Tax trouble ahead for one group of South Africans

Donors may be prevented from claiming tax deductions if non-profit organisations (NPOs) do not meet specific submission deadlines.

Tax Consulting South Africa’s manager of trust and deceased estate tax compliance, Zasha de Lange, explained that NPOs should be careful not to risk their S18A status.

A Section 18A tax-deductible receipt is an official document issued by a Section 18A-approved institution to a donor who makes a qualifying donation.

It serves as evidence of the donation made and enables the donor to claim a tax deduction from their taxable income upon submitting the income tax return.

De Lange explained that Section 18A-approved NPOs that rely on donations already know how important it is for donors to claim tax deductions on their contributions.

What they may not know, however, is that failing to submit IT3(d) forms on time or making errors in the process could risk their Section 18A status and leave their donors in the lurch.

The deadline for submissions of IT3(d) forms is fast approaching. The South African Revenue Service (SARS) requires all IT3(d) submissions for the 2024/2025 tax year to be made between 15 April and 31 May 2025.

She said the data on the IT3(d) forms includes all the Section 18A tax-deductible receipts issued to donors during the assessment year.

Allowing this tax deduction encourages individual and corporate donors to contribute to charitable causes operating for public benefit.

De Lange warned that while the submission period may seem like plenty of time, the process can be tricky, and last-minute filings often result in frustrating delays.

This will complicate issues for donors who want to claim the donations as a deduction on their taxable income. SARS has also stressed that they expect accurate submissions from the start.

Submitting incomplete or incorrect data on tax-deductible receipts issued to donors during the tax period leads to unnecessary revisions. This could slow down the process for the NPO and its donors.

Late submissions could lead to penalties

De Lange said that every year, countless NPOs scramble to submit in the final week before the cut-off date, only to face technical issues and processing delays.

An NPO’s IT3(d) declaration isn’t just a box-ticking exercise; it is crucial to maintaining transparency, compliance, and donor trust.

If an organisation misses the deadline or submits incorrect data, it could face several penalties. Potential SARS audits and penalties will create unnecessary administrative headaches, and they will also risk their S18A approval.

This would make donations non-deductible for donors. In addition, NPOs would lose donor confidence, which could affect future contributions.

As compliance standards tighten, De Lange said it is more important than ever to stay on top of your reporting obligations.

If an organisation is uncertain, it should seek assistance from professional service providers specialising in helping NPOs maintain compliance.

At the same time, they continue their vital work in addressing the pervasive socio-economic challenges facing our society.

According to De Lange, it is important to choose a team of experts who can offer comprehensive support. This includes end-to-end IT3(d) data preparation and submission to ensure accuracy from the start.

In addition, these experts should also assist with pre-submission compliance checks to catch any errors early and donor reporting best practices to simplify future submissions.

Finally, they should provide expert advisory support to keep organisations up to date with SARS requirements, and should be able to help compile and submit a Beneficial Ownership register.

De Lange stressed that NPOs should not leave this until the last minute. The first quarter of 2025 has already passed, and 31 May 2025 is approaching.

“Now is the perfect time to get your IT3(d) submissions in order with the assistance of experts. The sooner you act, the smoother the process will be – and the less you’ll have to worry about penalties or unforeseen delays.”