Can SARS charge donation tax on a company for making monthly tenths to a church on behalf of the director. Should it rather not be treated as part of the Directors remuneration? There was not a deduction claimed for the monthly contribution
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
We are not sure why you say that it is SARS that will charge donations tax on the company – does this mean they issued an assessment for donations tax to the company? We don’t know why it was not seen as dividend, or a taxable benefit (Seventh Schedule) by the company.
Under section 57, of the Income Tax Act, if “any property is disposed of by any company at the instance of any person; and that disposal would have been treated as a donation had that disposal been made by that person, that property must for the purposes of this Part be deemed to be disposed of under a donation by that person.” In that instance, SARS would have levied the tax on the individual and not the company.
A final comment regarding to the exemption from donations tax. In terms of section 56(1) donations “by or to any person (…) referred to in section 10 (1) … (cN), …;” are exempt from donations tax. If the ‘church’ is not an approved public benefit organisation, approved by SARS, this exemption is not available.