Q: I have a client who would like to claim his contribution to his nephew’s varsity fees as a donation. Is this an allowable deduction? I am of the opinion that it is not, as it would be the same as having to pay for school fees. Please advise.
From the SARS website:
What does not constitute a
bona fide donation for purposes of section 18A?
The following examples do not constitute a bona fide donation:
The donation of services rendered such as a professional person providing a
voluntary service or renders his skill free of charge. An amount paid for
attending a fundraising dinner, dance or charity golf day. The amount paid
for the successful bid of goods auctioned to raise funds by an organisation.
Memorabilia, paintings, etc, donated to be auctioned to raise funds. Amounts
paid for raffle or lottery tickets. Amounts paid for school fees, entrance
fees for school admittance or compulsory school levies. Value of free rent,
water and electricity provided by a lessor to the lessee which is an approved
PBO. Payments in respect of debt due by an entity approved in terms of
section 18A. An example would be the cost of repairs to a vehicle paid on
behalf of the PBO.
A: The reference
in the part that you copied from the SARS website (Amounts paid for school
fees, entrance fees for school admittance or compulsory school levies) is not
at all relevant to the question at hand.
It is merely an example of amounts paid that would not constitute a
donation and then also for section 18A purposes.
We agree that the principle (payment of varsity fees) is the
same, but whether or not it is a donation is irrelevant unless the section 18A
deduction is considered. From the
extract it is clear that the entity will not be able to issue the client with
the required section 18A receipt in respect of the "varsity fees”.
The deduction would only be possible if it meets the
requirements of section 11(a) read with section 23(g). To provide guidance on that we need to know
what trade the client is engaged in and what the purpose of the expense
was. The essential requirement is the in
production of income one. We accept that
section 23(m) does not apply.
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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