Official SARS Tax Guide • Updated for 2026 / 2027 Tax Year

Complete Guide to Donations Tax & Section 18A Deductions

Understand the 3 tiers of charitable organisations, calculate Section 18A tax deductions, master family gifting exemptions, avoid Section 7C trust traps, and stay 100% audit-proof with SARS.

Compiled by SA Accounting Network • Income Tax Act No. 58 of 1962

Watch: Donations Tax & Section 18A Explained
Free PDF Guide

Download the Donations Tax & Section 18A Guide

Get the complete offline reference booklet with the 3-tier hierarchy, company & trust gifting rules, VAT adjustments, and SARS audit checklists.

Download PDF
⚡

Quick Summary: How SARS Donations Tax & S18A Work

In South African tax law, donations operate under two distinct mechanisms depending on whether you are giving or receiving:

  • Section 18A Deductions: Donations made to approved Tier 3 Public Benefit Organisations (PBOs) reduce your taxable income up to a 10% annual limit. Any excess automatically rolls forward to future tax years indefinitely.
  • Personal Gifting Exemption: Individuals can give up to R150,000 per tax year completely tax-free across all recipients. Amounts above this threshold trigger a 20% Donations Tax.
  • Company & Trust Gifting: Non-natural persons only receive a R20,000 annual exemption for casual gifts. Donations between companies in the same group are 100% exempt under Section 56(1)(r).
  • Receiving Donations: Pure gratuitous gifts are tax-free capital receipts for individuals, but watch out for Section 59 joint liability if the donor neglects to pay Donations Tax!

1. Charitable Organisations: The 3-Tier Hierarchy

A common myth is that every non-profit can issue a tax-deductible receipt. SARS strictly regulates charitable status across three distinct tiers:

Tier Governing Body Income Tax Status Can Issue S18A Receipts?
Tier 1: NPO Dept of Social Development (DSD) Fully taxable (Zero automatic relief) No
Tier 2: PBO SARS Tax Exemption Unit (Sec 30) 100% Tax-Exempt (Sec 10(1)(cN)) No
Tier 3: Section 18A SARS TEU (Part II 9th Schedule) 100% Tax-Exempt Yes (Tax Deductible!)

2. Section 18A Deductions & The 10% Income Cap

Donating to an approved Tier 3 Section 18A PBO reduces your taxable income, saving tax at your personal marginal rate (18% – 45%) or the corporate flat rate of 27%.

Individual Tax Savings
18% – 45% marginal rate
(Deducted against taxable income)
Company Tax Savings
27% flat rate
(Deducted against corporate profit)

Core Rules for Claiming Section 18A:

  • The 10% Cap: Maximum allowable deduction in a tax year is capped at 10% of taxable income (before S18A and medical deductions).
  • The Rollover Rule: Any excess donation above 10% automatically rolls forward to subsequent tax years indefinitely.
  • No "Quid Pro Quo": Donations must be purely gratuitous. School fees, church tithes, and gala dinner tickets do not qualify.
  • Mandatory IT3(d) Reporting: Your certificate must include your ID number, SARS tax reference number, and proof of payment to pass eFiling verification.

3. Personal & Family Gifting (Donations Tax)

Gifting money or assets to family members or third parties is governed by Section 54 to 64 of the Income Tax Act:

Annual Exemption
R150,000
(Across all recipients combined)
Donations Tax Rate
20% Tax
(25% on amounts > R30 million)
Spousal Transfers
100% Exempt
(No monetary cap under Sec 56(1)(b))

4. Gifting to Trusts & Companies: SARS Anti-Avoidance Traps

Trust Gifting Traps

  • No Spousal Exemption on Trusts: Gifting to a trust where your spouse is a beneficiary does NOT qualify for the spousal exemption.
  • Section 7C Loan Trap: Interest-free or low-interest loans to trusts trigger an annual deemed donation on the foregone interest on the last day of February.
  • Section 7 Attribution: Income generated by assets donated to a trust remains taxable in YOUR hands as the donor.

