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Making a donation for World Refugee Day? Ensure you get these three things right to get a deduction AND avoid paying donations tax

by , 20 June 2013
Today is World Refugee Day and the United Nations says the number of refugees worldwide is at its highest in 18 years, at over 45 million people.. In an effort to raise awareness on the plight of refugees, the office of the United Nations' High Commissioner for Refugees (UNHCR) is urging civil society, individuals and companies to help them provide emergency kits for refugees. If your company wishes to donate to this cause, SARS will let you claim a deduction on your donation, but only if you follow these three rules...

The United Nations' (UN) World Refugee Day is observed on June 20 each year. The day is aimed at honouring the courage, strength and determination of women, men and children who are forced to flee their countries under threat of persecution, conflict and violence.

And the UN Refugee Agency, UNHCR, says refugees urgently need life-saving help.

It's urging you to make a donation today that could provide an essential kitchen set to enable a family to prepare food, warm bedding for families that have lost everything and a tent to shelter a whole family from the elements.

If your company donates to this cause or any other charitable organisation, your simple act of goodwill can get you money back from SARS.

But it's not as straightforward as just handing a cheque over.

'If you don't follow all the rules, not only will SARS disallow your deduction. You could end up paying donations tax of 20% on the donated amount,' warns The Practical Tax Loose Leaf Service.

Luckily, there are certain things you must do to ensure your company gets a deduction and most importantly avoids paying donations tax.

To avoid donations tax and to get deductions your company must do these three things as outlined by The Practical Tax Loose Leaf Service:

#1: Make sure you're donating to the right organisation

Your donation will only be valid if you make it to a Public Benefit Organisation (PBO), or Non Profit Organisation/Company, including a former Section 21 company that's approved by SARS.

If the organisation your company is donating to is approved by SARS, it means it has been registered as a charitable or non-profit organisation under South Africa's tax laws.

#2: Don't donate more than 10% of taxable income in a year

If you want to claim a deduction for the donation and you want to avoid paying donations tax on it, then don't donate more than 10% of taxable income to PBOs in a given year.

If you donate more than 10% of taxable income to PBOs during a year, the excess won't be tax deductible. It's important, however, to note that all donations to PBOs are exempt from donation tax.

#3: 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 when you submit your tax return.

Using these tips will ensure your company will be able to make charitable donations without having to worry about suffering under the burden of extra taxes.

If your company has any queries about your donations to the UN refugee agency, you can contact donors@unhcr.org.

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Andre 2013-06-26 14:13:15

The two paragraphs under #2 seems to be contradictory: the first says to NOT make more than 10% of taxable income to PBO's in order to avoid donations tax and the second says all donations to PBO's are exempt from donations tax.

Also, a PBO registered with SARS under section 30 to obtain income tax exemption status, still does not necessarily carry section 18A registration with SARS, which is what is required for the donor to receive a donation certificate qualifying the donation for tax deductibility no 10% limit applies to section 18A donations, I believe.

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