Requirements for claiming a tax deduction for charity donations amended

Tax experts at PwC have drawn attention to the additional information that, from this month, must be included on donations receipts for taxpayers to be eligible for a tax deduction for donating to certain organisations.

The South African Revenue Service (Sars) published a list of the additional information in the Government Gazette on 24 February.

Subject to certain limitations, a taxpayer may claim a deduction in terms of section 18A in respect of any bona fide donation of money or property in kind to certain organisations (including a public benefit organisation) during a year of assessment, provided that the donor received a valid receipt from the recipient of the donation, PwC said.

Before 1 March 2023, a section 18A receipt had to reflect the following information:

• The name of the organisation;
• The reference number of the organisation (as issued by Sars);
• The address of the donee;
• The date of receipt of the donation;
• The name and address of the donor;
• The amount of the donation or the nature thereof if not made in cash; and
• Certification that the receipt is issued for the purposes of section 18A, and the donation has been/will be used exclusively for the section 18A objects of the organisation.

Additional requirements

From 1 March 2023, Sars requires that the following information must also be included on a section 18A receipt:

• Donor nature of person (natural person, company, trust, etc);
• Donor identification type and country of issue (in the case of a natural person);
• Identification or registration number of the donor;
• Tax reference number of the donor (if available);
• Contact number of the donor;
• Email address of the donor;
• A unique receipt number; and
• Trading name of the donor (if different from the registered name).

PwC warns that not being able to submit a valid receipt could result in the deduction being disallowed, with the risk of understatement penalties being levied upon assessment of the taxpayer’s annual income tax return.

Has Sars approved the organisation?

Apart from a valid receipt, PwC said the following should also be borne in mind:

• The claim for a deduction in terms of section 18A is only permitted if the donation was made to an organisation, institution, agency or department approved by Sars.
• The fact that the donee is a non-profit organisation conducting a qualifying project does not necessarily mean it is an approved section 18A organisation.
• Donors should confirm the recipient’s section 18A status by requesting a copy of the organisation’s Sars approval letter. Alternatively, they can search the list of 18A approved organisations on the Sars website.

More changes are coming

Sars has issued the Business Requirement Specification document for its IT3(d) pilot project. The aim is to automate the submission of section 18A receipts and information to Sars as part of its third-party data-reporting requirements, PwC said.

The electronic disclosure process will require donees to submit an IT3(d) document to Sars that discloses all the required information pertaining to donations received. Sars will use this information to pre-populate the donation information on taxpayers’ income tax returns.

Once this process has been finally implemented, donors will be eligible for the section 18A deduction only if the donation was disclosed to Sars by the donee via the new electronic disclosure process. Failure by the donee to do so will result in the donor not being granted the section 18A donations deduction upon assessment of the income tax return.

Although the IT3(d) project is still in its pilot phase, and at this stage the date of implementation is not known, donors should take care to provide the donee with all the required information as prescribed by Sars relating to the donation made, PwC said.

Where a donation of property in kind was made, the donor may be requested to provide the issuer with the value of the donation, calculated with reference to section 18A(3). This is necessary to ensure that a valid section 18A receipt is issued by the donee and the donation information is correctly and accurately reported to Sars for income tax return processing purposes, PwC said.