Specialised governance and structuring advice for donors and non-profit organisations
With over twenty years of experience in the sector, we know the importance of effective structuring and good governance in enabling a foundation or organisation to achieve its goals impactfully and sustainably.
About Us
Sharing your passion for making a difference in South Africa
Anna Vayanos is an admitted attorney of the High Court of South Africa as well as a solicitor for England and Wales. Anna practised trust, tax and charity law both in Cape Town and London for a period of ten years. Passionate about making a difference in South Africa, she left legal practice to join BoE Private Clients (now Nedbank Private Wealth) where she headed up the Philanthropy Office. The business was recognised as the industry leader in South Africa in the provision of philanthropy services (Business Day, Top Private Banking Survey, August 2012) and remains the largest and most established philanthropy offering with repeated international recognition.Since 2013, Anna has been consulting independently through her own business, Anna Vayanos Philanthropy Consulting. She remains very active within the donor and NPO sector, holds a number of board positions and is a Steering Committee member of Women in Philanthropy (SA) a network of over 650 people active within the sector. She has spoken at many conferences, is a regular contributor of articles on industry-related topics, and co-wrote Advancing Philanthropy in South Africa with Shelagh Gastrow. She also recently wrote Good Governance and Foundations: a practical guide, for the Independent Philanthropy Association of South Africa, funded by the EU.Anna advises listed corporates, family businesses, local and foreign donors and NPOs and individual philanthropists.
Services
With over twenty years of experience in working with both donors and non-profit organisations, we not only offer the specialised technical expertise needed but also a very real understanding of this very important sector.
Tax and structuring
Advice on the optimal structure for your foundation or NPO.
Set up of structures
Set up of structures for foundations and organisations specifically to meet your needs whilst incorporating the requirements of the various tax approvals (PBO and S18A) and NPO registration.
Impactful and accountable grant-making
Working with both donors and NPOs and having sat on the boards of both NPOs and foundations, we are well-placed to advice on funding policies that are well-thought through, responsible and impactful.
Financial sustainability of NPOs and foundations
Advice on strategies to work towards the financial sustainability of your NPO or foundation. Please note, no investment advice is provided.
Governance
Guiding boards of trustees through what it takes to achieve good governance.
Trusteeships
Providing a professional trustee service.
Trustee and tax training
Useful and informative training on what it means to be a good trustee and how to ensure compliance with the various legal and tax requirements applicable to your organisation or foundation.
News & Articles
Update: New requirements affecting foundations
New reporting requirements for trustees – effective 1 April 2023
New requirements for S18A receipts
New legal requirements and their impact on foundations
When a foundation makes sense
Guide to the tax consequences of donating directly to non-profit organisations
Good governance and transparency: Building Blocks of Trust
Update: New requirements affecting foundations
By Anna Vayanos, June 2023
As you will be aware, there has been a spate of new reporting and disclosure requirements affecting foundations and other non profit organisations in South Africa. As a reminder, these are all part of South Africa’s initiatives to prevent money laundering and terrorism financing and our attempts to avoid, and now be removed from, our greylisting.Some more regulations have been published and so compliance with some of these is necessary and in some instances, possible, which sounds odd but in reading further, should make sense.
Non profit Organisation (NPO) registration
Not all foundations are formally registered as NPOs with the NPO Directorate. Up until now, registration has been voluntary, but soon, this will change and certain organisations or foundations, particularly those involved in funding or activities outside of South Africa, will need to formally register.The date for this compulsory registration has not yet been announced but the regulations setting out the further information required to be submitted by all foundations or organisations that are voluntarily registered, as well as those who will be compelled to register, have been published and are effective as of 8 May 2023.It is a somewhat tricky situation in that in some instances, the requirement to comply is already in place but the manner in which one must comply is not yet clear.Apparently, the NPO Directorate will be launching an awareness campaign which will hopefully clarify dates and means soon. In the meantime, a foundation’s board can consider whether they are likely candidates for compulsory registration as an NPO. This would apply if the foundation:
Makes donations to individuals or organisations outside of South Africa; or
Provides humanitarian, charitable, religious, educational or cultural services outside of South Africa.
Foundations set up as trusts
For those foundations set up as trusts, just a reminder that the beneficial ownership register is available for completion and can be accessed here.The online register is in a GoogleForms format (hopefully as an interim measure) and so there are concerns about the safety of the information lodged but since 1 April 2023, trustees are required to comply with the submission of this information.For some more background and detail, you are welcome to refer back to my article.
