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Do you know what kind of company you need to donate to, to get a tax deduction in return?

by , 18 July 2014
You probably know about donations tax. The tax SARS makes you pay if you make a donation. Doesn't sound fair, does it? Your company gives something out of the goodness of your heart and you have to pay tax on it.

There's a reason for this though. You see, some companies try to dispose of their assets under the table through a 'donation' so they don't have to pay Capital Gains Tax.

But you can avoid this tax and get a donation tax deduction instead, you just have to donate to the right kind of company...

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Here's what happens when you make a donation to a normal organisation

If you make a donation to an organisation that works for a profit, you have to pay donation tax equivalent to 20% of the value of the donation.  And that donation doesn't just have to be in cash. It could be:
- Home;
- Farms;
- Cars;
- Trademarks;
- Shares; and
- Anything, tangible or intangible, that has value.
So let's say you donate a laptop worth R10 000, you'll then pay R2 000 in donation tax.
But this is only is you donate to a profit based organisation. You can avoid donation tax if you donate to another type of company...

Donate money to Public Benefit Organisation (PBO) to get a tax deduction

If your want to get a donation tax deduction, only donate to PBOs. You must also ensure the donation isn't more than 10% of your company's taxable income for the year.
If you keep to these rules, you can claim a tax deduction on the donation. It's a great way to get some tax back and improve your company's image.
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