Donations That Qualify for Tax Deductions in South Africa

At Tax A Sured (Pty) Ltd, we understand the importance of maximizing your tax benefits while contributing to meaningful causes. The South African Revenue Service (SARS) offers tax deductions for donations made to registered and approved organizations under section 18A of the Income Tax Act (ITA). To help you navigate these opportunities, we've outlined the key requirements and qualifying donations.

Understanding Section 18A Tax Deductions

Under section 18A of the ITA, donations to certain public benefit organizations are eligible for tax deductions. However, these deductions are capped at 10% of your taxable income, excluding retirement fund lump sums and severance benefits. If your donations exceed this limit, the excess amount can be carried forward and deducted in the following tax year.

Qualifying Organizations

To be eligible for tax deductions, donations must be made to section 18A-approved organizations. These include:

• South African registered nonprofit companies, trusts, or associations of persons**** approved by SARS as public benefit organizations.

• Institutions, bodies, or boards established by law that have received SARS approval.

• Specialized agencies or international organizations and United Nations programs listed in the ITA.

• Government departments at the national, provincial, or local level, provided they are approved by SARS.

Eligible Donations

Only donations in the form of cash or property in kind qualify for tax deductions under section 18A. Let's break down these categories:

Cash Donations

Cash donations are straightforward and can be made through electronic fund transfers (EFT), credit or debit cards, or postal orders.

Property in Kind

Donations of property in kind are more complex and cover a range of items. Here's a detailed look:

1. Immovable Property: For example, buildings. The value is determined using a formula that considers the cost and a percentage of any capital gain.

2. Financial Instruments as Trading Stock: Such as shares in a company. The value is the lower of the fair market value or the amount accounted for in section 22(8)(C) of the ITA.

3. Other Trading Stock: Includes livestock, produce, computers, foodstuffs, furniture, medical supplies, and vehicles. The value is as per section 22(8)(C) or paragraph 11 of the First Schedule to the ITA.

4. Business Assets Not Classified as Trading Stock: For example, office equipment and delivery vehicles. The value is the lower of the fair market value or the cost minus any deductible allowances.

5. Personal Assets: Includes items such as personal computers and sports equipment. The value is the lower of the fair market value or the cost minus depreciation.

6. Constructed Property: Such as security fencing or buildings constructed by or on behalf of the taxpayer. The value is the lower of the fair market value or the construction cost.

Compliance and Documentation

To ensure your tax deduction is valid, SARS requires a section 18A receipt or certificate for each donation. This receipt must include specific information about the donor and the donation.

Staying Ahead

At Tax A Sured (Pty) Ltd, we advise our clients to keep meticulous records and documentary proof of their donations. This includes:

• Confirming the 18A status of recipient organizations.

• Ensuring donations are used for designated purposes.

• Obtaining and storing necessary declarations and receipts.

Failure to comply with these requirements could result in the disallowance of your tax deduction and potential penalties from SARS.

For personalized assistance and to ensure your donation affairs are in order, contact Tax A Sured (Pty) Ltd today. Together, we can make a positive impact while optimizing your tax benefits.