DONATIONS TAX
Donations Tax is a separate tax levied on the transfer of assets. This tax was introduced
so as to prevent taxpayers from donating all their assets before their death thereby
reducing their estate duty payable.
Tax on property, not on income
Donations tax is payable ONLY by South African residents.
Requirements (section 54):
◦ Property
◦ Disposed of under a donation
◦ By a SA resident
Basic principles:
1. Donations tax is payable on the value of any property (including money) that
is disposed of by any resident who is referred to as the donor.
2. Non-residents will not be liable for the payment of donations tax, even though
they may be donating assets situated in South Africa.
3. Donations tax is levied at a flat rate of 20% on the value of the property
donated. From 1 March 2018, the amount of donations exceeding R30 million
is taxed at a rate of 25%.
When payable (section 60(1))
◦ Within 1 month from date on which donation takes effect
But at end of following month therefore could be eg 1.5 months
after
Who must pay (section 59)?
◦ Donor
◦ If donor fails to pay within prescribed period (1 month): donor and donee
jointly and severally liable
TIMING OF DONATION
, Type of Timing of donation
donation
Oral When the legal requirements will be fulfilled (and therefore, the donation
takes place) upon delivery
Written When the legal requirements will be fulfilled (and therefore, the donation
takes place) when both the donor and donee signs the legal
documents. For example if the donor signs the document first and the
donee only thereafter, the timing of the donation will be the date on
which the donee had signed the documents.
DEFINITIONS S55
Property:
◦ Any right in/to property, whether movable/immovable,
corporeal/incorporeal, tangible/intangible and wherever it is situated
Donation:
◦ Any gratuitous disposal of property, including any gratuitous
waiver/renunciation of a right
◦ To be a donation, disposal must be: “given for nothing, without charge,
free” ITC 1448
◦ Disposal of property i.t.o. an obligation is not a donation (even if nothing
received in return)
◦ Release by creditor of amount owing – donation
◦ Rendering of service for nothing – not a donation (not property)
◦ Interest free loan: not a donation for purposes of donations tax but a
donation for purposes of Sec 7
◦
Donee:
◦ Any beneficiary under a donation
DEEMED DONATIONS
Property disposed of for inadequate consideration (section 58):
Low interest loan !=
◦ Amount of deemed donation is difference between:
donation
Value of property
S7C may take
Consideration payable by person acquiring it application
Sold asset
MV = 10 000
Proceeds = 2 000
Donations Tax is a separate tax levied on the transfer of assets. This tax was introduced
so as to prevent taxpayers from donating all their assets before their death thereby
reducing their estate duty payable.
Tax on property, not on income
Donations tax is payable ONLY by South African residents.
Requirements (section 54):
◦ Property
◦ Disposed of under a donation
◦ By a SA resident
Basic principles:
1. Donations tax is payable on the value of any property (including money) that
is disposed of by any resident who is referred to as the donor.
2. Non-residents will not be liable for the payment of donations tax, even though
they may be donating assets situated in South Africa.
3. Donations tax is levied at a flat rate of 20% on the value of the property
donated. From 1 March 2018, the amount of donations exceeding R30 million
is taxed at a rate of 25%.
When payable (section 60(1))
◦ Within 1 month from date on which donation takes effect
But at end of following month therefore could be eg 1.5 months
after
Who must pay (section 59)?
◦ Donor
◦ If donor fails to pay within prescribed period (1 month): donor and donee
jointly and severally liable
TIMING OF DONATION
, Type of Timing of donation
donation
Oral When the legal requirements will be fulfilled (and therefore, the donation
takes place) upon delivery
Written When the legal requirements will be fulfilled (and therefore, the donation
takes place) when both the donor and donee signs the legal
documents. For example if the donor signs the document first and the
donee only thereafter, the timing of the donation will be the date on
which the donee had signed the documents.
DEFINITIONS S55
Property:
◦ Any right in/to property, whether movable/immovable,
corporeal/incorporeal, tangible/intangible and wherever it is situated
Donation:
◦ Any gratuitous disposal of property, including any gratuitous
waiver/renunciation of a right
◦ To be a donation, disposal must be: “given for nothing, without charge,
free” ITC 1448
◦ Disposal of property i.t.o. an obligation is not a donation (even if nothing
received in return)
◦ Release by creditor of amount owing – donation
◦ Rendering of service for nothing – not a donation (not property)
◦ Interest free loan: not a donation for purposes of donations tax but a
donation for purposes of Sec 7
◦
Donee:
◦ Any beneficiary under a donation
DEEMED DONATIONS
Property disposed of for inadequate consideration (section 58):
Low interest loan !=
◦ Amount of deemed donation is difference between:
donation
Value of property
S7C may take
Consideration payable by person acquiring it application
Sold asset
MV = 10 000
Proceeds = 2 000
