TAX3702
Taxations of individuals
Learning Unit 10
Donation's tax
, Introduction
Learning outcomes
Donation’s tax Contents of learning unit
10.1 Background
10.2 Persons liable for payment
10.3 Payment period
10.4 Calculation of donations tax
10.5 Specific exemptions
10.6 General exemptions
10.7 Value of property donated
10.8 Questions
,Introduction
Donation’s tax:
• Donation's tax is regulated by the Income Tax Act but is not levied on an individual’s income.
• Donation's tax is levied when assets are transferred from one taxpayer to another at no
consideration or an inadequate consideration.
• Donation's tax is also not calculated once a year as in the case of income tax but is calculated
each time a donation (gift) is made.
• When a donation to a public benefit organization is made, the amount may sometimes be
deducted for normal tax purposes (refer to learning unit 5). = This deduction must not be
confused with donations tax.
,The donations tax payable on a donation by a resident is calculated as
follows:
1) Determine whether a donation was made by a resident.
Introduction
2) Determine the value of the donation.
3) Determine whether the donation or part thereof may be exempt
(specific exemption).
4) If not exempt, deduct any consideration paid.
5) Deduct general exemption or part thereof.
6) Multiply by 20% for donations up to R30 million, and 25% for
donations exceeding R30 million.
,Learning outcomes
After working through this learning unit, you should be able to
describe when donations tax will be levied
determine the value of a donation
identify those donations that are exempt from donations tax
explain at what rate donations tax is levied
describe which exemptions might apply
state who is responsible for payment of donations tax
calculate donations tax payable
,10.1 Background
Prescribed book sections: 11.1 - 11.3
,10.1
When a South African resident donates property for no consideration (a
gratuitous disposal) or for inadequate consideration,
• donations tax at a rate of 20% for donations up to R30 million, and
Background •
•
25% for donations exceeding R30 million,
may be payable on the value of the donation.
It is important to note that South African resident taxpayers and non-
resident taxpayers are dealt with separately for donations tax purposes.
• To be a resident, the person must have been living in South Africa at a
fixed address on a regular basis and with a degree of permanence or
continuity.
• Non-residents do not pay donations tax.
,Donation’s tax
• Donation's tax is a separate tax and bears no relation to the normal tax
calculation or the deduction of certain donations to benefit
organizations.
• Donation's tax is also regulated by the Act and is contained in Part V of
the Act from sections 54 to 64. 10.1 Background
• It is, therefore, important that the transactions that are subject to
donations tax be identified, and that a separate calculation be
performed for them.
• = Donation's tax is only applicable to residents of the Republic.
, Donation's tax
• Donation's tax is a form of capital transfer tax.
• It is not a tax that is levied on income, but on the transfer of capital
(assets/property).
In South Africa, we have two forms of capital transfer tax, namely
• donations tax and
10.1 Background
• estate duty
When a person dies,
• estate duty is payable on the net value of the property in that person’s estate.
• Persons would therefore be able to prevent an estate duty liability accruing if they
donated all their property to someone else before the date of their death.
• The purpose of donations tax is to prevent this avoidance practice.
• For example, should an individual know that they are to die the following day and
they donate some of their assets before their death, donations tax would be
payable on it.
• Both donations tax and estate duty are levied at the same rate.
, 10.1 Background
Critical questions
When a person deals with donations tax, the person is usually confronted with the following
questions:
Which transactions attract donations tax?
At which rate is donations tax calculated?
Are there certain transactions that are deemed to be donations?
Which specific donations are exempt from donations tax?
Is there a general exemption applicable to all persons?
Who is responsible for the payment of donations tax?
When is the donations tax payable?
Taxations of individuals
Learning Unit 10
Donation's tax
, Introduction
Learning outcomes
Donation’s tax Contents of learning unit
10.1 Background
10.2 Persons liable for payment
10.3 Payment period
10.4 Calculation of donations tax
10.5 Specific exemptions
10.6 General exemptions
10.7 Value of property donated
10.8 Questions
,Introduction
Donation’s tax:
• Donation's tax is regulated by the Income Tax Act but is not levied on an individual’s income.
• Donation's tax is levied when assets are transferred from one taxpayer to another at no
consideration or an inadequate consideration.
• Donation's tax is also not calculated once a year as in the case of income tax but is calculated
each time a donation (gift) is made.
• When a donation to a public benefit organization is made, the amount may sometimes be
deducted for normal tax purposes (refer to learning unit 5). = This deduction must not be
confused with donations tax.
,The donations tax payable on a donation by a resident is calculated as
follows:
1) Determine whether a donation was made by a resident.
Introduction
2) Determine the value of the donation.
3) Determine whether the donation or part thereof may be exempt
(specific exemption).
4) If not exempt, deduct any consideration paid.
5) Deduct general exemption or part thereof.
6) Multiply by 20% for donations up to R30 million, and 25% for
donations exceeding R30 million.
,Learning outcomes
After working through this learning unit, you should be able to
describe when donations tax will be levied
determine the value of a donation
identify those donations that are exempt from donations tax
explain at what rate donations tax is levied
describe which exemptions might apply
state who is responsible for payment of donations tax
calculate donations tax payable
,10.1 Background
Prescribed book sections: 11.1 - 11.3
,10.1
When a South African resident donates property for no consideration (a
gratuitous disposal) or for inadequate consideration,
• donations tax at a rate of 20% for donations up to R30 million, and
Background •
•
25% for donations exceeding R30 million,
may be payable on the value of the donation.
It is important to note that South African resident taxpayers and non-
resident taxpayers are dealt with separately for donations tax purposes.
• To be a resident, the person must have been living in South Africa at a
fixed address on a regular basis and with a degree of permanence or
continuity.
• Non-residents do not pay donations tax.
,Donation’s tax
• Donation's tax is a separate tax and bears no relation to the normal tax
calculation or the deduction of certain donations to benefit
organizations.
• Donation's tax is also regulated by the Act and is contained in Part V of
the Act from sections 54 to 64. 10.1 Background
• It is, therefore, important that the transactions that are subject to
donations tax be identified, and that a separate calculation be
performed for them.
• = Donation's tax is only applicable to residents of the Republic.
, Donation's tax
• Donation's tax is a form of capital transfer tax.
• It is not a tax that is levied on income, but on the transfer of capital
(assets/property).
In South Africa, we have two forms of capital transfer tax, namely
• donations tax and
10.1 Background
• estate duty
When a person dies,
• estate duty is payable on the net value of the property in that person’s estate.
• Persons would therefore be able to prevent an estate duty liability accruing if they
donated all their property to someone else before the date of their death.
• The purpose of donations tax is to prevent this avoidance practice.
• For example, should an individual know that they are to die the following day and
they donate some of their assets before their death, donations tax would be
payable on it.
• Both donations tax and estate duty are levied at the same rate.
, 10.1 Background
Critical questions
When a person deals with donations tax, the person is usually confronted with the following
questions:
Which transactions attract donations tax?
At which rate is donations tax calculated?
Are there certain transactions that are deemed to be donations?
Which specific donations are exempt from donations tax?
Is there a general exemption applicable to all persons?
Who is responsible for the payment of donations tax?
When is the donations tax payable?