Foundations set up as Non Profit Companies (NPCs)
As of 24 May 2023, the requirement for companies to disclose their beneficial ownership information with CIPC is now fully in place. Further information issued in the Guidance Note issued by CIPC can be found here.With the urgency with which some of these provisions and requirements are being introduced, the legislation seems to be way ahead of the means with which to comply but hopefully this will all become clearer soon. It is good to be aware of what is coming up and to keep an eye out for any deadlines.
New reporting requirements for trustees – effective 1 April 2023
By Anna Vayanos, March 2023
As of 1 April 2023, trustees are required to meet certain new reporting obligations. These new changes were brought in as part of the country’s efforts against money laundering and the financing of terrorist activities.The requirements have been brought in rather speedily with no period of grace and so it is important for trustees to be aware of these and to act as soon as possible.
1. Beneficial ownership
Keeping of information
The trustees are now required to keep certain information on the “beneficial owners” of the Trust. A very wide definition of “beneficial owners” has been included in the Trust Property Control Act (the Act that governs trusts) and includes:
a natural person who directly or indirectly owns the relevant trust property (for charitable trusts this would not really be applicable);
a natural person who exercises control of the administration of the trust (this should in any event be the trustees);
the trustees;
the founders;
any beneficiaries named in the trust deed;
anyone else who controls the trust.
The definition also includes the persons who own or “control’ any founder, trustee or beneficiary that is a legal person (for example, a company), partnership or other trust.The information required in respect of each “beneficial owner” includes:
their full names;
date of birth;
nationality;
passport or ID number (including type of document and country of issue);
citizenship;
residential address (and address for service of notices, if different);
other means of contact;
tax number (where the person is a registered taxpayer in South Africa);
class or category of beneficial ownership under which the person falls (for example, named beneficiary, founder or trustee);
the date on which the person became a beneficial owner;
the date on which the person ceased to be a beneficial owner (where applicable);
Where the person is a minor – this information must be provided in respect of his or her guardian.The trustees must also keep a certified (or verified) copy of the ID or passport of the “beneficial owners”.
Beneficial ownership register
The information on the “beneficial owners” of a trust must also be submitted by the trustees to the Master of the High Court, who will keep an electronic register. This is currently required to be done through the following link:Click here to follow link.The electronic form is very basic in format and appears to be an interim system. A trustee or someone with a power of attorney needs to input the information.According to the regulations, the information lodged with the Master and kept by the trustees must be made available to certain authorities (like the National Prosecuting Authority, SARS, the Financial Intelligence Centre), as the purpose of this is to create greater transparency.It is not the intention that there will be public access to this information, rather only by the trustees lodging this, the Master and the various authorities.
2. Accountable institutions
Trustees are now also required to record information about the accountable institutions that the trustees engage with. “Accountable Institutions” would include attorneys, banks, trust companies, financial services providers, estate agents and attorneys to name a few.This information is not required to be submitted but must be kept by the trustees who must also notify the accountable institutions of the fact that they are acting on behalf of a trust when they engage with them in that capacity and that the transaction or business relationship involves trust property.Information to be kept by the trustees includes:
the name of the accountable institution (and identity number (if a person) or registration number);
the nature of the functions for which the accountable institution is used as an agent to fulfil trustee functions;
the nature of any services obtained;
the date and nature of any transaction (if a single one) or the date and nature of the business relationship if the relationship is ongoing.
There has been quite an outcry about the fact that no period of grace has been given. Also, as mentioned, the beneficial ownership register is very rudimentary and has been set up through GoogleForms which raises concerns about the safety of the information lodged. Trustees find themselves between a rock and a hard place though – needing to comply as of 1 April.
New requirements for S18A receipts
By Anna Vayanos, March 2023
New requirements regarding the information to be included in a S18A receipt were recently introduced and are effective as of 1 March 2023.
Will these apply to my foundation?
If your foundation has S18A approval, then these requirements will indeed apply. The approval letter from SARS will indicate whether or not a foundation enjoys this approval.Donors require a special S18A receipt before they can claim the limited S18A tax deduction – which is available to both corporate and individuals donors alike.
How does the foundation comply with these new requirements?
