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A section 18A certificate is a document that is issued by a section 18A-approved public benefit organisation (or PBO) to a taxpayer who has made a donation to the PBO. In other words, if you have made a donation to a charitable organisation, you may be able to get a section 18A certificate.
If you are a taxpayer and have made a donation to a section 18A-approved PBO, the section 18A certificate will allow you to claim a tax deduction subject to a certain limit. This means that the more you donate, the less tax you will pay on your remaining income! But, the section 18A certificate issued by a section 18A-approved organisation is important – without it, the tax deduction cannot be claimed.
Yes. There is a limit. The current limit is 10% of your taxable income (excluding any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit, and severance benefit), as calculated before allowing any deduction for donations under section 18A or a deduction for foreign taxes. For example, if your taxable income for a particular year of assessment amounts to ZAR 100,000, the tax deduction would be limited to ZAR 10,000. But remember, the more that you donate up to the 10% limit, the more you can claim as a tax benefit. And don’t worry – if you donate over 10% of your taxable income in a year under assessment, you can then claim the tax deduction benefit during the next year under assessment. So the tax benefit connected with a donation will not be lost!
This is important. Only non-profit organisations that are PBO’s who have been approved by the Commissioner for SARS under the Income Tax Act to issue section 18A certificates may issue such certificates. This means that, if you want to claim the tax benefit, your donation must be made to section 18A-approved organisations only.
SARS maintains a list of approved section 18A organisations which can be accessed on the SARS website here.
No, only certain donations qualify for a section 18A certificate.
As a taxpayer, you will only be allowed to claim a deduction for a donation to a section 18A approved organisation if it is supported by a section 18A receipt or certificate issued by the organisation. This means that you must receive a section 18A receipt or certificate from the section 18A-approved organisation in order to claim the tax benefit.
No. A tax invoice will not (and should not) be issued – it is only the section 18A certificate that is required for the purposes of claiming the tax deduction.
On completing your annual income tax return, as a donor you will be required to provide the following information contained on each section 18A certificate:
You will be able to find all of this information on your section 18A certificate. You will need to upload the section 18A certificates to SARS via eFiling if SARS selects your income tax return for review/audit verification. You must also keep your section 18A certificates (along with all other tax related information relevant to your income tax returns) for a period of at least 5 years from the date of the assessment.
In some circumstances, by an employees’ tax certificate reflecting the donations made by the employer.
DoNation makes it easy for you to get your section 18A certificate from an organisation who you have donated to, both after making the donation and again during tax season.You will be able to log into www.thedonation.org.za at any time to see the status of all your donations and access any of your section 18A certificates. You will also receive detailed instructions from DoNation regarding how you should make use of your section 18A certificates which can be sent to your accountant or used by you when completing your eFiling.
Follow our easy, step-by-step guide, to sign up and start getting back up to 45% in tax refunds on your donations.
As most charitable organisations or non-profit organisations need donations in order to operate, the South African Government has provided a tax deduction for certain donations made by taxpayers. However, not all donations made to charities are tax deductible and section 18A of the Income Tax Act makes provision for the issuing of tax-deductible receipts to taxpayers by certain approved organisations. This means that, to be able to claim a tax deduction, a donor must be in possession of a valid section 18A receipt or certificate.
No. The tax benefit is not automatic and not all charitable and non-profit organisations can issue section 18A certificates.
A PBO or public benefit organisation must meet the following requirements: A PBO is a public benefit organisation which is entitled to preferential tax treatment under the Income Tax Act. The conditions and requirements for an organisation to be approved as a PBO are set out in section 30 of the ITA.
No. The fact that your organisation complies with the requirements set out in section 30 of the ITA, does not automatically grant your organisation a tax exemption. In order to qualify for the exemption, your organisation must apply to SARS for its PBO status. This application must be submitted to SARS’s tax exemption unit (or TEU). Together with your application, you must also submit your organisation’s founding document (which must contain the required information).Once your organisation’s application has been approved, your organisation will no longer be liable for income tax (and donations tax). However, please keep in mind that your organisation must still submit annual tax returns, as this obligation does not fall away. This form can be obtained from SARS.
