[Question] Donations Tax

[Connie K]

Good day
My client quoted a business colleague who is paying his children's school fees from his business and treating this as a donation? Apparently this is a tax-free fringe benefit?
I seriously doubt there is such a thing but can anyone shed a light on how donations can possibly be utilised in a legitimate manner for tax planning?

[HR Solutions]

Isn't it R100 000.00 per year that you can write off to donations tax ?

[Connie K]

Hi

Yes you can write off R100,000 to donations tax every year. But I know that most people would put such funds into a trust fund. Can school fees paid on behalf of a child qualify as a donation?

[Dave A]

My client quoted a business colleague who is paying his children's school fees from his business and treating this as a donation? Apparently this is a tax-free fringe benefit?

The thing to remember about Donations Tax is it applies to funds paid out from after-tax monies.

I suggest only donations to registered PBOs are deductible and suspect a donation out of the business to staff and/or family would not be deductible. You can check out the SARS Guide to Tax-deductible donations to make sure.

There is a tax-free fringe benefit for bursaries to staff and family of staff under certain conditions - see Interpretation Note 66 from SARS.

[BusFact]

Another thing to keep in mind is that individuals can make tax free donations of up to R100k per year, but companies can only do so up to R10k per year. So if the company is making the donation (and not coming from his loan account) then he will most likely have issues.

[HR Solutions]

Another thing to keep in mind is that individuals can make tax free donations of up to R100k per year, but companies can only do so up to R10k per year. So if the company is making the donation (and not coming from his loan account) then he will most likely have issues.

Just to clarify (for my sake) - I know Trust's can make tax free donations up to R100k per year ...... Isn't a Trust classed as a company/business ? I know it is when you open up a bank account ....

[BusFact]

Well, lets first clarify that we are talking about the person or entity making the donation (not receiving it).

The SARS pocket guide for 2016 says that only natural persons are allowed the R100k limit.

http://www.sars.gov.za/TaxTypes/DonationsTax/Pages/default.aspx

This seems to state that Trusts cannot donate more than R10k without being taxed on the donation.

Note that we are really talking "gifts" here. Normal donations to bona fide charities are exempt, I think.

[HR Solutions]

Well, lets first clarify that we are talking about the person or entity making the donation (not receiving it).

The SARS pocket guide for 2016 says that only natural persons are allowed the R100k limit.

http://www.sars.gov.za/TaxTypes/DonationsTax/Pages/default.aspx

This seems to state that Trusts cannot donate more than R10k without being taxed on the donation.

Note that we are really talking "gifts" here. Normal donations to bona fide charities are exempt, I think.

Im afraid I have to disagree with you here. I have a Trust with a number of property's etc. The R100k definitely applies to the Trust.
So the business/individual thing is misleading.

[Andromeda]

Hello HR Solutions, are you not perhaps speaking of donations made to trusts, as opposed to made by trusts?

I ask because the R100,000 is definitely relevant to natural persons. In respect of juristic persons (other than public companies) the limit is R10,000

[HR Solutions]

Hello HR Solutions, are you not perhaps speaking of donations made to trusts, as opposed to made by trusts?

I ask because the R100,000 is definitely relevant to natural persons. In respect of juristic persons (other than public companies) the limit is R10,000

Yes definitely relevant to natural persons. I think I have to admit I might be a bit confused here with the Trust/natural persons issue. I suspect you might be right Andromeda and Busfact. I have a meeting with attorney on monday so I will definitely clear this up with him.