Encouraging generosity through tax deductions
Find out how Section 18A approval allows certain organisations to issue tax-deductible receipts and how you can benefit as a donor.
BY donating to certain approved organisations, taxpayers can receive a Section 18A certificate which allows them to reduce their taxable income when filing with the South African Revenue Service (SARS).
HOLAH babies, a safe and happy place for abandoned children until they are placed with adoptive families, recently took to social media to urge people to consider donating to the organisation.
They said by donating, taxpayers do not only help provide love, care, and essentials for vulnerable children, but help lower their tax bill.
To help taxpayers understand how they can benefit, Durban Caxton Local Media has compiled key information on obtaining a Section 18A certificate and how donations can contribute to meaningful social impact.
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Under Section 18A of the Income Tax Act, qualifying organisations can issue tax-deductible donation receipts, allowing donors to reduce their taxable income. However, not all organisations can issue these receipts, only those approved by the SARS Commissioner and engaged in Public Benefit Activities (PBAs) in South Africa.
Who Can Issue Section 18A Receipts?
Only specific tax-exempt institutions can apply for approval to issue Section 18A receipts. These include, Public Benefit Organizations (PBOs), Public Institutions, Government Departments, and Specialized United Nations (UN) Agencies.
These institutions must formally apply to SARS for approval, and receipts can only be issued once SARS has confirmed Section 18A status and assigned a reference number, which must appear on the receipt.
SARS categorises Public Benefit Organisations (PBOs) into two main groups;
- “Doers” – These PBOs directly conduct the qualifying public benefit activities.
- “Conduits” – These PBOs provide funding or assets to other Section 18A-approved organisations (excluding Specialised UN Agencies).
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Some PBOs conduct both qualifying and non-qualifying activities, meaning their Section 18A approval is “ring-fenced” — meaning tax-deductible receipts can only be issued for funds related to qualifying activities. Conduit PBOs and ring-fenced PBOs must meet additional compliance and reporting requirements.
How to Apply for Section 18A Approval
Organisations seeking Section 18A status can apply when they register as a PBO under Section 30 or as a public institution under Section 10(1)(cA)(i). Those already registered can submit a written request to SARS, including, the specific public benefit activities they perform (as listed in Part II of the 9th Schedule), a detailed explanation of how these activities are carried out, and supporting documents, such as founding documents and financial statements.
For Donors: How to Claim a Tax Deduction
Taxpayers who make a bona fide donation in cash or in kind to a Section 18A-approved organisation can claim a tax deduction — provided they receive a valid Section 18A receipt or, in some cases, an employees’ tax certificate reflecting the donation.
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However, there are limits to the amount that can be claimed as a deduction. Donors should ensure that their chosen charity is Section 18A-approved before making contributions.
For more details on obtaining and maintaining Section 18A approval, visit the SARS website.
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