How to Reduce Your Donations Tax in South Africa

Donating to charities and non-profit organizations is a great way to give back to society and support causes that you believe in.

However, in South Africa, donations are subject to a tax called donations tax, which can reduce the impact of your giving.

In this article, we will discuss how to reduce your donations tax in South Africa.

Donations Tax in South Africa

Donations tax is a tax that is imposed on the transfer of property from one person to another as a donation.

The tax is levied on the fair market value of the property at a rate of 20%. However, the first R100,000 of donations made in a tax year is exempt from donations tax.

This means that you can donate up to R100,000 each year without paying any donations tax.

Donating to a Public Benefit Organization (PBO)

One way to reduce your donations tax is to donate to a public benefit organization (PBO).

PBOs are organizations that are approved by the South African Revenue Service (SARS) as eligible to receive tax-deductible donations.

When you donate to a PBO, you can claim a tax deduction on your income tax return for the donation amount.

This can help to reduce your overall tax liability and offset the donations tax that you would otherwise have to pay.

Donating to a Section 18A Organization

Another way to reduce your donations tax is to donate to a section 18A organization.

Section 18A is a provision in the Income Tax Act that allows for tax-deductible donations to certain approved organizations.

These organizations are typically non-profit organizations that provide for the welfare of animals, the environment, or other social causes.

When you donate to a section 18A organization, you can claim a tax deduction on your income tax return for the donation amount, which can help to reduce your overall tax liability.

Donating to a Family Trust

Donating to a family trust can also be a way to reduce your donations tax. A family trust is a legal entity that can be set up to manage assets for the benefit of a family.

When you donate to a family trust, the donation is not subject to donations tax, as long as the trust is a valid trust under South African law.

However, it is important to note that donations to family trusts are subject to income tax and capital gains tax.

Donating Assets Instead of Cash

Another way to reduce your donations tax is to donate assets instead of cash.

When you donate assets, such as property or shares, the donation is still subject to donations tax, but the value of the donation is based on the market value of the asset at the time of the donation.

This can be beneficial if the value of the asset has appreciated since you acquired it, as you will only be taxed on the appreciated value, not the original cost.

Donating to a Spouse

Donating to a spouse can also be a way to reduce your donations tax. When you donate to your spouse, the donation is not subject to donations tax, as long as your spouse is a South African resident.

However, it is important to note that donations to spouses are subject to income tax if the donation is made in the form of income or if the donation is made to a trust.