Section 18A of the Income Tax Act allows taxpayers to make a deduction from their taxable income when they make donations to certain organisations such as Public Benefit Organisations (PBOs) or Non-Profit Organisations (NPOs) – the Regenesys Foundation is one of these. The Regenesys Foundation is accredited with the South African Revenue Services (SARS) under this Act to offer donors tax rebate receipts.
A donation will only qualify for a deduction if it complies with the following requirements listed under section 18A:
- The donation must be made to an approved PBO that has status under section 18A (commonly referred to as donor deductible status).
- The PBO must use the donation to carry out a public benefit activity listed under Part II of the Ninth Schedule of the Income Tax Act. Alternatively, the PBO must provide funds to a PBO carrying on such activities.
- The donation must have been made bona fide and should not be a payment for services, which the organisation has rendered to the taxpayer.
- The donation can either be in cash or kind, but not in the form of a service, and
- The donation cannot exceed ten percent of the taxpayer’s taxable income. If it exceeds ten percent the excess amount will not qualify for tax deduction.
Donors, especially corporate donors, prefer to make donations to PBOs with section 18A status, as the value of that donation would be deducted from their taxable income.
How is the benefit claimed?
The Foundation that received the donation issues a receipt to the donor. Donors can claim the tax deduction from SARS when submitting their tax returns by attaching the 18A receipt received from the Foundation.
The tax receipt issued by the Foundation must have the following information on it:
- Section 18A reference number issued by the Commissioner of SARS
- The date that the donation was received by the Foundation
- The Foundation’s name and address
- The donor’s name and address
- The amount of the donation or the nature thereof (if in-kind), and
- A certification that the receipt is issued for the purposes of section 18A and has or will be used exclusively for the object of the Foundation.
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