Deductibility of donations for tax

A lot of taxpayers opt to give back to society in the form of donations. This can be done in a number of ways, being either in cash, in kind, or even just giving some time. One of the most commonly found initiatives is the corporate social responsibility programs to provide assistance in the form of donations where a need arises.

Generally donations are not deductible, but section 17(1)(s) of the Income Tax Act, 1981 (Act 24 of 1981) allows for the deduction from taxable income of a taxpayer the amounts donated by a taxpayer to a welfare organisation or an educational institution during a year of assessment.

To qualify for this deduction, the welfare organisation must be registered under the National Welfare Act, 1965 (Act 79 of 1965) and­ ­approved by the minister of health and social services.

An educational institution must be approved by the minister of higher education, training and innovation or with the minister of education, arts and culture.

Once the welfare organisation/educational institution is approved by either of these ministries, the organization (i.e. the welfare/educational institution) should apply to Inland Revenue for approval that contributions made to it, is deductible by its donors. Inland Revenue then approves this by issuing them with a formal letter and the template to be used by the organization for issuing donation certificates to its donors.



Deductions not allowed

• To qualify for the section 17(1)(s) deduction, an individual may not be nominated as a beneficiary (i.e. therefore the deduction would not be allowed if the beneficial owner of the donation is an individual instead of the registered welfare/educational institution.

• The amount donated may also not be for the payment of school fees or contributions to a school fund.

• Finally, the section 17(1)(s) deduction may not give rise to or increase your tax loss for the year of assessment.

The educational institution or welfare organisation must issue a certificate to the taxpayer in respect of the amount donated (i.e. this must be the certificate referred to in the article earlier, approved by the ministry of finance).

Such certificate should be included in the taxpayers' tax return when claiming a deduction. Where such certificate is not included in the tax return, the deduction will most likely not be awarded.

So as we approach winter time and the temperatures are dropping, warm your heart and look out for projects that you can support. Who knows, you may even be rewarded with a tax deduction. . .