Section 18A offers a win-win situation, allowing donors to contribute to causes they care about while receiving valuable tax deductions. Alternatively is there an option to use the BEE benefit on offer.
SECTION 18A TAX BENEFIT
In South Africa, Section 18A refers to a tax benefit that applies to donations made to registered Public Benefit Organisations (PBOs). Under this section of the Income Tax Act, individuals or companies who make donations to qualifying PBOs can receive a tax deduction for the value of the donation. This is designed to encourage charitable giving and support for Non-profit organizations.
Key Features of Section 18A Tax Benefit:
Tax Deduction: Donors (individuals and companies) can claim a tax deduction equal to the value of their donations made to a registered PBO, which reduces their taxable income and, as a result, the amount of tax they owe.
Qualifying PBOs: To qualify for this benefit, the recipient organization must be a registered Public Benefit Organisation with Section 18A status. These organizations must be involved in certain public benefit activities like education, health care, welfare, and environmental conservation.
Donations: The donations is monetary contributions provided they are made to a PBO that is registered under Section 18A.
Tax Certificates: To claim the tax deduction, the donor must obtain a Section 18A receipt or certificate from the qualifying PBO, which acts as proof of the donation.
Limitations: There are limits on how much you can deduct. For individuals, the donation deduction is typically limited to 10% of their taxable income. For companies, it can be up to 10% of taxable income as well. Donations above these limits may be carried forward to future tax years.
Benefits:
Reduced Tax Liability: By donating to a qualifying PBO, a taxpayer can lower their taxable income and, thus, reduce the amount of tax they owe.
Supporting Good Causes: The tax incentive encourages charitable donations, supporting causes like education, healthcare, disaster relief, and the environment.
Corporate Social Responsibility (CSR): For companies, Section 18A provides an opportunity to showcase their social responsibility by supporting Non-profit organizations while benefiting from tax relief.
