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Donations Tax
What is donations tax?
Donations tax is tax payable on the value of property disposed of by a resident by means of a donation.
What is the rate?
Donations tax is levied at a flat rate of 20% on the value of the property donated.
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Do any exemptions apply?
Donors as individuals
In terms of section 56(2) of the Income Tax Act - Donations tax shall not be payable in respect of so much of the sum of the values of all property disposed of under donations by a donor who is a natural person as does not during any year of assessment exceed R100 000. This came into operation from 2007/03/01 and is applicable in respect of any year of assessment commencing on or after that date.
Donors other than individuals
For juristic persons such as private companies, the exemption is limited to R10 000 in respect of casual gifts. Public companies are exempt from donations tax.
Donations to public-benefit organisations
These donations are exempt from tax, subject to certain conditions.
Where a donor makes more than one donation during the year of assessment, the exemption is calculated according to the order in which the donations took effect.
Donations between spouses
Donations between spouses are also exempt from this tax.
Where two individuals draw up a joint will and the survivor accepts (adiates) the conditions of the joint will at the death of the first dying, the difference in value between the survivor’s property, which falls into the massed estate, and the benefit derived from that estate is regarded as a donation.
Where two people are married in community of property and property is donated by one of the spouses, that donation is deemed to have been made in equal shares if that property falls within the joint estate of the spouses.
If that property was excluded from the joint estate of the spouses, that donation is treated as having been made solely by the spouse making the donation.
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When is a disposal considered a donation?
If any property has been disposed of for a consideration that, in the opinion of the Commissioner, is not an adequate consideration, that property is treated as having been disposed of by donation. The donor is liable for the payment of the donations tax. If the donor fails to pay the tax within the prescribed period, the donor and the donee are jointly and severally liable for the tax.
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