How much donations can a resident company make to a PBO to be deducted from taxable income? furthermore I read mention of R10 000.00 for a casual gift being made. Will a donation to a trust be acceptable?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
For a company (the Income Act refers to “any taxpayer”), “the deduction must not exceed … in any other case, ten per cent of the taxable income … of the taxpayer as calculated before allowing any deduction under this section” – see section 18A(1)(B).
In terms of the proviso to the above provision, “any amount of a donation … which has been disallowed solely by reason of the fact that it exceeds the amount of the deduction allowable in respect of the year of assessment shall be carried forward and shall, for the purposes of this section, be deemed to be a donation actually paid or transferred in the next succeeding year of assessment.”
The section 56(2)(a) principle must not be confused with the section 18A one.
The taxpayer can make a deduction, in terms of section 18A, if the donee is an approved public benefit organisation. Donations to these approved organisations then qualify for an exemption from donations tax – section 56(1)(h). This is in addition to qualifying to be deducted.
If the donee is not an approved public benefit organisation, no section 18A deduction is possible. The donation will then also be a taxable donation. In terms of section 56(2) of the Act, “donations tax shall not be payable in respect of—
(a) so much of the sum of the values of all casual gifts made by a donor other than a natural person during any year of assessment as does not exceed R10 000:
(b) …;”