Donation Tax - All you need to know

Receive a gift or donation from a generous family member or friend recently? Or, maybe you've just donated money, shares or even a house to someone you felt deserved it? 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 find out more.

How do I calculate Donations Tax?

If you've received the donation (the Donee):

If you've received a donation or gift, then the good news is that it's 100% tax-free (i.e. you won’t be taxed on it). There's no tax consequence for you as a beneficiary but you must remember to declare it in your Tax Return (ITR12) as an “Amount Considered Non-Taxable.” This is to make sure that you're declaring all of your income to SARS, including the non-taxable bits.

There is one exception to this though. If the Donor (the person who gave you the donation or gift) does not pay the Donations Tax on time, then the Donor and you (as the Donee) become equally responsible for the tax. You certainly don't want to be paying taxes on a gift, so if you're ever on the receiving end of a large gift (i.e. over R 100 000), make sure you raise these important tax consequences with the Donor.

 

If you’re the one making the donation (the Donor):

If you've been the generous giver, you're liable for Donations Tax, which is calculated at a flat rate of 20% on the value of the donation or gift, up to R 30 million. If the donation exceeds R 30 million, then the amount over and above R 30 million will be taxed at 25%.

However, there is some good news. Donation Tax only kicks in once you've donated more than R 100 000 in a single tax year. In other words, you can make multiple donations in a tax year, and as long as the total value of the donations doesn't exceed R 100 000, you won’t have to pay any Donations Tax at all.

*Please note that donations made to organisations that are not registered as PBO's with SARS, is not tax deductible, this means that it won't aid in reducing your tax liability with SARS. 

Here’s an example:

Peter has had a great year and his business is doing well. He’d like to share some of his good fortune with his friends and family.

First, he gives his friend Willem a cash cheque for R 10 000, because he knows they’ve been struggling to pay school fees. Then he decides that he no longer needs that old car gathering dust in his garage, so he gives it to his daughter who’s at university (valued at R 60 000). Finally, he sends his nephew, who wants to propose to his long-term girlfriend, a gift of R 40 000 to help pay for the wedding.

What will Peter have to pay in Donations Tax? We first need to calculate the total value of his donations for the tax year.

   R 10 000 to his friend
+ R 60 000 to his daughter
+ R 40 000 to his nephew

Total donations = R 110 000

Remember that the Donations Tax threshold is R 100 000, so Peter is only liable for 20% tax on the amount over and above that, which in this case is R 10 000 (R 110 000 - R 100 000).

Therefore, Peter will pay Donations Tax of 20% x R 10 000 = R 2 000.

 

How do I pay Donations Tax?

After making a donation, the donor needs to fill in a IT144 form and send it to SARS. It's important to know that Donations Tax must be paid by the end of the month following the month during which the donation was made, and that it’s not part of your normal tax return. Payment must be made through eFiling.

 

FAQ

 
I gave my mother and sister R 25 000 each. Can I deduct it as an expense against my income and how much Donations Tax should I pay on it?
 
You can’t deduct this as an expense. You will also not have to pay tax on it if it was the only donations that you made for the tax year, as it is below the R 100 000 threshold, meaning that your donations are tax-free. 
 

I’m a South Africa citizen and would like to receive a monetary gift from my sister who is a UK citizen only - is there any tax implication for me?
 
Donations Tax is payable by the donor and not you, the recipient. Therefore there are no tax implications for you, however you need to disclose it in your tax return (ITR12) as an "amount not considered taxable".
 
Also, there is no Donations Tax payable on donations from a foreign resident to a South African resident, as long as the funds donated are from a foreign source (i.e. from work your sister has performed in the UK).
 

My father has sold his house at a discounted price to my eldest sister and some of the proceeds of the sale will be split between the remaining siblings. What are the tax implications for my father and is there any way to minimise the taxes which he will have to pay?
 
The difference between the market value of the house (confirmed by a property assessor) and the discounted price will be considered a donation, and will therefore be subject to Donations Tax of 20%. However, there is an annual exemption of R 100 000 per person per year, so only the donation amount exceeding R 100 000 will be taxed.
 
In addition to the Donations Tax payable on the discount, he will need to pay Donations Tax on the proceeds that he distributes to his other children. Your father could also distribute the proceeds over multiple tax years, in order to take advantage of the R 100 000 annual exemption. 
 

I want to donate R 120 000 as a gift to a friend to help him pay back a loan. Does this amount attract tax?
 
Yes, it will attract Donations Tax of R 20 000 x 20% if you donate the full amount in one year. However since the annual donations exemption is R 100 000 per tax year, you can split the gift over two tax years so that it falls below the donations tax threshold (i.e R 60 000 in the first year and R 60 000 in the second year) - then there will be no donations tax to pay.
 

Will my husband be expected to pay Donations Tax on cash he transferred to me for safe keeping?

No, a donation between spouses is tax-free and you won’t need to declare it on your tax return.