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The donations tax exemption: using it to deduct non-section 18A approved donations

13 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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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 the following:

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 decision.


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