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Three ways to ensure your charitable donations qualify for a SARS tax break

by , 01 February 2013
Three ways to ensure your charitable donations qualify for a SARS tax breakOn Wednesday, Patrice Motsepe, the fourth richest man in South Africa, joined the likes of Warren Buffett and Bill Gates in pledging to donate at least half his family's money generated by their assets to the poor. While this is a big move for an individual, it's not just individuals that should use donations to better the community. Companies should follow suit too - not just for the good feeling you'll be left with, but also to take advantage of SARS's charity deduction tax break...

South African billionaire Patrice Motsepe's charitable donation should amount to an estimated R1.2 billion per year, says André Janse van Vuuren on Moneyweb.
 
That's a lot of money.
 
And while this move has generated a lot of praise from political parties like the DA and the ANC, it's also sparked debate that South Africa's National Treasury must boost South Africa's tax incentives for charitable donations to make it easier to others to follow in Motsepe's footsteps, reports SAPA.
 
'Our tax laws need to reflect the reality of need across our country by increasing the tax deductibility of charitable giving and making it easier to set up charitable foundations,' Democratic Alliance MP, Tim Harris told media after Motsepe announced his decision.
 
While the country debates the issue, The Tax Bulletin outlines three rules you must follow for you company to receive a tax break from SARS on your next charitable donation.
 
Follow these three rules to get the thumbs up from SARS on your charity donation
 
  1. Make sure you're donating to the right organisation: Your donation is only valid for a SARS' tax break if you make it to a SARS approved public benefit organisation (PBO) or Non Profit Organisation/Company (NPO/C). 'Donations are tax deductible if they're made to certain types of non-profit organisations,' Billy Joubert, tax director at Deloitte told the Mail & Guardian. To get the deduction, the donor needs to obtain a section 18A certificate from the organisation concerned – this proves it's a SARS approved PBO.
  1. Don't donate more than 10% of your taxable income a year: To claim a deduction for the donation and avoid paying donations tax on it, don't donate more than 10% of taxable income to PBOs in a given year. If you do, the excess won't be tax deductible.
  1. Get a receipt from the PBO: When you make your donation, the PBO must issue you with a receipt. You'll need to attach this as a supporting document if SARS questions the deduction of the donation when you submit your tax return.
 
Getting your cash back from SARS when you make a charitable donation is as easy as adhering to these rules. And be warned, if you don't follow all the rules, not only will SARS reject your deduction claim, but you could end up paying donations tax of 20% on the donated amount.

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