Riette Engels-Van Zyl – Director and Tax expert Lawtons Africa

Income tax and donations tax relief measures have been made available for donors and qualifying Public Benefit Organisations (PBOs) established to assist with COVID-19 disaster relief efforts. 

The tax relief includes:

1. An exemption from income tax on receipts and accruals of the PBO (other than from certain business undertakings and trading activities);

2. An exemption from donations tax on donations made to or by the PBO; and

3. Donations made to a PBO will be tax deductible in the hands of the donor.  (The amount of tax deductible donations allowable in any year of assessment is limited to 10% of the taxable income of that donor.)

The Disaster Management Tax Relief Bill, published by National Treasury on 1 April 2020 for public comment, proposes a number of amendments to provide for COVID-19 tax relief, for retrospective enactment when Parliament re-convenes later this year. 

1. COVID-19 disaster relief funds will on application and approval by the Commissioner for SARS be deemed to be PBOs as contemplated in the Income Tax Act and will be subject to the same criteria prescribed in the Act for all PBOs, on the following basis: 

• The approval as a PBO in terms of sections 30 and 18A of the Act will only apply for a limited period of 4 months from 1 April 2020 to 31 July 2020.

• Receipts and accruals of COVID-19 disaster relief funds will be exempt from income tax. 

• Donations made to or by the COVID-19 disaster relief funds will be exempt from donations tax.

• The COVID-19 disaster relief fund will also qualify for approval in terms of section 18A in respect of donations made to it.

• Donations made to a COVID-19 disaster relief fund will qualify for a tax deduction in the hands of the donor, subject to the limitation provided in section 18A (This provides that the donor may deduct in any year of assessment the amount of the donations made by that person, limited to 10% of the taxable income of that donor before a section 18A deduction or section 6quat deduction).

Transfer of assets of COVID-19 disaster relief funds

The provisions set out in the Disaster Management Tax Relief Bill will cease to apply to the COVID-19 disaster relief fund at the end of the period of four months.

Where the disaster relief fund has not been dissolved and its assets have not been distributed on or before 31 July 2020, the Disaster Management Tax Relief Bill will deem the PBO to be a small business funding entity as contemplated in section 30C of the Income Tax Act.