Two legal requirements a donation must fulfill to take effect

Simangele Mzizi, Fsp Business, 26 Aug. 2014

Tags: tax, sars, donations tax

Donations tax is in the spotlight.

According to media reports, SARS is investigating if the people footing Julius Malema’s tax bill are paying donations tax on their contributions.

This shows that SARS leaves no stone unturned when it comes to donations tax. It’ll certainly come after you as well and slap you with harsh penalties if you don’t account for this tax correctly.

The good news is you can avoid any hassles if you have the know-how.

Keep reading to discover two legal requirements a donation must fulfill to take effect so you can account for donations tax correctly and avoid SARS penalties.

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Before we look at when a donation takes effect, let’s define what a donation is

A donation is when:
  • You give something away for free;
  • You get rid of something for a lesser price than it’s worth; or
  • When a company disposes of property, at the request of any person.
Now let’s look at when a donation takes effect.

A donation will take effect when you meet these two legal requirements

Requirement #1: The person you’re donating to must accept the donation; and

Requirement #2: The donee must take delivery of the item. But if you both agree, in writing, that you’ll give the item at a future date, the effective date of the donation is the date you sign the contract.

After this, you must pay donations tax using an IT 144. You must pay it before the end of the month following the month the donation took effect.

The Practical Tax Loose Leaf Service explains that if, for example, you donate R15 000 in May, you must pay R3 000 in tax before the end of June.

If you don’t pay donations tax within this period, you’ll both be jointly and severally liable for the tax. Don’t take that risk. Account for donations tax correctly especially now that you know the two legal requirements a donation must fulfill to take effect.

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