Section 18A Tax Savings Information

Section 18A Donor Deductibility Donations

What are the benefits of Section 18A tax certificates

A non profit organisation must be registered with SARS as a PBO. By giving to a PBO the donor (individual or corporate) saves on various taxes like - 20% Donations Tax; 20% Estate Duty and Capital Gains Tax. However, this PBO status does not give the donor any income tax savings.

18A Donor Deductibility Status

For a donor to obtain income tax benefits, the PBO must have a section 18A tax status. A donor can only claim the donation as a tax write-off is when the donation is made to a PBO that also has a section 18A status. Where the PBO undertakes activities that fall under the categories of

• Welfare and humanitarian
• Health care
• Land and housing
• Education and development
• Conservation, environment and animal welfare

It would qualify for a section 18A status and can issue its donors with tax certificates. The donor submits this 18A Tax Certificate/Receipt to SARS when claiming the donation.

Deduction limited to 10%

The tax claim is limited to 10% of one’s taxable income. Donations in excess of 10% of one’s taxable income will be carried forward, for example, to the 2020 financial year and can be claimed in that year. Although given in the 2019 financial year, the rolled over amount will be deemed to be transferred in the 2020 financial year.

Donations in cash or property-in-kind

The donation can be either in the form of cash or property-in-kind. Examples of property-in-kind donations that can be made are :

• Trading stock, for example, a supermarket can donate groceries or a retail store can donate school uniforms. The donor would claim the lower of cost or fair market value of the stock as a tax write-off.
• Other trading assets, for example, a company can donate usable assets to the 18A PBO. In this case the write off would be the lower of the depreciated value or the fair market value of the asset.
• Immovable property that is purchased, manufactured, erected, assembled or constructed can be donated to the 18A PBO. Here the lower of cost or fair market value of the property can be claimed by the donor as a tax write-off.

Restrictions on Section 18A donations:

• The 18A PBO cannot issue Section 18A tax certificates in respect of services rendered by the donor.
• The funds must be used in South Africa only.
• The funds cannot be used for non-18A activities like religious and cultural activities and sports.

Where an organisation has mixed activities, it is preferable to maintain two banking accounts, one bank account for 18A activities and the other account for non-18A activities.

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