Donations Tax in SA: A Quick Guide for Generous Givers

Donating money or property to family, friends, or organisations is often driven by goodwill — but if you’re a South African tax resident, it’s important to understand how Donations Tax might apply to those gifts. Whether you’re making a once-off financial contribution or supporting someone regularly, the South African Revenue Service (SARS) may consider the donation a taxable transaction.

In this article, we unpack when donations tax applies, who pays it, how it works, and how exemptions and case law shape its interpretation.

What is Donations Tax?

Donations Tax is a separate tax — distinct from income tax — that is levied in terms of Sections 54 to 64 of the Income Tax Act 58 of 1962. It applies when a South African tax resident disposes of property — including money — gratuitously, meaning without receiving anything of equal value in return. The law views this as a transfer of wealth, and SARS is entitled to tax it accordingly.

Donations Tax rates:

20% on the total value of donations up to R30 million in a tax year25% on any portion of donations exceeding R30 million.

It’s important to note that the donor, not the recipient, is responsible for paying donations tax.

“But I’ve Already Paid Tax on That Money!”

This is one of the most common misunderstandings around donations tax in South Africa. While the money may have been earned and taxed as income, the act of giving it away is treated as a separate transaction. SARS taxes the transfer itself, not the original source of the funds. The rationale is that you are parting with an asset for no value in return — creating a new taxable event.

10 Common Questions About Donations Tax in South Africa

1. When is a gift considered a donation under tax law?

A donation is defined in Section 55(1) as any disposal of property made gratuitously, or any waiver or renunciation of a right, where there is no compensation. In Commissioner for SARS v ABC Trust (2004), a taxpayer transferred assets into a trust for the future benefit of a nephew. The court found that the transfer was gratuitous, immediate, and made without compensation — even though the nephew would only benefit later. It was therefore classified as a donation subject to donations tax.

2. Can a loan be seen as a donation for tax purposes?

Yes — in certain circumstances, what appears to be a loan can be reclassified by SARS as a donation, especially if there is no real expectation of repayment.

If you give money to someone and:

• Don’t charge interest,

• Don’t record the loan in writing,

• Don’t specify repayment terms, or

• Never take steps to recover it,

SARS may argue that the transaction was made gratuitously, and therefore falls within the scope of donations tax as defined in Section 55(1) of the Income Tax Act. This issue commonly arises in informal loans to family members or related trusts. To prevent unintended donations tax, ensure a proper loan agreement exists with enforceable terms and interest where applicable.

3. Are all donations taxable?

Not all donations attract tax. Section 56(2) of the Income Tax Act provides several important exemptions.

These include:

• The first R100,000 donated by a natural person per tax year

• Up to R10,000 per year in casual gifts from companies or trusts

• Donations made to SARS-approved Public Benefit Organisations (PBOs)

• Donations made between spouses

• Certain conditional or deferred donations

Commissioner for SARS v Executor of Estate Late Mr. X (2006) considered a case where a donation was set to take effect only upon the donor’s death. The court held that because the recipient received no benefit during the donor’s lifetime, the donation was deferred, and therefore not subject to donations tax. This illustrates how the timing of the benefit plays a role in taxability.

4. Do companies and trusts qualify for the R100,000 exemption?

No. Only natural persons (individuals) qualify for the R100,000 annual exemption. Companies and trusts may only deduct R10,000 per year in casual gifts. Any amount over that is taxed from the first rand.

5. Do I have to file a tax form if I donate R100,000 or less?

If you are a natural person and the total donations made in the year do not exceed R100,000, you are not required to submit an IT144 (Declaration by Donor) form to SARS. However, you should still keep documentation in case SARS requests supporting evidence.

6. Are gifts to my children or parents taxable?

Yes, unless the total amount you donated to all recipients during the year falls within the R100,000 exemption. There is no automatic exemption for donations to children, parents, or other relatives. Only donations between spouses are specifically exempt under Section 56(2)(b).

7. What if I sell something cheaply to a family member or friend?

That could still count as a donation. In terms of Section 58 of the Act, the difference between the fair market value and the price paid is treated as a deemed donation, and may attract donations tax if not otherwise exempt.

8. Are donations from overseas taxed in South Africa?

Donations received from non-residents are not subject to donations tax in South Africa. This is because donations tax applies to the donor, and only donors who are South African residents are liable. However, the recipient in South Africa should still declare the donation as a non-taxable receipt on their income tax return.

9. Can I deduct donations to charity for income tax purposes?

Only donations made to SARS-approved Public Benefit Organisations that also have Section 18A status are deductible from your taxable income.

If the PBO is not approved under Section 18A, the donation may still be exempt from donations tax — but it won’t qualify for an income tax deduction.

Always request a valid Section 18A certificate from the organisation to claim the deduction.

10. What happens if Donations Tax isn’t paid?

If the donor fails to pay donations tax, Section 60(2) allows SARS to recover the tax from the recipient. Both parties may be held jointly liable if the tax is not paid on time.

In X and Another v Commissioner for the South African Revenue Service (52/2023) [2024] ZATC 12, SARS successfully argued that unexplained funds received by a taxpayer — which lacked proof of donor intent — were taxable as income. This case highlights the importance of clear documentation when claiming a transfer was a donation.

When and How to Submit the IT144 Form

You must complete and submit the IT144 form if:

• You are a natural person who donated more than R100,000 in a tax year

• You are a company or trust that donated more than R10,000

• The donation does not fall under a Section 56(2) exemption

Deadline: The end of the month following the month in which the donation was made

Submission: File via eFiling or email SARS.

Final Thoughts on Donations Tax

Whether you’re donating to a friend, relative, or a good cause, it’s important to understand the Donations Tax rules in South Africa. While SARS allows for generous exemptions, failure to comply with the reporting and payment rules can result in penalties — or a tax bill you didn’t expect.

• Keep records of all donations

• Understand the thresholds and exemptions

• File the IT144 when required

Being informed ensures you can give generously — and legally — without creating avoidable tax consequences.

Disclaimer: This article is intended for general information purposes and does not constitute legal or tax advice. For tailored assistance, please consult a registered tax practitioner.