We are of the opinion that we can put forward a case for a donation to be exempt from Donations Tax in terms of section 56(2)(c). The donation was R1m. From a practical point of view, how to go about requesting the discretion of the Commissioner to have t
Important:
This answer is based on tax law for the tax year ending 28 February 2018.
Answer:
Such a donation will have to be declared by the donee on the ITR12. If the donor made no other taxable donations, such a donation, to the extent it qualifies for the exemption, doesn’t have to be declared on the IT144.
The IT144 is not used to obtain SARS’s view on the issue. The Tax Administration Act, in Chapter 7, allows for SARS to make a ruling, an ‘advance ruling’, upon ‘application’ by a person – see section 77 of the Act. It also allows for non-binding private opinions – see section 88. The ‘application’ must be made in the manner prescribed in section 76.
The exemption, from donations tax, is found in section 56(2)(c) of the Income Tax Act. We copy it below:
Donations tax shall not be payable in respect of so much of any bona fide contribution made by the donor towards the maintenance of any person as the Commissioner considers to be reasonable.
We agree with you that this gives a discretion to SARS. The exercise of this discretion by SARS is not subject to objection and appeal. If an adverse ruling is obtained the parties will have to use section 9 of the Tax Administration Act.
In general, if the amount paid is a bona fide contribution towards maintenance, it is unlikely that it can be found to be unreasonable. Of course, the parties bear the burden to prove this and that the exemption applies – see section 102(1)(a) of the Act.