1. As of 1 March 2023, the following additional information is required to be obtained and included on all S18A receipts issued:
the nature of the donor: natural person, trust, company etc.;
if a person: Donor’s ID or passport number (and country of issue);
if a company or trust: the donor’s registration number;
income tax reference number of the donor (this is not essential, only if available);
contact number of the donor;
email address of the donor;
a unique receipt number (previous practice was to issue sequentially numbered receipts in any event); and
trading name of the donor (if it’s a company or trust and the trading name is different to its registered name).
2. Any non-compliant receipts already issued by the foundation on or after 1 March 2023 should be reissued with the necessary information included. Receipts issued before this date will be acceptable if issued in accordance with the previous requirements.
Please also note:
Just a reminder that the it is not necessary to issue a S18A receipt in respect of each and every donation received as a matter of course. Not every donor can avail themselves of the benefits of the tax deduction, for example, donors who aren’t tax resident here.
It is suggested that S18A receipts be provided to donors only when asked, while definitely still making donors aware of the foundation’s S18A approval in order to help attract donations if the foundation is reliant on receiving further donor funding.
New legal requirements and their impact on foundations
By Anna Vayanos, March 2023
As part of the efforts to avoid the greylisting of South Africa from an anti-money laundering and anti-terrorism financing perspective which were unfortunately unsuccessful, certain legal changes have been introduced and will affect almost all foundations .While the regulations providing further detail have not yet been finalised, some of the changes are already in place, others will become effective on 1 April 2023 and the rest at a later date to be determined. Once the regulations have been finalised, a further note will follow to provide further information on what these involve.
Which foundations will be affected?
Foundations set up as trusts or companies; and
Foundations voluntarily registered as Non Profit Organisations (NPOs) with the NPO Directorate or subject to the newly introduced compulsory registration (see below).
Compulsory registration as an NPO for certain foundations
It will be compulsory for some foundations to formally register as an NPO, regardless of whether set up as a trust, non-profit company (NPC) or voluntary association (the latter having a constitution). You may recall that this is otherwise a voluntary registration and as many foundations are not involved in fundraising, many had chosen not to register.As from 1 April 2023, if your foundation funds or carries on activities outside of South Africa, its registration as an NPO will be compulsory. More specifically if it:
makes donations to individuals or organisations outside of South Africa; or
provides humanitarian, charitable, religious, educational or cultural services outside of South Africa.
Please note: The time period within which this registration must take place has not yet been advised.
Disqualification of certain individuals
Most trust deeds, memoranda of incorporation and constitutions will already have clauses excluding certain individuals from acting as trustees or directors. Effectively, more people will be excluded by the new changes and founding documents should be amended to reflect the additional disqualifications.As from 1 April 2023, certain individuals will be disqualified from acting as trustees, directors or in an executive capacity. By way of example, for trusts and registered NPOs, those disqualified will now include unrehabilitated insolvents, those convicted of fraud, theft, forgery, purgery, money laundering or terrorist financing.A register containing the names of the disqualified individuals will be kept by the Master of the High Court and by the NPO Directorate.CIPC (the Companies and Intellectual Property Commission) already maintains a register of disqualified individuals and the disqualifications introduced in relation to trusts and registered NPOs mentioned above are based on what is already in place for companies. A further disqualification has been added for companies relating to convictions for money laundering and terrorism financing.
Disclosure of information
Many of the new legal changes will require a foundation to disclose and, in some instances, keep a record of a lot more information. The regulations will confirm exactly what these requirements will be.
Foundations set up as trusts:
As from 1 April 2023, there will be certain disclosure requirements regarding the “beneficial owners” of trusts in order to provide further transparency.For trusts, this involves:
establishing and recording certain information (the details of which will become apparent when the regulations are finalised) regarding the “beneficial owners” of the trust; and
lodging a register of this with the Master (this is not yet required - the details of this still need to be finalised);
keeping this information up to date; and
providing this information as prescribed (this is also not yet in effect).
“Beneficial owner” in relation to a trust includes:
a natural person who directly or indirectly ultimately owns the trust property (this is not really applicable to foundations);
a natural person who exercises effective control of the administration of the trust arrangements (this is likely to be the trustees who are already included in this list);
each founder of the trust;
each trustee of the trust;
each beneficiary named in the trust deed; and
if a founder, trustee or beneficiary is a legal person (such as a company) or partnership or another trust then the person(s) who ultimately owns or controls that company, partnership or trust.
