A ‘s 7C donation’, as from 1 March 2017, is regarded as being made to a trust on the last day of each year of assessment of the trust, that is, for the first time, on the last day of February 2018 (s 7C(3)(b) of the Income Tax Act).
Donations tax is payable by the end of the month following the month during which the donation takes effect, that is, on the present facts, by 31 March 2018 (s 60).
Donations tax rate and amount
A soft loan attracts an annual donations tax levied on the difference between the ‘official interest rate’ and the interest rate charged, if any.
The official rate was 8% until 31 July 2017, and 7,75% as from 1 August 2017.
The 20% donations tax rate applies (to be amended, as from 1 March 2018).
If otherwise unused, the R100 000 donations tax exemption (s 56(2)(b)) is deducted from the determined amount of a s 7C donation, before the levy of the donations tax.
Basis of calculation
In the context of s 7C, I can find nothing prescribed in the Income Tax Act or any SARS literature on the basis of the calculation of the interest charged.
The term ‘official rate of interest’ is defined in para 1 of the Seventh Schedule to the Income Tax Act. In my view, s 7C interest is, like official interest for fringe benefits tax purposes, also calculated monthly (at month-end, on the outstanding loan balance), on a simple interest basis, as it is on a loan to an employee.
Method of payment
The eFiling system does not currently cater for the IT 144 form (donations tax form) declaration, and this must be submitted manually.
Payment can nevertheless be made through eFiling, on the basis of the taxpayer’s income tax reference number. Go to the link ‘Additional payments to SARS’; then ‘Create additional payment’; then ‘Tax type’ subcategory ‘Donations’.