Tax and 18A
Terminology as per the Basic Guide to Tax-Deductible Donations (Issue 2)
PBO – means means a public benefit organisation as defined in paragraph (a)(i) of the definition of “public benefit organisation” in section 30(1), which is constituted as either a non-profit company as defined in section 1 of the Companies Act 71 of 2008, trust or an association of ersons that has been incorporated, formed or established in South Africa, and approved by the Commissioner under section 30(3).
Section 18A – means the section that provides for the tax-deductibility of
donations made to section 18A-approved organisations carrying on PBAs in Part II in South Africa.
Section 18A-approved organisation – means any PBO contemplated in paragraph (a)(i) of the definition of “public benefit organisation” in section 30(1), and any institution, board or body, agency or the government which carries on PBAs in Part II in South Africa, and which has been approved by the Commissioner under section 18A.
Section 18A receipt” means a special prescribed receipt issued under section 18A by a section 18A-approved organisation entitling the donor to a tax deduction for bona fide donations made.
- Helderberg Hospice is an 18A approved organisation.
- A Section 18A receipt can only be given for a bona-fide gratuitous donation for which the giver (or any related party) receives no value at all in return and where the donation (cash or goods) will be used only for carrying out approved public benefit activities.
- No Section 18A receipts can be issued if any level of value is enjoyed as a result of the payment or “donation” (even if the value received is far less than the value given). By way of example, sponsors receive marketing in return for their sponsorship and attendees enjoy the event that they attend. The alternative to issuing a Section 18A receipt for sponsorships is for the PBO to invoice the sponsor for the amount received as they may then be able to claim the amount as a tax deductible marketing expense. However, if the PBO is a VAT vendor, the sponsorship amount must include VAT.
- No section 18A receipt can be issued either for goods received for auctioning or sale by the Public Benefit Organisation for fundraising purposes or for the amount paid for items or services bought at an auction sale.
- No Section 18A receipts should ever be issued for tickets, sponsorships, auction items (received and sold) or for any type of free or discounted services.
Page 4 of SARS’ “Basic Guide to Tax-Deductible Donations (Issue 2) which lists clearly the payments and transfers that do not qualify for a deduction under Section
18A.” The following payments or transfers do not qualify for a deduction under section 18A:
- Amounts paid to attend a fundraising event such as a dinner or charity golf day.
- Memorabilia and other assets donated to be auctioned to raise funds.
- Amounts paid for school fees, school entrance fees or compulsory school levies.
- Amounts paid for raffle or lottery tickets.
- Amounts paid for the successful bid for goods auctioned to raise funds.
- The value of free rent, water and electricity provided by a lessor to the lessee which is a section 18A-approved organisation.
- Payments of debt owed by a section 18A-approved organisation, for example, the cost of repairs to a section 18A-approved organisation’s vehicle paid to the service station on behalf of that organisation and not paid directly to the section 18Aapproved organisation.
- Prizes and sponsorships donated for a fundraising event such as a charity golf day.
- Tithes and offerings to churches or other faith-based organisations in support of their religious activities.
- Membership fees.
- Promissory notes.
- Payments made in future instalments and post-dated cheques.