Charitable giving can be tax-deductible
In today’s difficult economy, many corporates tend to cut back on their support for non-profit, charitable organisations. Faith Ngwenya, Technical and Standards Executive at the South African Institute of Professional Accountants (SAIPA), believes that they should reconsider this, especially given that these donations can be tax-deductible.
“Charities and non-profits provide a wide range of services to the broader community, often filling in the gaps that government grants and aid don’t reach,” says Ngwenya. “While one must recognise that money is tight, corporates really shouldn’t forget their commitment to the broader stakeholder community – in line with the kind of thinking encapsulated in King III. And, if they choose their charities carefully, their donations could be tax-deductible.”
Ngwenya goes on to explain that these tax deductions depend on the fulfillment of two conditions. The total amount claimed for deduction must not exceed 10 percent of taxable income, and must be made with no strings attached. Crucially, the donation must be made to a qualifying public-benefit organisation (PBO). Such organisations are registered with SARS, and are entitled to issue the donor with a certificate in terms of section 18(a) of the Income Tax Act. This certificate is basically a receipt that reflects the organisation’s PBO registration number, the date of the donation, the names and addresses of both parties, and the amount of the donation.
Donations may be in cash or kind.
“Without a section 18(a) certificate, the donation won’t be accepted as tax-deductible,” says Ngwenya. “Be sure to check that you are dealing with an organisation that has the appropriate registration with SARS and thus the authority to issue such a certificate.”
Another factor that could be affecting corporates’ propensity to make charitable donations is the change in black economic empowerment codes, which now value ownership higher than donations made to charities with black-empowerment objectives.
“Again, I believe that corporates shouldn’t confuse their desire to meet the requirements of the black economic empowerment codes – which are obviously a priority – with their responsibility to the community as a whole,” Ngwenya concludes. “Charities and non-profits depend on donations to survive, and without them our society would have even more problems than it has at present. As Christmas approaches, we need to find a way to support charities as well as meet our other commitments.”