the month following the month in which any donation was made.

For example, any donations made in February 2025 will trigger a tax liability due and payable to SARS by 31 March 2025 to avoid late payment penalties and interest.

Donations Tax on deemed donations in terms of Section 7C will be due and payable to SARS the month following a trust or company year-end.

NEW AND IMPROVED DONATIONS DECLARATION FORM

A donor is required to complete an IT144 self-declaration form and submit it to the nearest SARS office, including proof of payment. The declaration can be accessed by visiting the SARS website.

As of 01 November 2024, taxpayers are required to complete donation declarations on the new IT144 declaration form. The new declaration gives effect to the Donations Tax regulations that are applicable from 01 March 2018.

The form has been designed to:

• Streamline the reporting and tracking of accumulated donations.

• Assist taxpayers in accurately declaring donations.

• The form now incorporates the provision of Section 7C to ensure deemed donations are correctly reported.

CONCLUSION

Should you require assistance or have any queries regarding this new Donations Tax form, or alternatively, you have any concerns regarding the Donations Tax implications of any transaction that you may be considering, we recommend that you please contact your nearest PKF Office for further information and/or assistance.