Are Veterinary Inspection Fund Fees Deductible for Farmers? Business Expense or Donation?

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Are Veterinary Inspection Fund Fees Deductible for Farmers? Business Expense or Donation?

• 25 June 2025
• Corporate Tax
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

Question:

A fund will be established with an initial fee of R1,000 per farmer to cover veterinary inspections of suspected diseased rural animals. Farmers will be invoiced for this fee. Clarification is sought on whether SARS would allow farmers to deduct this fee as a business expense or as a donation, particularly as the direct link to income production may be disputed. The farmers’ association is registered as a Non-Profit Organisation (NPO).

Answer:

The Problem / Facts

A fund will be established with an initial fee of R1,000 per farmer to cover veterinary inspections of suspected diseased rural animals. Farmers will be invoiced for this fee. Clarification is sought on whether SARS would allow farmers to deduct this fee as a business expense or as a donation, particularly as the direct link to income production may be disputed. The farmers’ association is registered as a Non-Profit Organisation (NPO).

Analysis of the Tax Issues Identified

The primary issue is whether the R1,000 fee qualifies for a tax deduction for the contributing farmers. This involves assessing whether the expenditure is incurred in the production of income (Section 11(a)) or, alternatively, if it qualifies as a deductible donation under Section 18A when paid to a qualifying NPO. A secondary question is whether VAT applies and if input VAT may be claimed.

List of Tax Issues with Relevant Sections of Tax Legislation

• Deductibility of business expenses: Section 11(a), Income Tax Act 58 of 1962

• Deductibility of donations: Section 18A, Income Tax Act 58 of 1962

• Definition of a Public Benefit Organisation (PBO): Section 30, Income Tax Act 58 of 1962

Applicable Law

Income Tax Act 58 of 1962 (notably Sections 11(a), 18A, 30)

Application of the Law to the Facts

• Section 11(a) (General Deduction Formula):
  Expenditure is deductible if incurred in the production of income and not of a capital nature. Although the inspection fees may not be directly incurred to produce income, a strong argument exists that preventing the spread of animal disease is essential to safeguarding future income and the viability of livestock operations. SARS has supported deductions for similar industry levies and protective measures, provided a direct link to business income can be demonstrated. The invoice and nature of the expense should be recorded as a farming or business operational cost.

• Section 18A (Donation Deduction):
  If SARS does not accept the expenditure as incurred in the production of income, the payment may qualify as a donation. If the NPO (farmers’ association) is a registered Public Benefit Organisation (PBO) and issues a Section 18A certificate, farmers may claim a deduction against taxable income for donations, subject to annual limits (generally 10% of taxable income). Non-approved NPOs (i.e., not PBOs) do not grant such deductions.

• VAT Act 89 of 1991:
  If the farmer and/or the association are VAT vendors, VAT implications must be considered. Fees paid for veterinary services provided by VAT vendors may attract VAT. Farmers may be able to claim input VAT if the supply relates to taxable farming operations and a valid tax invoice is issued.

Conclusion

If the R1,000 fee is a compulsory operational cost linked to the income-producing activities of the farm, a deduction may be possible under Section 11(a), provided the connection to protecting income can be substantiated. Alternatively, if not accepted as a business expense, the payment may qualify as a deductible donation under Section 18A if made to a registered PBO issuing a valid certificate. VAT implications depend on the VAT status of the parties involved.

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