Should my spouse pay 20% donation tax?

 

Before this question can be answered we need to look at the meaning of the word donation:

A donation is:

  • any gratuitous disposal of property including any gratuitous waiver or renunciation of a right; or
  • a disposal of any property for an inadequate consideration.

Section 7(10) of the Income Tax Act, No 58 of 1962 (the Act) states that if a person (donator recipient) receives a donation he/she is obliged to disclose such a donation to SARS.

As general rule, when a person (donator) donates money or property to another person (donator recipient) the donator will have to pay 20% donation tax to SARS.

Section 58 of the Act list exemptions which may be applicable when donating. In this regard section 58 of the Act exempts spouses from paying donation tax. In this article our focus is on a spouse who donates immovable or movable property to his/her spouse.

Donating immovable property

  • Immovable property is defined as an item of property that cannot be moved without destroying or altering it. Immovable property is fixed to the earth, such as land or a house.
  • When a spouse (donator) donates immovable property to his/her spouse (donator recipient), the donator will not be obliged to pay donations tax (section 67 of the Act). Thus the general rule of paying 20% donation tax will not be applicable in this circumstance.
  • If there is a mortgage bond over the property you plan to donate to your spouse (donator recipient), it is advised that you (donator) should be absolutely certain that your spouse (donator recipient) are in the financial position to continue paying the outstanding mortgage. If this is not the case, it is best to consult with one of our attorneys.

What you (donator) have to pay when donating property

  • Transfer Duty
    • Is the tax that the you (donator) will have to pay if you donate immovable property to your spouse (donator recipient).
    • It is important to note that you (donator) will have to pay the transfer duty within 6(six) months of donating the immovable property.

(Please contact our office so we can provide you with the exact amount of transfer duty calculated from a sliding scale)

  • Transfer Fees
    • Transfer Fees are paid to the Transferring Attorney (Conveyancer) for their service to transfer your (donator) property from your name to the name of your spouse (donator recipient).
    • The amount payable will depend on the value of the property.

The general rule of paying 20% donation tax to SARS is not applicable when you want to donate money, investment or movable property to your spouse.

Read sections 54 to 64 of the Act for more information on donations.

Please contact our office if you want to make any donation approximating immovable property, movable property, money, investment etc.

* The Act (Income Tax Act, No 58 of 1962)