A client of mine recently donated some money to her former church in SA. She sent the money directly to them. In her request she asked that some of the money be donated to a specific family and to a specific child's school fees. It seems this has caused c
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
We need to make a comment before we provide the guidance required.
You mentioned that the donation was to the individual’s “former church in SA” and we accept that the individual is not physically present in the RSA. For purposes of the guidance that follows however it was accepted that the individual is someone who is deemed to be exclusively a resident of the RSA for purposes of the application of any agreement entered into between the governments of the RSA and the other country (where the individual is physically present) for the avoidance of double tax.
For the donation to the church, the donee, to be exempt from donations tax, the church must be a person (including any sphere of government) referred to in section 10(1) … (cN) … of the Income Tax Act. That requires approval as a public benefit organisation by SARS (under section 30 of the Act).
In order for the church to issue a section 18A receipt, in order for the donor to make a deduction thereof, the public benefit organisation must carry on Part II, of the Ninth Schedule, activities and must also have received approval from SARS to be able to issue the section 18A receipts.
It is not a tax related issue, but we are not sure why the church would want to transfer the money back to the donor’s RSA bank account. It appears that the intention, of the donor was for the church to act as her agent in this respect.
But, if the church is approved as a public benefit organisation, all its receipts otherwise than from any business undertaking or trading activity, will be exempt from normal tax – see section 10(1)(cN).