Guide to the tax consequences of donating directly to non-profit organisations

This is a general guide to the tax consequences of giving directly to non-profit organisations and is not intended to be comprehensive. It is important to seek advice applicable to your own circumstances.

Tax approvals

If an organisation carries out activities that are for the public benefit, it can obtain certain tax approvals from the South African Revenue Service (SARS), which will enable it to pay no (or less) tax and through which it can offer its donors certain tax advantages.

The main advantages are:

  • Public Benefit Organisation (PBO) approval
  • Approval in terms of Section 18A of the Income Tax Act (S18A)

These approvals are not automatic and not all organisations or foundations qualify for either or both. A donor would need to find out from an organisation which approvals it enjoys.

PBO approval

If an organisation has PBO approval, its donors can benefit from a number of tax savings in respect of their donations. Depending on the facts, this could include exemption from donations tax, capital gains tax and estate duty savings.

Section 18A approval

If an organisation has S18A approval, it can offer its donors a level of tax deductibility in addition to the tax savings already mentioned. Broadly speaking, a donor can deduct the total value of donations made in any tax year to S18A-approved organisations up to the value of 10% of the donor’s taxable income in that year. Any surplus can be carried over and claimed as a deduction in the subsequent tax year (again up to the same 10% limit).

This deduction is claimed through the donor’s tax return and the donor must obtain a S18A receipt from the beneficiary organisation.

The flow chart below illustrates some of these advantages: