My Client pays his Mom's monthly expenses. Can this be treated as a Donation in his hands and if so, is the amount limited that he is allowed to declare as a donation?
Important:
This answer is based on tax law for the tax year ending 28 February 2018.
Answer:
There is no deduction that is allowed for purposes of donations tax. You are probably referring to the section 56(1)(b) exemption from donations tax that is available to natural persons in respect of each year of assessment.
We are not sure why you don’t believe that the exemption, from donations tax, found in section 56(2)(c) of the Income Tax Act, applies here. 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.
It may be because of the nature of the expenses. The specific provision (section 56(2)(c) of the Income Tax Act) uses the words “as the Commissioner considers to be reasonable”. In principle, SARS (the Commissioner) may conclude that not all of the amount paid to the person is a bona fide contribution made towards maintenance, in which case he will make his assessment as to what is reasonable on that portion of the contribution which he considers bona fide. SARS may also find that the full amount paid is a bona fide contribution, but that in his opinion only a portion of it is reasonable. It is generally accepted that a conclusion of this sort (by SARS) appears difficult to sustain. In general, if the amount paid is a bona fide contribution towards maintenance, it is unlikely that it can be found to be unreasonable.