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Tax Talk

Tax Talk

Author: Natalie Wocke
Date: 2014-08-08
Donations tax - Be aware..your generosity may have tax consequences.

Donations tax is dealt with in paragraphs 54 to 64 of the Income Tax Act No.58 of 1962. Donations tax is payable on the value of assets disposed of by way of donation, by a South African Resident.

Donations tax is different from income tax in that it is not a tax levied on taxable income, but on the Transfer of wealth. Donations tax is levied at a rate of 20% on all donations made by South African resident natural persons, in excess of the annual donations tax exemption of R100,000 in any year of assessment. Separate rules apply to persons who are not natural persons, which is not dealt with here.

Donations tax is frequently not considered by the man in the street when transferring assets and cash, and in view of this can result in unexpected taxes payable where a gratuitous disposition is made, in excess of the R100,000 exemption, in any year of assessment. There are many exemptions applicable to donations tax, the most common and useful being the transfer of assets between spouses - is completely exempt from donations tax. Structuring your transactions to make use of the annual donations exemption is permissible, but requires proper planning ahead.

Ensure you do not unintentionally fall foul of these provisions when planning to gratuitously dispose of assets. Contact your nearest branch of Roberts and Chaplin for a professional consultation. Ballito(032 586 0387) or Umhlali (032 947 1010).