A formal application, on the prescribed application form (which is available on the SARS website), must be completed and submitted to the Tax Exemption Unit (or TEU) within SARS for consideration and approval under section 18A of the Income Tax Act. The organisation must clearly state on the application form which activities, as listed in Part II of the Ninth Schedule to the Income Tax Act, the organisation is conducting and motivate how the activities of the organisation fall within the scope of the section 18A activities. A copy of the organisation’s latest available financial statements must also be submitted. The Commissioner of SARS must issue a reference number for the purposes of section 18A (which is different to a taxpayer reference number) and this number must appear on the section 18A certificate issued to donors.
The application for approval under section 18A of the Income Tax Act may be done at the same time as an application for approval as a PBO under section 30 of the Income Tax Act.
If the organisation does not conduct the public benefit activities listed in Part II to the Ninth Schedule to the Income Tax Act, the organisation will not be able to issue section 18A certificates. This includes the following activities undertaken by a PBO:
No. The process to register as a non-profit organisation (NPO) or Non Profit Company (NPC) does not mean that an organisation will automatically qualify as a PBO or for the section 18A tax benefit. These are different processes with different consequences.Registration as an NPO is also not a condition for approval as a PBO since the registration as an NPO under the NPO Act is a voluntary registration lodged with the Directorate of NPOs. Useful information can be obtained from the Department of Social Development’s website at www.dsd.gov.za.
Section 18A certificates may only be issued in respect of donations issued in cash (money) or kind (other than services). A section 18A certificate may not be issued if the donation consists of free services rendered to the PBO. A section 18A receipt may also be issued only for an eligible donation that is solely and exclusively used for public benefit activities, as listed in Part II of the Ninth Schedule to the Income Tax Act, in South Africa.
Section 18A-approved organisations must create their own receipts ensuring that all appropriate details appear on the section 18A certificate or receipt. Importantly, SARS does not make section 18A receipts available to section 18A-approved organisations.
The section 18A receipt or certificate issued by the organisation must include the following details:
Make sure that your organisation:
Complies with the rules and regulation of section 30 of the ITA
Uses, or will use, the donations solely in pursuance of the organisation's objectives
Has provided SARS with its current/updated documents
Issues section 18A receipts to all qualifying taxpayers
Submitted its annual tax returns
Informs SARS of any changes relating to the nature or status of the organisation
It is very important that section 18A-approved organisations maintain proper control over the application and spending of donations received that qualify for a tax deduction.This means that the record-keeping of a PBO must clearly identify the donations received for public benefit activities in Part II of the Ninth Schedule to the Income Tax Act and the use to which those donations were applied.Depending on the public benefit activities carried on (i.e. if carrying on combination of public benefit activities listed in Part I and Part II), a section 18A-approved organisation has an obligation to obtain, retain or submit an audit certificate to the Commissioner of SARS. This audit certificate must be kept for record-keeping purposes. The audit certificate must confirm the following:
The person who issues the audit certificate must be independent from the activities of the organisation, as it serves as a control mechanism implemented by SARS, and must be suitably qualified.PBOs carrying on only public benefit activities in Part II of the Ninth Schedule to the Income Tax Act in South Africa are not required to obtain and retain an audit certificate.
DoNation makes it easy for your organisation to provide section 18A certificate to a taxpayer who has made a bona fide donation, both at the time of the donation being made and again during tax season.The donor will be able to log into www.thedonation.org.za at any time to see the status of all his or her donations and access any of their section 18A certificates. The donor will also receive detailed instructions from DoNation regarding how they should make use of their section 18A certificates which can be sent to their accountant or used by them when completing their eFiling. This will also help your organisation from an administrative perspective, rather than having to deal with numerous requests for section 18A certificates.
Follow our easy step-by-step 10 minute guide to add our donation form to your donations page allowing donors to register their donations. For more detail please go here.
Yes! Once registered, you can record donations, along with the details of the donor, and we'll generate and send an 18A receipt to the donor on your behalf.
Jacky Botha Accounting Services Tel: 087 012 5962Email: email@example.com: //www.jbaccservices.com/