Donations Tax

Question 1

Donations Tax Exemptions part 1

Answer 1

1. Donations less than R100 000 per taxpayer per year ( natural persons) to any person
2. Donations between spouses
3. Donations mortis causa (donation upon death)
4. Donations cancelled within 6 months
5. Donation of foreign property acquired by donor before becoming resident
6. Donation of foreign property acquired as a result of inheritance from non-resident

Question 2

Donations tax exemptions part 2

Answer 2

7. Donation of foreign property acquired by donor by donation from non-resident
8. Where trustees distribute assets in terms of trust to beneficiaries
9. Donations made by public companies are exempt from donations tax
10. Donations to government, PBOs, political parties, pension, provident or RA funds, body corporate
11. Donations which are bona fide payments for maintenance
12. Casual donations not exceeding R10 000 made by non-public company

Question 3

Valuation of donated property

Answer 3

1. Value is fair market value on date of donation EXCEPT annuities or usufructs
2. Fair market value is price obtained between willing buyer and willing seller acting at arms length
3. Farming property – fair market value is 70% of market value

Question 4

Steps to follow to value

Answer 4

1. Calculate the fair market value of the property subject to the limited interest
2. Calculate annualised value of the right by multiplying the fair market value by 12% - if it is an annuity determine annual value (USUFRUCT AND BARE DOMINIUM)
3. Determine shortest of:
   3.1 the life expectancy of the DONOR (anb) (A)
   3.2 the life expectancy of the DONEE ( anb) (A)
   3.3 fixed period
4. Obtain the applicable discount rate from
   4.1 (A) if shortest period is life expectancy of either DONOR or DONEE
   4.2 (B) if shortest period is fixed period
5. Multiply discount rate by annual value to determine value of USUFRUCT from donation point of view

Question 5

Fiduciary rights

Answer 5

asset is transferred to one person subject to it then being transferred to another, either subject to the happening of an event or at a specified time

Question 6

Usufructs

Answer 6

Created when a person becomes the owner of the fruits, income or usufruct of an asset but does not own the asset.

Question 7

Who is liable

Answer 7

Donor is liable BUT if donor fails to pay the tax within specified period ( within 3 months or such longer period sanctioned by SARS), the donor and the donee will become jointly and severally liable