WORDS Kajal Chowthee, Fiduciary and Tax Specialist, Sanlam Private Wealth
The end of the year is traditionally the season of giving in many countries. Charitable giving has always been a core consideration for many South Africans, who often donate or make specific bequests in their wills to Public Benefit Organisations (PBOs). Before you donate to a cause that is close to your heart, however, it’s a good idea to take note of the tax consequences.
Any individual or company making a bona fide donation to a registered PBO can qualify for an income tax deduction, provided the PBO is able to issue the required certificate to the donor. A bona fide donation is a voluntary gift given out of generosity, without reciprocal obligations or personal benefit for the donor.
The deductible portion of the donation is capped at 10% of the taxable income of the donor. With donor companies, an excess donation may be rolled over in the subsequent year of tax assessment.
About PBOs
Non-profit organisations that undertake and support particular public benefit activities can register as PBOs and where required, apply for the relevant tax exemptions. These activities typically include welfare and humanitarian, healthcare, land and housing, education and development, religion, belief and philosophy, cultural, conservation, environment and animal welfare, research, and sport.
Registered PBOs are exempt from income tax, but certain receipts and accruals from activities carried out by a PBO may be taxable. Donations and bequests made to registered PBOs are also not subject to donations tax and/or estate duty. Similarly, assets donated or bequeathed to registered PBOs aren’t subject to capital gains tax.
Sanlam Private Wealth can assist you with creating a PBO and drafting your will containing bequests to a registered PBO. For further information, contact Kajal Chowthee at kajalc@privatewealth.sanlam.co.za.
