Can S18A certificates be issued for any general donations in support of a PBO's activities?
Important:
This answer is based on tax law for the tax year ending 28 February 2018.
Answer:
The deduction, under section 18A of the Income Tax Act, is only available in respect of “bona fide donations” and requires “a receipt issued by the public benefit organisation, institution, board, body or agency or the department concerned”, on which certain details are given.
A public benefit organisation doesn’t, by virtue of the fact that it is a public benefit organisation, qualify to issue the section 18A receipt. Section 18A(2) requires “a certification to the effect that the receipt is issued for the purposes of section 18A of the Income Tax Act, 1962, and that the donation has been or will be used exclusively for the object of the public benefit organisation, institution, board, body or agency concerned or, in the case of a department in carrying on the relevant public benefit activity…”
This follows from the requirement in section 18A(1) that the deduction is in respect of “any bona fide donations by that taxpayer … to any public benefit organisation contemplated in paragraph (a)(i) of the definition of ‘public benefit organisation’ in section 30(1) approved by the Commissioner under section 30; or institution, board or body contemplated in section 10(1)(cA)(i)”.
The public benefit organisation must therefore also have approval to issue the section 18A receipt. The SARS approval (as PBO) is based on Part 1 of the Ninth Schedule and the section 18A on part 2 of the Schedule. The donation must therefore be for activities listed in part 2 of the Ninth Schedule – if not, the receipt can’t be issued. We therefore don’t agree with your comment that it “can be issued for any donations received in support of the PBO's activities including general donations”.