Helping a child buy a first home, gifting a family member a car or moving assets into a trust can all feel like simple acts of generosity. In South Africa, however, many of these gifts carry a tax consequence known as donations tax.
Understanding how donations tax works helps you give with confidence, stay compliant with SARS and plan your estate more effectively.
What is Donations Tax?
Donations tax is a tax on the value of property that a South African tax resident gives away during their lifetime. It is paid by the person making the donation (the donor), not the person receiving it.
It works alongside estate duty. Without it, people could avoid estate duty simply by giving their assets away before death.
What Constitutes a Donation?
For tax purposes, a donation is any gratuitous disposal of property, including the waiver of a right, where the donor receives nothing in return. This is broader than most people expect.
A donation can include:
- Cash gifts or transfers to family members
- Transferring property, vehicles, shares or other assets
- Writing off a loan someone owes you
- Selling an asset for far less than its market value, where the shortfall may be treated as a donation
Donations are valued at market value on the date they are made, not at what the donor originally paid.
The Law Governing Donations Tax in South Africa
Donations tax is regulated by Part V of the Income Tax Act 58 of 1962, specifically sections 54 to 64. These sections define what a donation is, set out the exemptions, determine how donations are valued and prescribe the rates and payment rules.
Donations to approved public benefit organisations are dealt with separately under section 18A of the same Act, which allows donors to claim an income tax deduction.
Important Aspects Everyone Should Know About Donations Tax
The Rates
Donations tax is charged at 20% on the taxable value of donations up to R30 million. Once your cumulative donations exceed R30 million, the excess is taxed at 25%.
The Annual Exemption
Individuals may donate up to R150 000 per tax year without paying donations tax. Companies and trusts are limited to R20 000 per year for casual gifts. Unused exemption cannot be carried over to the next year.
Exempt Donations
Some donations are exempt regardless of value, including:
- Donations between spouses
- Bona fide maintenance, such as a parent paying a child’s school fees or living costs
- Bequests made in a Will, which fall under estate duty instead
- Donations to approved public benefit organisations and certain government bodies
Payment and Declaration
The donor must complete an IT144 declaration and pay any donations tax due by the end of the month following the month in which the donation was made. Late payment attracts penalties and interest.
Recipients Are Not Off the Hook
Although the donor is responsible for donations tax, the donor and recipient become jointly liable if the tax is not paid on time. Recipients should also declare donations received on their own tax return.
Trusts and Interest-Free Loans
Lending money to a trust interest-free, or at a low rate, can trigger donations tax on the interest that would otherwise have been charged at the official SARS rate. This catches out many families who fund trusts through loan accounts.
Conclusion
Donations tax affects far more people than just the wealthy. Any significant gift, asset transfer or loan write-off may need to be declared and taxed, and mistakes can lead to penalties or unexpected costs for your family.
With careful planning, the exemptions can be used year after year to transfer wealth tax-efficiently. If you are planning to make a donation, fund a trust or restructure your estate, contact Crest Trust today. Our fiduciary team will help you understand your donations tax obligations and plan with confidence.
FAQs
How to avoid donation tax between parents and children?
Parents can use their R150 000 annual exemption each, so a married couple can give up to R200 000 per year between them. Spreading larger gifts over several tax years, and paying for genuine maintenance such as education, also keeps gifts outside donations tax.
How much of your donation is tax deductible?
Donations to an approved section 18A organisation are deductible up to 10% of your taxable income. Any excess can be carried forward to the following tax year, provided you hold a valid section 18A receipt.
Is there any tax on donations?
Yes. Donations by South African tax residents that exceed the annual R150 000 exemption, and that do not qualify for another exemption, are subject to donations tax.
What is the rate of SARS donation tax in 2026?
For 2026, donations tax is 20% on donations up to R30 million and 25% on the portion above R30 million, after the R150 000 annual exemption for individuals.