‘Tis the season of giving, right? There’s no better festive stocking stuffer than a forex transfer, so if you’re wondering how much money you can send overseas as a gift from South Africa, we’ve got you covered. Take a look at what you need to know about cross-border gifting of currency to ensure you stay on the right side of the exchange control regulations.
The South African Reserve Bank has made provision for a gift allowance that can be used by residents to send up to R1,000,000 overseas as a gift. However, any amounts that exceed R100,000 become taxable at a rate of 20%. This means that all amounts under R100,000 will have no tax implications for the person giving the money.
- Gifts can only be given by a South African resident to a third party who currently lives overseas. It is irrelevant whether that person is a non-resident or a South African resident temporarily abroad.
- It is worth noting that your gift allowance falls under the Single Discretionary Allowance of R1 million, and cannot be used to supplement or extend the SDA.
What is donations tax , how does it work and who pays it?
If you’ve given or received a rather generous monetary gift recently, it’s important to know that the South African Revenue Service takes a particular interest in these kinds of exchanges. Additionally, if you’ve donated a large sum of money, given away shares or property ownership to someone else, SARS wants to know about it. Their interest in these transactions is to ensure that there is nothing underhanded going on, under the pretense of gifting. Declare these actions to SARS, and be aware of their tax implications.
If it is not a monetary contribution, SARS views a donation as the disposal of property or waiver of rights in a physical asset with a material value. This contribution or disposal is done without any expectation of receiving something in return. This part is important. In order to qualify as a donation in terms of the Income Tax Act, there can be no expectation of reward or acknowledgement from the donor. Should the donor expect something in return, it does not count as a donation, and is considered a transaction instead. As such, if the intention is to provide a financial handout to a loved one, or to sell a property at a discounted rate to a friend, or support a charity close to your heart – it’s important to know what counts as a donation, in order to understand the tax implications.
- Donations tax in South Africa applies to any individual, trust or business that is resident in South Africa according to the Income Tax Act. As such, The person making the donation (donor) is liable to pay donations tax, calculated at a flat rate of 20% on the value of the donation/gift up to R30 million. After the R30 million threshold, the donation tax goes up to 25%.
- Donations from a foreign resident do not attract donations tax if the funds donated come from a foreign source. However, there are exceptions to every rule, and understanding these is the most effective way to ensure you are not under- or over-taxed.
The tax implications for the donee: the recipient of the donation pays no donations tax in South Africa
The donee/recipient is not expected to pay tax on the donation/gift they have received. As a beneficiary, there is no tax implication for you, as long as you declare it in your Tax Return (ITR12) as an “Amount Considered Non-Taxable.” SARS wants to know about all your income, even if it’s not taxable.
As with all rules, there are exceptions. If the donor (the person who gave the donation or the gift) does not pay the donation or gift tax on time, then the donor and recipient become equally liable for the tax.
Who pays the tax on a donation (or gift) between spouses?
In terms of the Income Tax Act, donations/gifts between spouses are exempt from donations tax.
What are some other exemptions to donation tax?
- Category 1 exemptions: Section 18A of the Income Tax Act allows individuals to donate up to 10% of taxable earnings towards an approved Public Benefit Organisation on a tax-deductible basis.
- Category 2 exemptions: Companies and trusts can make casual gifts up to the value of R10 000 per year of assessment, without attracting tax.
- Category 3 exemptions: Donations made by natural persons are exempt from tax up to the first R100 000. So, for example, where parents help children to buy their first property (by contributing the deposit or paying the transfer) it is necessary to take this threshold into account. It is advisable to put this transaction into an agreement, so there is a signed record of what the money was intended for – as a gift or a loan. Accordingly, donations tax applies where a property is sold to someone at a discounted price, with the tax being calculated on the difference between the market value and sale price.
- Category 4 exemptions: Donations made by a natural person to contribute to the bona fide maintenance of a person are also exempt from donations tax. Although there is no set limit, the exemption is at the discretion of what the SARS Commissioner deems reasonable.
FinGlobal: cross-border financial specialists for South Africans
Now that you know exactly how much money you can send overseas as a gift from South Africa, FinGlobal can help you make it happen. We provide fast, effective forex services and speedy international remittances. Our services are competitively priced, exceptionally efficient and we’re ready to show you why we are the cross-border financial specialists of choice for South Africans all over the world. To get started with our services, simply leave your contact details in the form below.
