Original Research

Donations in kind: An investigation of the value for purposes of section 18A of the Income Tax Act

Rudie Nel, Nicolette Klopper
Journal of Economic and Financial Sciences | Vol 12, No 1 | a418 | DOI: https://doi.org/10.4102/jef.v12i1.418 | © 2019 Rudie Nel, Nicolette Klopper | This work is licensed under CC Attribution 4.0
Submitted: 12 September 2018 | Published: 29 July 2019

About the author(s)

Rudie Nel, School of Accountancy, Stellenbosch University, Cape Town, South Africa
Nicolette Klopper, School of Accountancy, Stellenbosch University, Cape Town, South Africa


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Abstract

Orientation: The tax deductibility of donations in kind in terms of the Income Tax Act No. 58 of 1962 in South Africa.

Research purpose: The aim of this article is to critically analyse the provisions of section 18A(2)(a)(v) of the Income Tax Act No. 58 of 1962 to determine the value, if any, to be indicated on a section 18A receipt. It is also investigated whether the donee or donor is responsible for determining the fair market value, if such value should be included on a section 18A receipt.

Motivation for the study: Addressing uncertainty regarding which amount, if any, should be included on a section 18A receipt for tax purposes in respect of a donation in kind.

Research design, approach and method: This article involves a non-empirical interpretative analysis of tax legislation and other literature. The mode of inquiry for the article is qualitative in nature and follows a doctrinal method, which is closely associated with tax research.

Main findings: This article highlights the possible ambiguity in the interpretation of section 18A(2)(a)(v) of the Income Tax Act No. 58 of 1962 and that the term ‘nature’ could be construed as including a value.

Practical/managerial implications: The donor would have certain tax implications preceding a section 18A deduction which would require the donor to determine the fair market value and could enable the donor to also indicate such fair market value in respect of a donation in kind to the donee.

Contribution/value-add: This article contributes to literature by highlighting the uncertainty in respect of the interpretation of tax legislation relating to section 18A.


Keywords

donation in kind; property in kind; section 18A; section 18A receipt; fair market value

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