Donating to a worthy charity/non-profit organisation makes one feel good, as the world, and South Africa in particular, depends on these organisations to pick up the slack from government and millions would suffer without them.
An added benefit of making donations to certain charities is that you may be entitled to a tax deduction, provided that several requirements are met.
There is a misconception that donations made to charities are automatically tax deductible – this is not so!
This article seeks to clarify which donations are tax deductible, and to educate potential donors on how to successfully secure a tax deduction in terms of section 18A of the Income Tax Act (the Act).
To claim a tax deduction, donors need to be in possession of a valid section 18A certificate. Only organisations who are approved as a Public Benefit Organisation (PBO) by SARS in terms of section 18A of the Act are entitled to issue donors with section 18A certificates for a bona fide donation made.
Tax Deductible Donations
A bona fide donation is a donation made with “no strings attached” and cannot be of any direct or indirect benefit to the donor (or any “connected person” to the donor).
PBO’s that are approved in terms of section 18A of the Act are put through a rigorous registration process by the Tax Exemption Unit at SARS and need to carry out one or more public benefit activities mentioned in Part II of the 9th Schedule to the Act (amongst a number of other requirements).
For a section18A certificate to be valid, it must contain the following information:
- The reference number of the organisation issued to it by the Commissioner for purposes of section 18A;
- The date of the receipt of the donation;
- The name and address of the organisation issuing the receipt to which enquiries may be directed;
- The name and address of the donor;
- The amount or nature of the donation if not in cash;
- Certification that the receipt is issued for the purpose of section 18A and that the donation will be used exclusively for the activities which are approved for section 18A purposes; and
- The receipt must be issued in the year when the donation is received by the organisation approved for purposes of section 18A.
It is important to note that not all PBO’s registered with SARS are approved in terms of section 18A of the Act. Before making a donation to a PBO or organisation who claims to be approved by SARS in terms of section18A of the Act, it is important that donors check whether the organisation is in fact duly registered in this regard.
SARS have actually made this very easy for potential donors to check – there is an updated list of all section 18A approved PBO’s. To access this list, simply log onto the SARS home page (www.sars.gov.za) and search for “Approved Section18A PBO’s” the search function.
Input the name of the charity you wish to donate to – if the charity appears on this list, you can be reassured that, on receipt of your donation, the charity will in fact be entitled to issue you with a valid section 18A certificate for you to claim your tax deduction.
Charitable Donations Tax Deduction Limit
Tax-deductible donations are limited to 10% of your taxable income (excluding any retirement fund lump sum benefits).
e.g. if your taxable income for the 2019 assessment year is R100 000, the tax deduction would be limited to R10,000.
Any amount donated in excess of 10% of your taxable income will not be lost, as it will be carried over to the next year of assessment.
When completing an annual income tax return, donors claiming a section 18A tax deduction must input the following information contained on each section 18A certificate:
- the amount donated to each donee; and
- the relevant approved PBO reference number of each donee.
It is important that you upload the section 18A certificates to SARS via e-Filing should SARS select the income tax return for review/audit verification.
Taxpayers are required to keep section 18A certificates (and all other tax related information relevant to their income tax returns) for at least 5 years from the date of the assessment.
Another benefit of donating to an approved PBO is that such donations are exempt from donations tax as well as capital gains tax (in relation to assets donated), ensuring that the beneficiaries of the donation enjoy the full benefit of the donations, and that the donors are not subject to any adverse tax implications subsequent to making the donations.
Ensuring that you are in receipt of a valid section 18A certificate issued by an organisation approved in terms of section 18A and claiming the deduction correctly on your income tax return will help prevent any unwanted surprises on assessment.
The Little Fighters Cancer Trust is a registered Non-Profit Organisation (NPO) with Public Benefit Organisation (PBO) status.
LFCT is certified Level 1 BBEEE – Donors may therefore also claim BBBEE points against the Socio-Economic Development element of the BBBEE scorecard.
- Trust Registration No: IT2817/2010
- NPO No: 089-376
- PBO No: 930037657
- Tax Registration No: 1000/881/17/5
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