Corporate Gifting Rules

  • R20,000 Casual Gift Limit: Companies only get a R20k annual exemption (not R150k) for gifts to third parties. Excess triggers 20% Donations Tax.
  • Staff & Shareholders: Payments to employees are taxable under PAYE; gifts to shareholders are treated as Dividends (20% Dividends Tax).
  • Group Exemption (Sec 56(1)(r)): Donations between companies within the same corporate group are 100% tax-free.

5. Receiving Donations: Tax Traps & Minister Rules

While genuine gifts received by individuals are tax-free capital receipts, SARS enforces strict exceptions:

Section 59 Joint Liability

If a donor fails to pay Donations Tax on a taxable gift, SARS has the legal power under Section 59 to collect the unpaid tax directly from the recipient!

Pastors & Missionaries (IN 139)

"Love offerings", honoraria, and stipends given for spiritual work are TAXABLE gross income under Section 1(1)(c) and cannot be claimed as tax-free gifts.

VAT on Stock Donations (Sec 18)

Donating trading stock where Input VAT was originally claimed triggers an Output VAT clawback under Section 18(1) of the VAT Act.

Unexplained Bank Deposits

Always keep a signed Letter of Donation for large cash gifts so you can prove to SARS auditors that the funds are not undeclared trading income.

6. Master Case Studies: Tax Impacts Compared

Compare how SARS treats various real-world gifting and charitable donation scenarios:

Scenario Amount Given SARS Mechanism Tax Saved / (Tax Due) Action & Due Date
1: Gift to Child (House Deposit) R120,000 Within R150k annual exemption R0 Tax None required
2: Gift to Child (Over Limit) R250,000 R100,000 taxable excess (R20,000 Tax Due) Form IT144 (End of next month)
3: Gift to Legal Spouse R500,000 100% Spousal Exemption (Sec 56(1)(b)) R0 Tax Completely exempt
4: S18A Donation (R600k Income) R30,000 Deductible (Within 10% cap @ 36%) R10,800 Tax Saved Claim on annual ITR12 return
5: S18A Donation (Over 10% Cap) R80,000 (R500k Inc) R50k deducted now; R30k rolls forward R18,000 Tax Saved R30,000 carries to next tax year!
6: Company Gift to Third Party R50,000 R30,000 taxable excess (over R20k cap) (R6,000 Tax Due) Form IT144 (End of next month)

7. SARS Audit Proofing & Compliance Checklist

SARS automatically cross-checks Section 18A receipts and flagged cash transfers. Keep these records ready:

1. Section 18A Receipts

Ensure your receipt includes the PBO Section 18A reference number, your full ID/tax number, and matching bank payment proof.

2. Form IT144 Submission

For taxable family gifts > R150k, retain your stamped Form IT144 and SARS payment confirmation on file.

3. Donor Letters

For large gifts received, retain a signed letter from the donor confirming the unconditional nature of the transfer.

Frequently Asked Questions

No. Under the "No Quid Pro Quo" rule, a donation must be gratuitous without reciprocal benefit. Church tithes for general operating expenses and payments toward school tuition or building fees that benefit your dependants do not qualify for Section 18A certificates.

The excess portion is not forfeited. SARS allows you to roll over any unused Section 18A donation amounts into future tax years indefinitely, where it will be treated as a qualifying donation made in that year.

The R150,000 exemption (effective 1 March 2026) is a cumulative annual limit per donor, not per recipient. If you donate R100,000 to one child and R100,000 to another in the same tax year, your total is R200,000—triggering 20% Donations Tax on the R50,000 excess.

Donations Tax is not filed on your annual income tax return. You must complete Form IT144 and make payment to SARS by the end of the month following the month in which the donation took place.

No. Under SARS Interpretation Note 139, amounts given to pastors, ministers, or missionaries in respect of their ministry work or spiritual calling constitute taxable gross income under Section 1(1)(c) and must be declared for income tax.

No. Unconditional cash donations carry zero VAT. Furthermore, if a business donates trading stock or assets where Input VAT was originally claimed, it must account for an Output VAT adjustment under Section 18(1) of the VAT Act.

Need assistance with Donations Tax compliance, Section 18A certificates, or trust structures? Contact our tax team!