Trustees will also be required to:
record certain details about the accountable institutions (such as financial services providers, banks, estate agents and legal practitioners) that the trust makes use of in relation to trust property (the details of this are still to be finalised); and
disclose to an accountable institution that they are acting in their capacity as trustee and that the transaction or business relationship relates to trust property.
Also, from 1 April 2023, a trustee appointed outside of South Africa may only act in relation to trust property in South Africa if formally authorised by the Master to act as trustee in respect of that property.
Foundations set up as NPCs:
There are again requirements about beneficial ownership and disclosure of information applicable to foundations set up as NPCs.Disclosure requirements involve:
recording certain information about beneficial owners in the company’s securities register, maintaining information on or a register of beneficiary interests and beneficial ownership;
submitting a copy of the securities register annually; and
CIPC making the annual return available to prescribed persons.
Once the regulations are finalised, it will become much clearer as to what is needed in order to comply and, as mentioned, a follow-up note at the time will provide guidance on this.
Good governance and transparency: Building Blocks of Trust
By Anna Vayanos
Anna Vayanos is an admitted attorney of the High Court of South Africa (nonpractising) as well as a solicitor for England and Wales and consults independently through her own business, Anna Vayanos Philanthropy Consulting. She has over 20 years of experience in advising both donors and NPOs and also has extensive experience as a trustee of both NPOs and foundations. She provides tax, structuring and governance advice, is very involved in the philanthropy sector and is passionate about assisting her clients to make a difference in South Africa. Trust is key for the building of any good relationship. One of the ways for any organisation to show a potential partner that it is trustworthy is to show meaningful commitment to good governance. This in essence shows commitment to doing the right thing. In turn, this allows potential partners to gain an impression of how the other partner is likely to conduct itself in the relationship and also whether they would like to be aligned with them, reputationally or otherwise. While non-profit organisations are called upon to account in so many ways to establish the credibility required to attract funding, independent philanthropy isn’t subject to the same level of pressure – rather it is borne out by a conscious decision by the board to commit to good governance, something I am seeing more and more of.
Good governance in South Africa
In South Africa, we have the King IV™ Code (which includes a supplement for Non-Profit Organisations (NPOs)) as well as the Independent Code of Governance for NPOs on Profits. Neither of these are legally binding nor specifically tailored towards independent foundations. Both though seek to encourage commitment to similar, fairly universal underlying values and principles, which any board in their fulfilment of their fiduciary duties would be seeking to practise in any event.Even subscribing to implement every aspect of one of the codes or preparing endless policies to do so will not mean though that there is good governance. Rather, it is the meaningful application of these values and principles behind the codes to every decision and to everything that a foundation does, that leads to true good governance. And it is this, that leads to credibility and forms the foundation of trust.Also, the implementation of the codes can be daunting for any foundation board but it is important to remember it is not a “one size fits all”. While this does not
mean deciding which values or principles to implement or leave out it rather involves a board deciding how best to implement these values and principles in a way that is appropriate and meaningful for the foundation.
Transparency and good governance
Transparency is a recommended practice of good governance, and I would like to use this as an example of how meaningful implementation of a governance practice or principle can differ from foundation to foundation. A foundation need not share all of its information, but the sharing of certain aspects can be a good starting point for the building of trust both with society as a whole and with potential partners.
Calls for transparency
Recently, there have been increased calls for donor foundations to be more transparent about their spend, the source of their funding and their impact to name a few things. There are many varied reasons for this:
Society would like to see the wealthy, as well as corporates, use their money in a way that has a broader public benefit.
There is a global pushback against wealth and privilege.
NPOs would like to know what each foundation funds so as to possibly apply for funding.
Funders would like to share learnings and find opportunities for collaboration.
Taxpayers would like there to be accountability on the impact of the spend considering the tax exemption that most foundations enjoy.
Reasons in favour of privacy
Having worked with independent philanthropy for many years, I respect and understand many funders’ desire for privacy, particularly when it comes to private funders or family foundations. Personally, I have never experienced this desire being motivated by anything other than noble, well-meaning purposes. Funders are often uncomfortable with too much information being shared about their giving in particular because:
Their philanthropy is often very personal and there is a level of privacy that many funders seek – some feeling it is inappropriate to go public about their philanthropic endeavours.
