The Tax Benefits of Donations

tax-donationsMany business owners make donations to good causes on a regular basis, and since the tax laws were first amended in 2006 there have been several taxation benefits associated with donations, allowing your business to do well while doing good. Here are a few important details concerning tax-deductible donations:

Which Organisations Are Eligible?

In order to benefit from a tax rebate, you will need to donate to an organisation which is registered with SARS as a Section 18(A) Public Benefit Organisation, or exempt organisation. SARS requires that all organisations which receive tax-deductible donations should comply with certain regulations, and if you mistakenly donate to an organisation that is not approved by SARS, you may end up losing your tax rebate.

Section 18(A) Public Benefit Organisations include non-profit initiatives which assist the homeless, provide educational and housing to the poor, and generally contribute to bettering society. SARS has a list of exempt organisations which can be downloaded here.

How Much Can I Donate?

While there is no legal limit to the amount of money you may donate to a BPO, the tax rebate you will receive may not exceed 10% of your taxable income. This means that any amount you donate above the 10% threshold may not qualify for a rebate.

What Documentation Should I Keep?

It is extremely important that the BPO you donate to provides you with the necessary documentation which will prove that you made a donation to an organisation approved by SARS. You will need a receipt from the organisation which contains the following information:

  • The date on which you made the donation.
  • Multiple donations may be reflected on one receipt, provided that they fall within the same tax year.
  • Your name must appear on the receipt, stating that you were the donor.
  • The receipt must be worded correctly, stating that it was issued in terms of Section 18(A) of the Income Tax Act.

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