How to maximise your tax benefit from donating to PBOs and how the new SARS rules for S18A certificates affect you.
What are PBOs and S18A certificates?
Public Benefit Organisations (PBOs) are non-profit entities that carry out activities for the public good, such as education, health, welfare, religion, culture, environment, and animal protection. PBOs can apply to the South African Revenue Services (SARS) for a special tax status that exempts them from paying income tax and allows them to issue tax deductible receipts to their donors. These receipts are called Section 18A certificates, named after the Section of the Income Tax Act that regulates them.
Why is it important to get a Section 18A certificate?
If you donate to a PBO that has a Section 18A approval from SARS, you can claim a tax deduction for your donation, up to 10% of your taxable income. This means that you can reduce your tax liability by supporting a cause that you care about. However, to claim this deduction, you need to have a valid Section 18A certificate from the PBO that shows the amount and date of your donation, the name and registration number of the PBO, and the reference number of the SARS approval.
What is the new SARS rule and how does it affect you?
SARS has recently introduced a new rule that requires all PBOs that have issued Section 18A certificates to their donors from March 1, 2023 to February 29, 2024, to submit the details of these donations to SARS electronically by May 31, 2024. This is to ensure that the donations are correctly reflected in the tax returns of the donors and that there is no abuse of the tax benefit. If a PBO fails to comply with this rule, it may lose its Section 18A approval and its donors may not be able to claim the tax deduction for their donations.
As a donor, you need to make sure that the PBO that you donate to is compliant with this rule and that it provides you with a Section 18A certificate that matches the information that it submits to SARS. You also need to check that the PBO has a valid Section 18A approval from SARS and that it is registered as a Public Benefit Organisation with the SARS. You can verify these details on the SARS website or by contacting the PBO directly.
How can you maximise your tax benefit from donating to PBOs?
Donating to PBOs is not only a way of contributing to the social good, but also a way of saving on your taxes. To maximise your tax benefit, you should follow these steps:
- Plan your donations ahead of time and budget for them according to your available funds and taxable income.
- Choose PBOs that have a Section 18A approval from SARS and that are registered as non-profit organisations with the Department of Social Development, a Non-Profit Company or a qualifying charitable Trust.
- Ask for a Section 18A certificate from the PBO for every donation that you make and keep it for at least five years after assessment.
- Check that the Section 18A certificate has all the required information and that it matches the data that the PBO submits to SARS.
- Claim the tax deduction for your donations in your tax return, up to 10% of your taxable income and attach the Section 18A certificates as supporting documents.
- If you have any questions or doubts about the tax deductibility of your donations, consult a tax professional.
Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.
Article prepared by: Stefan Diederiks CA(SA)
Entrepreneurial Business Services Director, Registered Tax Practitioner
For any queries or further information, please contact:
• Hassen Kajie
Entrepreneurial Business Services Director
M: (+27) 82 333 3389 | E: hassen@nexia-sabt.co.za
• Yousuf Hassen
Entrepreneurial Business Services Director
M: (+27) 82 333 3376 | E: yhassen@nexia-sabt.co.za
Source: The South African Revenue Services