DONATION TAX IN SOUTH AFRICA

DONATION TAX IN SOUTH AFRICA: A SIMPLE GUIDE
Donation tax is charged by the South African Revenue Service (SARS) when a natural person or legal entity hereinafter referred to as the “donor” donates/disposes of property (money or assets) to a third party.

What is a donation?
A donation is when a donor gives something of value to a third party without the expectance of receiving something in return. This can include amongst others, cash, immovable property, shares or investments. If an asset is sold for less than its market value, SARS has the right to charge donation tax on the difference in value.

Who is responsible for payment of the donation tax?
The donor is responsible for payment of the donation tax to SARS. If the donor does not make payment of the donation tax, SARS has the right to recover the donation tax from the recipient of the donation (the donee). The donation tax must be paid to SARS by the end of the month following the month in which the donation was made.

How much is donation tax?
Donation tax is payable at a rate of 20% on the value of any cash or asset donated up to R30 000 000.00 and 25% for cumulative donations exceeding R30 000 000.00.

Are there any exemptions?
While the donation tax rate is relatively high, the law provides useful exemptions that allow donors to make reasonable donations without tax consequences. Certain donations are exempted from donation tax, which include donations between spouses, donations to approved public benefit organisations, donations up to the value of R150 000,00 per tax year and legally and/or morally obliged maintenance payments.

As donation tax can interact with other taxes, it is advisable to seek professional advice before making large or complex donations.