Abstract
Orientation: The tax deductibility of donations in kind in terms of the Income Tax Act No. 58 of 1962 in South Africa.Research purpose: The aim of this article is to critically analyse the provisions of section 18A(2)(a)(v) of the Income Tax Act No. 58 of 1962 to determine the value, if any, to be indicated on a section 18A receipt. It is also investigated whether the donee or donor is responsible for determining the fair market value, if such value should be included on a section 18A receipt.Motivation for the study: Addressing uncertainty regarding which amount, if any, should be included on a section 18A receipt for tax purposes in respect of a donation in kind.Research design, approach and method: This article involves a non-empirical interpretative analysis of tax legislation and other literature. The mode of inquiry for the article is qualitative in nature and follows a doctrinal method, which is closely associated with tax research.Main findings: This article highlights the possible ambiguity in the interpretation of section 18A(2)(a)(v) of the Income Tax Act No. 58 of 1962 and that the term ‘nature’ could be construed as including a value.Practical/managerial implications: The donor would have certain tax implications preceding a section 18A deduction which would require the donor to determine the fair market value and could enable the donor to also indicate such fair market value in respect of a donation in kind to the donee.Contribution/value-add: This article contributes to literature by highlighting the uncertainty in respect of the interpretation of tax legislation relating to section 18A.
Highlights
In terms of the Tax exemption guide for public benefit organisations in South Africa, issued by the South African Revenue Service (SARS 2017), it is widely accepted that the tax deductibility of donations, in cash or in kind, influences donor behaviour (Oberholzer 2004)
Based on the preceding tax consequences in terms of the Income Tax Act (the Act), it is submitted that the donor as taxpayer would have to determine the fair market value of the property donated in kind for purposes of normal tax treatment preceding a section 18A deduction
The ordinary meaning of ‘nature’ could, still afford interpretation of ‘nature’ to include an amount or value. This submission is supported by the example provided in SARS (2016a:22), which https://www.jefjournal.org.za indicates a value in an example of a section 18A receipt
Summary
The requirement could be for the donor to provide the fair market value of the property donated to the donee, which is analysed in the section that follows by considering the tax position of the donor as a result of a section 18A donation. Based on the preceding tax consequences in terms of the Act, it is submitted that the donor as taxpayer would have to determine the fair market value of the property donated in kind for purposes of normal tax treatment preceding a section 18A deduction. The donor values the property donated, the donee would not have to value the property, which could further reduce the compliance burden of the donee It is, recognised that a difference in timing exists between the date of a donation, when the section 18A receipt is issued, and the date the donee submits a tax return. The donor would, still bear the burden of proof of a valuation in terms of section 102 of the Tax Administration Act and such a determination could still be performed on the date of a donation
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
