[Question] Donations made by Company - Donations tax implications

[dellatjie]

Good afternoon,

I have read up on donations tax, and understand that individuals get a yearly exemption of R100 000 from donations taxfor donations made, and that there is an exemption for other entities for casual gifts to the amount of R10 000.

Does anyone know if there is any other exemption for companies? Don't companies have a similar exemption than that of individuals?

[Dave A]

If I recall correctly, for public companies the exemption from donations tax is unlimited.

Another key difference is an individual can make an exempt donation to a connected person - no such luck for companies

[dellatjie]

Dave,

What do you think the logic behind this is? I mean, usually there is a reason for several parts of the income tax act being set up in a certain way. For example, the interest exemption is there to promote saving.

Why would SARS not give an exemption to private companies, but to public companies?

[Dave A]

I checked with my daughter - the limit on private companies is R10k.

As for why? No doubt because of an expectation that when it comes to private companies it would be abused to avoid tax.
With public companies, there are auditors, proper reporting, and shareholders who would ask questions if too much of what might otherwise have been their dividends is just given away.

The other problem with public companies is the massive differences in scale. If they were to limit it, it would have to be a percentage rather than a quantity.

[dellatjie]

Morning Dave,

That R10 000 exemption is available for casual gifts - not sure what the definition of casual gifts would be, but it is not a general exemption.

[Dave A]

That R10 000 exemption is available for casual gifts - not sure what the definition of casual gifts would be, but it is not a general exemption.

Aah! Interesting.

[CLIVE-TRIANGLE]

Why would SARS not give an exemption to private companies, but to public companies?

Because directors are less inclined to effectively give away shareholders' money; public companies are dividend driven.