Overview of SARS Regulations
On November 2022, the South African Revenue Service (SARS) has published a draft regulation for additional information that is required on Section 18A Tax Receipts.
The requirements are intended to improve the transparency of information on Section 18A Tax Receipts issued to donors.
Definition of Section 18A Tax Receipts
The definition of Section 18A Receipts is a crucial part of the new South African Revenue Services (SARS) regulations. These receipts are issued when tax deductible donations are made to approved institutions, such as non profit organizations or charities. The section 18A receipt is required for the donors to be able to deduct their donation from their taxable income.
Section 18A allows donors to claim deductions from tax on donations towards registered section 18A charitable and welfare entities. The donation must be in money or goods in kind. Section 18A Tax receipts cannot be issued for services rendered to the organisation. Donations must also meet strict criteria set out by SARS before they can qualify for a deduction under this section. More details on Section 18A Tax Receipts can be found on our Free Section 18A Tax Receipts Handbook.
New Regulations for Section 18A Tax Receipts issued from 1 March 2023
The following additional information must be included on a Section 18A Tax Receipt issued in terms of section 18A(2)(a) of the Income Tax Act:
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- Type of Donor (natural person, company, trust, etc.);
- Donor Identification type and country of issue (in case of a natural person);
- Identification or registration number of the donor;
- Tax reference number of the donor (if available);
- Contact number of the donor
- E-mail address of the donor
- A unique receipt number
- Trading name of the donor (if different from the registered name)
The additional information requirements will be applicable to all 18A Tax Receipts issued from 1 March 2023. The above information should be kept by the 18A PBO and made available to SARS when requested.
Challenges with the changes
The additional requirements add to the challenges currently experienced by nonprofit organisations in their operational reporting requirements, which is to submit a detailed audited statement of how the PBO ‘s 18A funds were expended for their organisation. The additional requirements will require them to also make sure that they need to maintain detailed records for each donor that contributed to a Section 18A project.
This may lead to a significant increase in administrative burden for non-profit organisations and negatively impact on the time and funds available for their core activities. In addition the PBO needs to have quick access to all its Section 18A Tax Receipts issued previously when requested by SARS.
Stay compliant with ActiveDonor
Preparation well in advance is the key. Even though there are a few months left before the changes come into effect, we at ActiveDonor have already started updating our application to be compliant with the new legislation when it comes into effect. We’ve also started communicating with our NPOs to make them aware of the new requirements. The ActiveDonor team is working on a solution that will allow you to deploy a donor update information form, containing all the information required for issuing Section 18A Tax Receipts.
With ActiveDonor you can now instantly access all of your S18A Tax Receipts that you may have issued throughout the years. This means you can reply to SARS quickly and earn the trust of your donors.
Conclusion: Summary of Changes
SARS is focusing on the additional information required to ensure it takes approved best practices to create deductions available for qualifying donors and prevent section 18A abuse, so the process may be made more efficient. The additional information requirements will be applicable to all approved section 18A institutions with effect from 1 March 2023, requiring such institutions to issue receipts with the additional information and keep all the required information available for SARS.
SARS is also embarking on a further process that will ultimately prescribe the manner in which this information needs to be submitted to SARS. This will be dealt with in a different process and through a separate notice.
These new mandates from SARS can be found by clicking on the link below.
Click here to download a free Sample Section 18A Template that complies with the above regulations.