They would like to invite applications in order to remain targeted in their activities rather than be approached by numerous organisations with potentially unrelated programmes. Many also do not have the infrastructure to deal with a large influx of applications.
While there is a tax saving if giving through a foundation, the funder could have continued to give in their personal capacity, thus avoiding the need to be public
about their philanthropy which might be very personal to them. The establishment of foundations is something we, as a society, would want to encourage in order to create long term, committed funders.The boards of foundations are in fact already accountable on many levels. Although information might not be widely shared on spend and activities, the board is required to account to various authorities such as the South African Revenue Service (SARS), the Master of the High Court, vested beneficiaries, its co-funders and through the Promotion of Access to Information Act (PAIA) to name a few. It is not this unregulated, unaccountable landscape that it may seem to some.
A balanced approach
In my view, a balance can certainly be struck. There are many merits to public disclosure of some foundation information. It is still possible to maintain a degree
of privacy and avoid some of the potential disadvantages of making certain information public. As with the application of all of the principles of the good governance – the board can and should consciously decide on what strikes that balance and is appropriate for the foundation.For example, they can choose to just share funding guidelines, application procedures (or the fact that application is by invitation only), reports on impact, details of the composition of the board and could join donor forums to share learnings and meet and collaborate with other funders.While acknowledging the desire for privacy, the sharing of the appropriate amount of information about the foundation will also help engender trust and can be used to such good effect including inspiring others, accessing new partners, sharing learnings, and preventing misconceptions.Information is necessary for the building of trust. We need information in order to be able to assess a potential partner in the same way as foundations require
information from the partners they choose to work with and fund. A partner will not know a foundation’s stance on good governance unless it has the information to do so and so this all takes us back to the premise that transparency and good governance are indeed building blocks of trust.
This article was first published in IPASA Philanthropy Views, 2nd Quarter 2022. See more here
When a foundation makes sense
By Anna Vayanos
A charitable foundation is a structure through which the funder conducts their giving or corporate social investment (CSI) activities to help ensure focused and sustained giving. It usually takes the form of a trust or a non-profit company (NPC), and involves the donation of capital to the foundation (either at the start or over time) and the investment of this capital or endowment. Proper investment of the capital should produce income to cover part or all of the distributions to beneficiaries or programme costs. In this way, the foundation becomes financially sustainable and able to give independently and into the future.
Why set up a foundation?
Corporate funders
• Sustainable CSI
Tough times for funders are usually even tougher times for the beneficiaries that they support. A financially sustainable foundation can continue to give in tough financial times, as amounts available for CSI are no longer dependent on the company’s financial position in any particular year, provided that the foundation has a reasonable endowment.• Easier quantification of CSI
It is becoming increasingly important to track CSI spend for reporting against the B-BBEE scorecard, for example. CSI efforts and spend can be tracked more easily by channelling all relevant activities through a foundation. Similarly, it also then becomes easier to measure the impact of your company’s CSI.• Protection of CSI funds
The foundation’s assets will be separate to those of the company’s and thus protected from any of the company’s financial risk.• Fundraising
Directing money generated from fundraising campaigns directly into a separate foundation provides external funders with peace of mind, knowing that their contributions are paid to an entity separate to the company, for a clearly defined purpose.• Branding and legacy
Managing CSI through a foundation creates a branding opportunity for the business, using the name of the foundation as a related brand to highlight CSI efforts. A foundation separate from the company can also continue to exist even if the company ceases activities in the country or shuts down. The foundation and its brand can then remain as a legacy. An example of this is the well-established Zenex Foundation in South Africa.• Significant tax saving
A company could benefit from a number of tax advantages whether it gives directly to beneficiaries or through a foundation. However, the added advantage of making use of a foundation that enjoys the necessary approvals is that there should be no income tax or capital gains tax payable on the investment of the funds within the foundation. Funds that would have been paid towards tax can instead be used towards the objectives of the foundation.• Input from independent trustees
Independent trustees can be appointed to the board of a foundation - and should be carefully selected for their relevant expertise and experience in a business’s CSI focus areas. They can help guide a company’s CSI to ensure the effectiveness of programmes and their involvement can also give these added credibility in beneficiary communities.
