SARS eyes large Christmas gifts

Large Christmas gifts are a sign of generosity, but the South Africa Revenue Service (SARS) may also be thrilled to take a piece of the pie.

According to CPD Consortium, donations above a certain threshold trigger tax, even if there are some exemptions.

Acts of generosity do not escape the watchful eye of SARS, with donors having to declare donations to revenue service.

Fundamentally, a donation is a gift – a transfer of value motivated purely by generosity, such as giving money or giving your car to a relative without charging them.

SARS will now pay closer attention to these transactions as part of its aim to close the tax compliance gap.

The tax man will require a detailed description of the kind of donation in its updated Donations Tax Declaration Form (IT144), which became effective on 1 November 2024. 

“Naming it only as a car or donation will not suffice, and the detail may just be what makes SARS frown upon the extent of the donation to be exempt from tax,” said CPD Consortium

A detailed description could state the following: 2024 BMW X5 M60i with extra horsepower, with the number of kilometres on the clock and any additional luxuries the car boasts.

Supporting documents, including proof of payment or valuations for non-cash donations, are now more important than ever to avoid compliance issues.

These details are required as applicable legislation determines if the Commissioner can question whether the donation qualifies for an exemption.

CPD Consortium said that a new Ferrari for your son may not be exempt from donations tax.

Although the donor is responsible for paying donation tax if they fail to pay the tax due by the end of the month following the month during which the gift was donated, the donor and the beneficiary will be held jointly and severally liable for tax.

The updated IT144 form also includes a self-assessment section, which emphasises accuracy and streamlining the filing process.

What to note

A donor is a natural person who can make donations of up to R100,000 per year of assessment before the donations tax kicks in, among other exemptions. 

Over this threshold up to a total value of R30 million, donations tax is levied at 20% of the value of the donation. Over R30 million, the tax stands at 25%.

Companies and trusts may donate casual gifts of up to R10,000 per tax year.

Other notable exemptions include the following:

• Spousal exemptions: Donations between spouses.
• Maintenance contributions: Donations made for the maintenance of any person (for instance an unemployed family member). The exemption is not limited to a specific amount, but to what the Commissioner considers reasonable. In such a case, showing that there is a monthly payment on your bank statement will likely not be sufficient proof that it is an exempt donation.
• Public Benefit Donations: Contributions to qualifying charities or public benefit organisations.

In some cases, transactions can involve partial payment in return but still contain a generous amount being donated.

For instance, selling an item significantly below its market value could still qualify as a donation if the “generosity” is substantial.

SARS requires the following information on its forms:

• Date of when the donation was made.
• Description of the nature of the donation e.g. cash, cars, shares, fixed property etc.
• Details of how the property was donated e.g. Notarial deed, donation agreement. A copy of such must be attached upon submission of the IT144.
• Provide as much detail about the property being donated e.g. brand new 2024 BMW X5 M60i.
• Provide the value of the donation in rands.
• The basis of the valuation to substantiate the rand value of the property donated must also be submitted with the IT144 e.g. property evaluation report in the case of fixed property.

When it comes to properties, one would need to attach supporting documents to prove the market value of the property.

Moreover, a key area of SARS’s renewed focus is interest-free or low-interest loans made to trusts.

“If you lend money to a family trust without charging market-related interest, SARS views the difference between the interest charged and the official rate as a deemed donation,” said CPD Consortium

“This could result in ongoing donations tax liabilities, making compliance critical for trust structures.”

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