Section 18A of the Income Tax Act (Act 58 of 1962), as amended by the Revenue Laws Amendment Act (Act 45 of 2003) entitles a taxpayer (an individual or a legal entity, including a trust) to deduct annual donations to certain public benefit organisations (PBOs). This amount must not exceed 5% (five percent) of their taxable income.
A donation is given voluntary and freely by the donor out of generosity to a donee (the person receiving the donation) without expecting anything in exchange.
Who May Issue A Section 18A Certificate?
Not all NPO’s and PBO’s qualify to issue an 18A certificate.
Donations to an eligible PBO for the issuing of section 18A receipts are restricted to specific organisations approved by the Commissioner and is granted to PBO’s listed in PART II under public benefit activities (PBA’s).
In other words, not all PBO’s can issue an 18A certificate.
Qualifying PBO’s are recognised by Government as organisations dependent on the generosity of the public. To encourage this generosity, a tax deduction for certain donations is granted to taxpayers.
Lake Farm Centre is an approved Section 18A PBO, because the services we provide falls within the public benefit activities categorised in PART II.
WHAT KIND OF DONATIONS QUALIFY?
Donations can be in the form of cash (money) or of property in kind.
Cash does not include, for example, school fees, raffle payment, memorabilia and other assets donated to be auctioned to raise funds or the value of free rent, water and electricity provided, or amounts paid to attend a fundraising event, membership fees, prizes and sponsorships donated for an event, etc.
Property in kind includes, for example, computers, vehicles, office equipment, shares or trading stock, property purchased, manufactured, erected, installed, or constructed by or on behalf of the taxpayer for example carpets or cupboards installed or security fencing and buildings built.
The donation of a service such as time, skill or effort to a section 18A-approved organisation will not qualify as a deduction for purposes of section 18A, since a service is not a donation of property made in kind.
WHAT INFORMATION DOES A QUALIFYING DONOR HAVE TO PROVIDE?
A section 18A certificate issued to a charitable donor requires the display of specific information. Additional information is required from March 2023. Below is a list of this information.
- Donor nature of person (natural person, company, trust etc.)
- Donor identification type and country of issue in case of a natural person.
- Identification or registration number of the donor in case of a business, etc.
- Income tax reference number of the donor.
- Contact number of the donor.
- Electronic mail address of the donor.
- A unique receipt number.
- Trading name of the donor if different from the registered name.
For more information download the Basic Guide to 18A approval by clicking on the button below.
