Giving is Good, provided you are doing it right...


Please note that every effort has been made to ensure that the advice given in this educational material is correct. Nevertheless, that advice is given purely as guidance readers to assist them with particular problems relating to the subject matter of the educational material, and African Venture Group will have no responsibility to any person for any claim of any nature whatsoever that may arise out of, or relate to, the contents of this educational material.

Donations and NPO's

Giving is Good, provided you are doing it right...


So you just gave your money to a Non Profit Organisation, did it benefit your Taxable Income?


It is easy to verify these claims


Although it is not mandatory to register as an NPO, virtually all non-profit organisations do so as it shows a commitment to the spirit of altruism and good governance required of such organisations. NPOs are under the jurisdiction of the Department of Social Development (DSD) and it is a quick process to check if an NPO is registered. Follow this link to verify an NPO.


Many of these NPOs are also PBOs which are usually registered with SARS to enable you as donor to claim the tax allowances available, and can be verified on the SARS by following this link SARS.



What else can you ask for?


Ask the NPO to give you proof that the money you are giving is going to where the NPO promises. This is a standard requirement – Foundations that give to NPOs require that they report back verifying not only that the money was correctly spent, but also showing the impact this giving has had on the targeted individuals and communities. 


When you make a donation to a section 18A registered PBO, they must issue you with a prescribed certificate that SARS will require you to submit when you claim the deduction in your tax return. The certificate also verifies that the donation will only be used for certain purposes as prescribed by law and approved by SARS.



Create a policy that benefits you...


Instead of donating to causes on an ad-hoc basis, why not have a “giving policy”? Establish how much you are prepared to donate and the causes you want to support. Many companies are now encouraging their staff to donate to good causes. 


To do this, an understanding of tax legislation is important:



Donations tax


A company will not incur donations tax for the first R10 000 per annum in donations and an individual R100 000 per annum – any amounts over the company or individual limit are taxed at 20%.


Note that you cannot claim a tax deduction for any donations tax you pay in this regard.



PBOs


Over and above this, SARS allows both registered and non-registered NPOs that meet the legal criteria in the Income Tax Act to register as a PBO. One advantage of being a PBO is that individuals or companies will not be subject to donations tax on their donations to the PBO even for amounts over the limits set out above.


To also get a tax deduction, check that the PBO is registered in terms of section 18A of the Income Tax Act – only those PBOs which are additionally approved by SARS in terms of section 18A can also issue donation tax receipts for donations received. Donors can then deduct up to 10% of their taxable income (for individuals, adjusted for retirement lump sums and severance pay) from donations to PBOs on assessment of their taxes. Note that SARS will require presentation of a valid donations tax receipt from the donor to claim the deduction. Should the individual or company have given more than 10% of their taxable income in one year, then the excess over 10% can be carried over to the next year. Thus, you get favourable tax treatment by donating to PBOs. 


Staff can also get tax relief on their PAYE through “payroll giving” whereby the employer donates on their behalf up to 5% of the employee’s remuneration (adjusted for pension and RAF contributions) to qualifying section 18A PBOs. The donation will then be reflected on the employee’s IRP5 at the end of the year and the PBO will issue a section 18A receipt to the employer as proof. 


Having a company-wide giving campaign will forge closer links with employees, as this is something all the staff can be involved in and buy into. 


The Solidarity Fund


This fund has been set up as a COVID-19 relief fund and has PBO and section 18A status which has been enhanced to allow taxpayers donating to it to claim 20% of their taxable income as a deduction. There will thus be a limit of 10% for any qualifying donations (including donations to the Solidarity Fund in excess of its specific limit) and an additional 10% for donations to the Solidarity Fund. Where staff elect to do “payroll giving”, employers can deduct up to either 33% for 3 months during 1 April to 1 July 2020 or 16,6% over 6 months during 1 April to 1 September 2020 for the 2021 tax year, of employees’ remuneration, when staff donate to the Solidarity Fund. The same rules apply in terms of section 18A certificates as covered above – make sure that you will get a section 18A receipt.


For further information contact African Venture Group.


African Venture Group

1 Nollsworth Crescent, Umhlanga, Durban, 4051

 

National:

078 115 6607

International:

+27 78 115 6607

Email: info@africanventuregroup.co.za

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