The donations tax exemption: using it to deduct non-section 18A approved donations
13 November 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a query
regarding the S56(2)(a) donations exemption. My interpretation of this section
is that applies to donation tax, and not income tax.
We have an employee who uses this section to substantiate
Normally as a company and as an individual one can deduct
s18A approved donations made from taxable income. However, he uses this section
to say that a company can deduct non-S18A approved donation to the value of R
10 000 from taxable income. I disagree with that interpretation, but he is
adamant that he is correct. Do you have any insight in this?
A: You are
absolutely correct – section 56(2)(a) is only relevant to donations tax and has
no relevance to normal tax.
A deduction of donations other than section 18A ones, can
only be made if they meet the requirements of section 11(a) and are not
prohibited by section 23. In this regard
the comment by Judge Conradie in the Warner Bros case is important:
"Moneys expended by a taxpayer from motives of pure
liberality also fail to qualify as expenditure in the production of income.
This was reconfirmed in Commissioner for Inland Revenue v Pick 'n Pay
Wholesalers (Pty) Ltd”.
Disclaimer: Nothing in
this query and answer should be construed as constituting tax advice or a tax
opinion. An expert should be consulted for advice based on the facts and
circumstances of each transaction/case. Even though great care has been taken
to ensure the accuracy of the answer, SAIT do not accept any responsibility for
consequences of decisions taken based on this query and answer. It remains your
own responsibility to consult the relevant primary resources when taking a