What are 18A Tax Deductions?

Section 18A Donor Deductibility Donations

A non profit organisation must be registered with SARS as a PBO. By giving to a PBO the donor (individual or corporate) saves on various taxes like – 20% Donations Tax; 20% Estate Duty and Capital Gains Tax. However, this PBO status does not give the donor any income tax savings.

18A Donor Tax Deductibility Status

For a donor (individual or corporate) to obtain income tax savings, the PBO must have a section 18A Tax status.  An organisation that has a PBO and a section 18A  Tax status can issue section 18A Tax certificates to its donors. These 18A Tax certificates allow the donors to claim their donations as tax write-offs.

The tax-write off is limited to 10% of the taxpayer’s annual taxable income. However, any excess amount can be carried over to the following year.

Section 18A Tax certificates can only be issued for the following categories of public benefit activities:

      • Welfare and humanitarian
      • Health care
      • Land and housing
      • Education and development
      • Conservation, environment and animal welfare

Donations in cash or property-in-kind

The donation can be either in the form of cash or property-in-kind. Examples of property-in-kind donations that can be made are :

    • Trading stock, for example, a supermarket can donate groceries or a retail store can donate school uniforms. The donor would claim the lower of cost or fair market value of the stock as a tax write-off.
    • Other trading assets, for example, a company can donate usable assets to the 18A PBO. In this case the write off would be the lower of the depreciated value or the fair market value of the asset.
    • Immovable property that is purchased, manufactured, erected, assembled or constructed can be donated to the 18A PBO. Here the lower of cost or fair market value of the property can be claimed by the donor as a tax write-off.

Restrictions on usage of Section 18A donations:

  •  The 18A PBO cannot issue Section 18A Tax certificates in respect of services rendered by the donor.
  • The funds must be used in South Africa only.
  • The funds cannot be used for non-18A activities like religious and cultural activities and sports.

Where an organisation has mixed activities, it is preferable to maintain two banking accounts, one bank account for 18A activities and the other account for non-18A activities.

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