Donations tax

What is it?

A donation is any gratuitous (free or at no charge) disposal of property including any gratuitous waiver or renunciation of a right.  If the person (donee) receiving the donation gives anything in return, that it is not a donation.
 
A donation takes effect when all legal formalities for a valid donation have been complied with (section 55(3)).
 

Donations Tax Rate

For the month of February 2018 and prior months, it is a flat rate of 20%.
From 1 March 2018, donations tax is levied at a rate of 20% on the aggregated value of property donated not exceeding R30 million, and at a rate of 25% on the value exceeding R30 million (section 64(1)). Take note of the following –
  • in determining the R30 million threshold, the aggregate value of property donated commences from 1 March 2018 to date of current donation. Any donations made prior to 1 March 2018 must not be taken into account;
  • the aggregate value of property to determine the R30 million threshold is calculated after deducting any exemptions (s56);
  • where the donor has exceeded the R30 million threshold, all subsequent donations will be taxed at the rate of 25%.

Exemptions

There are four (4) categories of exemptions –
  • Category one – Certain donations are completely exempt from donations tax.  For example, a donation made to a spouse; an approved public benefit organisation; any sphere of government; that is cancelled within six (6) months from the date that it took effect; etc (section 56(1)).
  • Category two - In the case of a donor who is not a natural person (for example, companies and trusts), the exemption is limited to casual gifts not exceeding R10 000 per year of assessment (section 56(2)(a)).
  • Category three - The first R100 000 of property donated in each year of assessment by a natural person is exempt from donations tax (section 56(2)(b)).The first R100 000 of property donated in each year of assessment by a natural person is exempt from donations tax (section 56(2)(b)).
  • Category four - So much of any bona fide contribution made by the donor towards the maintenance of any person. This exemption is limited to what the Commissioner considers reasonable (section 56(2)(c)).

Who is liable for donations tax?

Donations tax applies to any person (for example: individual, company or trust) that is a resident. Hence, non-residents are not liable for donations tax.
 
The person making the donation (donor) is liable for to pay the donations tax, however if the donor fails to pay the tax within the payment period the donor and donee are jointly and severally liable (section 59).
 
The Commissioner may at any time raise an assessment on the donor or donee (or both) for the donations tax.  Including where the Commissioner is satisfied that the full amount of donation tax was not paid, raise an assessment for the difference.  The payment by either the donor or donee will discharge this joint liability (section 60(5)).
 

What steps must I take?

After making a donation you should complete the donations tax return  (Form IT144 - Declaration by donor / donee) and submit it to your nearest SARS branch together with your proof of payment. Donations tax payments must be made via eFiling.
 

When should it be paid?

Donations tax must be paid by the end of the month following the month during which the donation takes effect or such longer period as SARS may allow (section 60(1)).
 
How does Donations Tax work in relation to an inheritance? Click here for more information.
 
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Last Updated: 16/10/2019 9:39 AM     print this page
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 Top FAQs

What is Donations Tax?
Donations tax is payable on the total value of property disposed of, whether directly or indirectly, by a resident by means of a donation.

What is the rate of Donations tax?
Donations tax is levied at a flat rate of 20% on the value of the property donated.

Do any exemptions apply to Donations Tax?
Under section 56(2) of the Income Tax Act, 1962, donations tax is not payable in respect of the sum of the value of all property disposed of under donations, by a donor who is a natural person,

What happens when a disposal of property is considered "inadequate"?
If any property has been disposed of for a consideration which, in the opinion of the Commissioner, is not an adequate consideration, that property is treated as having been disposed of by donation.