Families and individuals
• Determining your vision and committing to giving
The exercise of setting up a foundation involves considering the funder’s values, passions and the areas in which they would like to make a difference. Once there is clarity on these, the foundation should be carefully structured to ensure commitment to the achievement of the funder’s vision for the longer term.• Sustainable giving
A foundation, funded and invested properly, can ensure that the funder’s giving is financially sustainable and not reliant on the availability of excess personal income. Income earned within the foundation can be distributed to beneficiaries long after any initial donations have been made to the foundation. Not only does this allow the funder to plan their giving but it also allows for longer-term commitments to beneficiaries, which is immensely beneficial to them and their programmes.• Involvement of the next generation
By including the funder’s children as trustees or in the everyday activities of the foundation, an opportunity is created to keep their family connected and involved. This can also help to ensure that the funder’s vision is understood during their lifetime, which will assist with its continued achievement after their death.• Leaving a legacy
Many people would like to leave a legacy after their death by using funds made during their lifetime, to continue to make a difference long after they have passed away. Setting up a foundation either while still alive or in terms of the funder’s Will can enable them to do this.• Significant tax savings, including estate duty savings
The funder could benefit from a number of tax advantages whether they give directly to beneficiaries or through a foundation. However, the added advantage of making use of a foundation that enjoys the necessary approvals is that there should be no income tax or capital gains tax payable on the investment of the funds within the foundation. Funds that would have been paid towards tax can instead be used towards the objectives of the foundation.
When not to establish a foundation
A foundation requires longer-term commitment and sufficient funds to make it practically and financially viable. If a company chooses to spend CSI funding, or an individual chooses to spend excess personal income, within a short time period from when it becomes available, then a foundation would not be appropriate. Giving directly to organisations or beneficiaries would make more sense.Also, if the amounts available for giving or CSI activities are quite low then the use of a foundation might not be financially viable.
Should a foundation continue for a limited period or into perpetuity?
This is very much a matter of choice. It is usually not viable to set up a foundation for too short a time period but some funders do prefer to set a time limit on the lifespan of their foundation. For an individual funder this could be because they would rather see, and give input on, the impact of their philanthropy during their lifetime. Others specifically want their legacy of giving to continue after death. A foundation can also be structured in such a way so as to terminate once it has fulfilled the particular purpose for which it was established.
How much capital is enough?
A foundation need not be fully funded upfront; its capital base can be built up over time. However, unless the intention is to have at least R1 million of capital ultimately invested within the foundation for the longer term, it is probably not financially viable to set up a foundation due to the ongoing costs involved.
What are the costs involved?
Start-up costs
Initial set-up costs of a foundation should be between R15 000 and R20 000 depending on complexity. This includes the registration of a trust or NPC, as well as the various applications for tax exemption (and possible registration as a Non-Profit Organisation, although this is voluntary and more appropriate for foundations fundraising from third parties).Running costs
Annual running costs include, as a minimum, fees for:
• the preparation of annual financial statements
• an annual audit or review
• preparation and submission of an income tax return.Depending on the size and activities of the foundation, there could also be staff and other overhead costs.There are additional ongoing requirements that need to be complied with in terms of tax approvals and registrations obtained. These are not cost prohibitive and can be outsourced.
First published in the Trialogue Funders Guide to Social Development in South Africa. Edited in September 2020.
Guide to the tax consequences of donating directly to non-profit organisations
By Anna Vayanos
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 a potential beneficiary 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 table below illustrates some of these potential advantages. Availability of these advantages depends on a number of factors inducing the type of donation and any benefits given in return.
| Which tax approvals does the beneficiary organisation enjoy? | ||||
|---|---|---|---|---|
| It does not have PBO or Section 18A approval. | - | It is an approved PBO without Section 18A approval. | - | It is an approved PBO with Section 18A approval. |
| Donations tax is likely to be payable. No capital gains tax saving (on donations in kind). No estate duty saving (if in terms of a Will). No S18A tax deduction available. | - | No donations tax payable. No capital gains tax payable in respect of donations in kind. Estate duty saving (if in terms of a Will). No S18A tax deduction available. | - | No donations tax. No capital gains tax payable in respect of donations in kind. Estate duty saving (if in terms of a Will). S18A tax deduction available. |
This article was first published in the Trialogue Funder’s Guide to Social Development in South Africa and edited in September 2020
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