Unit 5 - Donations Tax Intro Flashcards
What is donations tax?
Tax on the transfer of assets (not to a PBO s18A)
What is the purpose of donations tax?
Persons donate their assets to avoid:
- Normal income tax
- Estate duty
Who is liable to pay donations tax?
The DONOR
What happens if the donor does not pay the donations tax within the prescribed period?
The donor and donee become jointly & severally liable for the donations tax.
What is the rate of donations tax?
20% - before/on/ after 1/3/2018, if aggregate of the value & value of any other property disposed of under taxable donation < R 30mil
25% - on/after 1/3/2018, if aggregate of the value & value of any other property disposed of under taxable donation
> R 30mil
What gives rise to donations tax?
Property disposed of
by a SA resident
ito a donation
either directly/indirectly
incl. donations to a trust.
What donations are taken into consideration when calculating the aggregate R 30mil threshold?
ONLY donations made on/after 1/3/2018
The R 30mil threshold is a lifetime threshold.
What donations are not considered when calculating the aggregate R 30mil threshold?
Exempt donations
For the purpose of imposing donations tax @ rates set out in s64(1)(a) of the Act.
Does the donations tax provision apply to non-residents if they donate SA assets?
No, the donations tax provision does not apply to non-residents even if they donate SA assets.
Define donation.
Any gratuitous disposal of property/ any gratuitous waiver/renunciation of a right.
i.e. something given away for no consideration/ given away for an inadequate amount.
Gratuitous = given away/received without pmt/obligation.
Define donee.
Any beneficiary under a donation.
The donee can be a trust as well.
Define donor.
SA resident making a donation either directly/indirectly.
Define fair market value.
Either:
- Price which could be obtained upon sale
of property btw a willing buyer and
willing seller dealing @ arm’s length in
an open market,
OR
- ito immovable property on which bona
fide farming undertaking is being carried
on in R.
= Price which could be obtained upon
sale of property btw a willing buyer
and willing seller dealing @ arm’s
length in an open market - 30% of that
price.
Define Property.
Any right in/to property,
movable/immovable
corporeal/incorporeal
wherever situated.
When does a donation take effect?
- When all legal formalities have taken
effect for a valid donation (offer &
acceptance, delivery, registration, etc.)
:. Valid donation takes effect when the
donee accepts.- ORAL = On date of delivery
- PROMISE = Signed document
- Donation = contract & normal Roman-
Dutch law of contracts applies. - Excludes Executory contracts of donation
= Donations ito which the subject matter
of the donation will be delivered to the
donee @ future date :. Only executory
contracts of donation have to be in
writing & witnessed to take effect.
s57 - Donations by a company?
Disposal by the company is deemed to be a donation made by the person @ whose instance the disposal was made,
if any property disposed of by any company @ instance of any person (CEO), & disposal would have been treated as a donation had that person (CEO) made the donation directly.
s57 - Donations by company.
Dividends?
If a company makes a donation to someone, on instructions of the shareholder
= Dividend distribution by company, &
Donation made by the shareholder, pd
by the company on behalf of the
shareholder
s57A - Donations made by spouses.
If donated property falls within joint estate
= donation is deemed to be made in equal shares by each spouse. 50/50
If the donated property was excluded from the joint estate
= donation deemed to be made solely by the spouse making the donation.
Define a spouse.
- A partner of a person
- In a marriage/customary union recog. ito
laws of R - a Union recog. as a marriage under the
tenets of any religion - a same-sex/heterosexual union which the
Commissioner is satisfied is intended to
be permanent
Note: In the absence of proof to the contrary, the last 2 unions above are deemed to be out of community of property.
s57B - Disposal of right to receive assets relating to services rendered by EE
When the whole/part of compensation for services is to be pd in the form of an asset, the following applies if “EE” disposes of the right to receive the asset before it accrues to “EE”:
- The disposal is disregarded
- EE is treated as having acquired the asset
= on the date it would have accrued to EE
if they hadn’t disposed of the right - The EE is treated as having pd for the
asset. The amount of this deemed
expenditure = Value of the asset/fringe
benefit incl. in EE GI. - EE is deemed to have donated the asset
to the other person for the amount =
Deemed expenditure - The other person is deemed to have
acquired the asset for amount = Deemed
expenditure
Note:
- Not ltd to EE, “EE” = covers all persons
who received an asset in return for
services rendered i.e. independent
consultants
- Came into operation on 1/3/2022
Define a deemed donation.
Whenever property is disposed of
for a consideration that is inadequate in the opinion of the Commissioner
Value of the donation = Value of property reduced by consideration pd.
