Donations tax is tax payable at a flat rate of on the value of property disposed of by a donation. Donations tax is levied at a flat rate of 20% on the value of the property donated.
A donation includes property disposed of for an inadequate consideration.
A list of exemptions can be found on the SARS website in Section 56(1) which contains a list of exempt donations that include amongst others donations between spouses and donations to approved public benefit organisations.
A donation will be exempt if the total value of donations for a year of assessment does not exceed:
Donors as individuals
Donations tax shall not be payable in respect of the sum of the values of all property disposed of under donations (by a donor who is a natural person), where it exceeds R100 000 during any year of assessment. This came into operation on 1 March 2007 and is applicable in respect of any year of assessment commencing on or after that date.
So, In other words, the first R100 000 of any bona fide donation will be free of donations tax. It should be noted that this amount is the maximum allowed per year of assessment.
For example, any juristic persons such as private companies, the exemption is limited to R10 000 per year of assessment in respect of casual gifts. However, where a year of assessment is less than 12 months, or where it exceeds 12 months, the exemption amount of R10 000 must be adjusted proportionately. Public companies are exempt from donations tax in terms of the ITA (Income Tax Act).
These donations are exempt from tax.
Donations between spouses
Donations between spouses are exempt from this tax. Where two people are married in community of property and property is then donated by one of the spouses, that donation is deemed to have been made in equal shares if that property falls within the joint estate of the spouses. If that property was excluded from the joint estate of the spouses, that donation is treated as having been made solely by the spouse making the donation.
Donations tax applies to any individual, company or trust that is a resident as defined in section 1 of the Income Tax Act, 1962.
Non-residents are not liable for donations tax.
The person making the donation (the donor) is liable for the tax but if the donor fails to pay the tax within the set period the donor and donee are jointly and severally liable for the payment of the outstanding tax.
Public companies and public benefit organisations amongst others are exempt from donations tax.
After making a donation you should fill in a Declaration by donor / done form found on the SARS website and send it to SARS with your payment.
Donations tax must be paid by the end of the month following the month during which the donation takes effect or such longer period as SARS may allow. The payment must be accompanied by the relevant paper work, which needs to be submitted at the same time. A donation takes effect when all legal formalities for a valid donation have been complied with and should be paid via the eFiling system on the SARS website