Donations Tax Flashcards
1
Q
General principles on donations
A
- Donation of property gives rise to recoupment (8)(4)(a) read s8(4)(k)
-The recoupment will be included in the gross income
-Donation to non-PBO can claim capital loss
-If sold at MV to trust there is no donations tax - Donations of an allowance asset triggers disposal at MV
-Capital gains and losses on the disposal of a capital asset to a PBO are disregarded for CGT purposes (para. 62 of 8th schedule) - Gratuitous disposition (Actual donation) or waiver of a right
- Consider specific and general exemption (NB)
-A donation to a Public Benefit Organisation is exempt from donations tax. - Only applies to residents on property
-Consider s7 - Cash is not an asset for CGT purposes
- Donation of cash has no CGT implications as cash is not an asset for CGT purposes
- Donation deemed to be made on the last day or YoA
- Annual exemption of 100k and rate of 20% IF exceed ms R30m then 25%
- Expenditure of improvements incurred by the person inheriting property is not a donation. - no gratuitous disposition
- If there is a donation it would be for bonafide s56(2)(c) exemption
- Not on income but on property
- No donations if made by NR
- Donatio mortis causa forms part of property of Estate
- A donation is also a disposal for CGT
- It is a separate tax (when you transfer wealth)
- Donation of farm results in donation tax being payable at 20% on 70% of mv of farm
- Disposal of shares for inadequate consideration is a donation and donation tax is payable
- Donations tax paid will form part of BC of the asset
- Donation of immovable property will be subject to payment of transfer duty
- Donation mortis causa and in contemplation of death are exempt from donations tax because they form part of estate duty. Only apply when a person dies
- It applies to residents only
-no donations tax is payable as X is a public company and is therefore exempt from
donations tax (section 56(1)(n)).
-It is also exempt in terms of (section 56(1)(r) – group company exemption)
CASH: Donation:
-The donation of cash does not constitute a disposal as defined for CGT purposes.
- Stock donated at CP recoupment if s18A received
- Land and building, include separate calculations
- Donation of immovable property is subject to transfer duty
- For donor and donee calculate recoupment, CGT, allowances. If acquired asset for free s11e for donee
2
Q
Sell shares to trust on loan account, if you die loan is waived (interest free loan)
A
- Sale of shares at MV is not a donation
- Interest free loan is not a donation for donations tax purposes it is a continuing donation in terms of s7 to extent trust saves paying interest at market rates
- s7C interest free loan gives rise to on going annual donation
3
Q
Donations on property situated outside SA
A
- NR when obtained property then now resident when you donate it exempt
- Inherit foreign property from NR you’re R when you dispose it (exempt)
- Proceeds from 2 above reinvest are exempt
4
Q
Bare Dominium and Usufrusts
A
- A bare dominium cannot dispose of usufruct unless you sell it to someone but BD and usufruct right remain with the initial holder
- If the usufruct holder dies, goes to BD.
- The BD can never transfer to usufruct
5
Q
What constitutes a donation?
A
- Donate cash or assets
- Sell at less than MV (diff)
- Interest-free loan (ongoing donation) amount you sacrificed
- As long as capital remains unpaid failure to charge interest is a continuing donation
Par 73 limitation
6
Q
VAT: Donations
A
- There is normally a change in use for VAT purposes, since originally when the asset was acquired 85% input VAT was claimed, but now it is used for non-taxable purposes(i.e. 0% taxable).
- s18(1) of the VAT Act applies
- Output VAT and Input VAT
7
Q
Donation to non profit organisation
A
*Allowances
VAT
-Output tax adjustment s18(1)
-On MV
-Time of supply: Donation date
* s11(a) output VAT adjustment (omv15/115)
* Recoupment: donation of allowance asset at MV
* Donations TAX (MV * 20%)
*CGT: P = MV - Recoupment
BC = TV + DT (formula)
8
Q
Income tax implications irt services rendered for free
A
- He waived his right to fees no gross income as not amount received or accrued
- NO s18A as no valid tax certificate
- right to fees is property which is an incorporeal right
- Waiving of right can be seen to be a donation
- It will be exempt as donated to PBO no donations tax
9
Q
Donation to spouse
A
- Not DT between spouses
- s9HB rollover provisions
- BC rolls over to spouse
- Par 68 may apply to speak to if make gain on disposal
