The document contains a high-level summary of Donations Tax to which South African Residents are subject to, on the the gratuitous disposal of property . It contains details relating to all the Donations Tax implications that a taxpayer would be subject to on the donation of property.
What is DONATIONS TAX? DEFINITIONS
A tax on the transfer of wealth and not an income tax Any gratuitous disposal of property or any
gratuitous waiver or renunciation of a right.
Donations
oAimed at preventing estate duty avoidance, where
(s55)-
a person may “donate” his assets prior to his death to “given or received without payment or
avoid paying estate duties and prevent income tax obligation”
avoidance achieved through transferring assets to a
Family trust.
Gratuitous o “given or made without receiving any
value in return”
LEVY OF DONATIONS TAX DONATION
Payable on the value of property disposed of through ▪ A disposal of property due to an obligation
a donation by a SA resident. ▪ Disposal motivated by reasons not gratuitousness
▪ distribution by a trust to a beneficiary or a dividend
paid by a company
FOUR PILLARS
1. Property
2. Disposed of under a donation ( link to CGT disposal-
triggers CGT calculation)
3. By a person (individual, company, close corporation,
trust, etc.) o Definition: Par 11 -8th Schedule
4. Who or which is a resident of the RSA ( N/A to non-
o When there is a donation of a capital asset =
residents )
CGT consequences.
o Time of disposal =date of compliance with all
Note: EXCLUDES : SERVICES rendered to someone free of charge, legal requirements for a valid donation
as no transfer of property takes place.
Disposal
o Par 38: Deems Proceeds = MV
Base Cost for Donee =MV
o Donations tax ADDED to the Base Cost of
Donor
DONATIONS BY A COMPANY-s57 =
Property disposed of - Disposal by company =Donation Beneficiary under a donation./recipient
Donee(s55)-
by a company on made by that person
instruction of any
person, which would PURPOSE -Prevents a person from
be a donation if avoiding Dividend tax o Price obtained between a willing buyer and a
made by that person willing seller dealing at arm’s length in an open
market
= DIVIDEND distribution by the
OR
company Fair Market
Where a company
makes a donation to = DONATION by Shareholder as paid
Value (s55)- o For immovable property where bona fide
someone, on the by company on behalf of the
Selling Price farming is undertaken in RSA;
instruction of the shareholder.
shareholder, =Price obtained between a willing buyer and
seller in an arms’ length sale REDUCED by 30%
o If Donation not exempt = SARS will
raise donations tax to the shareholder. Property Any right in or to property movable or
(s55) immovable, corporeal or incorporeal, wherever
situated;includes money .
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