Tax and SARS knowledge base
Company donations tax on assets or forgiven debt
Can a company pay donations tax when it gives an asset or forgives a debt?
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Direct answer
Yes. SARS says donations tax applies to a resident person, including a company, and that a donation is a gratuitous disposal of property, including a gratuitous waiver or renunciation of a right. A company that gives an asset for no consideration, or forgives a debt without receiving value, may therefore need a donations-tax review before the transaction is implemented.
SARS says the donor is liable for donations tax. If the donor does not pay within the payment period, the donor and donee can be jointly and severally liable under section 59. Exemptions, value, recipient status and related tax consequences can change the outcome.
What this means in practice
The transaction must be described accurately. A company may transfer cash, property, shares, intellectual property, a claim against a shareholder or another asset. It may waive a loan, settle a debt for less than its full value or transfer an asset at a price that does not reflect its value. The legal agreements, accounting entries and tax analysis should all describe the same transaction.
SARS explains that if the recipient gives something in return, the transfer is not a donation. That is only the starting point. Transfers for inadequate consideration can still require detailed review, including deemed-donation rules, valuation, debt-tax consequences and the tax position of both entities. Do not use a nominal price or a late accounting journal as a substitute for a genuine value analysis.
For the 2026 tax guide, SARS states a 20% donations-tax rate on the cumulative value of property donated from 1 March 2018 that does not exceed R30 million, and 25% on the value above that threshold. The SARS guide also says that for a taxpayer who is not a natural person, the casual-gift exemption is limited to R20,000 in total per tax year. Use the rates only after checking the current law and the company’s cumulative donation history.
Step-by-step
- Identify exactly what value is leaving the company.
Gather the asset register, loan account, contract, shareholder records, invoices and correspondence. State whether the company is giving cash, transferring an asset, releasing a claim or reducing a debt. Identify the recipient, its relationship to the company and what, if anything, it provides in return.
- Establish the legal and tax date.
SARS says a donation takes effect once the legal formalities for a valid donation have been completed. Record the resolution date, agreement date, effective date, asset delivery date and any payment date. Avoid backdated board resolutions or post-event reclassification.
- Obtain reliable value evidence.
Prepare a valuation that is suitable for the asset or debt. For a debt waiver, document the face amount, recoverability, security, debtor financial position and any consideration. For property or shares, retain independent or supportable market-value evidence. The valuation should be contemporaneous and explain assumptions.
- Test exemptions and related rules.
Review the current statutory exemptions. SARS's 2026 Budget Tax Guide lists donations between companies forming part of a South African group of companies as exempt, and also lists donations to certain public benefit organisations. Eligibility is not assumed from a group chart, common director or family relationship. Check the statutory group definition and relevant conditions before relying on an exemption.
- Review other tax consequences.
Donations tax is not the only possible consequence. A transfer can affect capital gains tax, recoupments, VAT, transfer duty, securities transfer tax, dividends tax, debt reduction rules, income tax and company law. A debt waiver needs its own debt-tax analysis, particularly where the debtor or creditor is connected to the company.
- Complete the compliance record.
Prepare the required donations-tax filing and payment steps using the current SARS process, then retain proof. Reconcile the tax file to the company’s accounting entries, financial statements, shareholder loan records and annual return disclosures where applicable.
Documents and records to keep
Keep the board and shareholder resolutions, signed agreement or debt release, recipient details, valuation, asset register, loan schedules, proof of consideration, exemption analysis, tax calculation, return and payment confirmation. Keep a cumulative register of relevant donations from 1 March 2018 for rate-threshold purposes.
Important limits and exceptions
This article does not decide whether a particular transfer is a donation, whether an exemption applies or what the value is. A transaction can involve inadequate consideration even where it is documented as a sale. A waiver of debt can also trigger distinct income-tax rules. Do not choose a tax treatment based only on the company’s commercial intention.
The R20,000 casual-gift amount and the 20% and 25% rates stated here are from SARS's 2026 tax guide. Check current guidance before implementing a transaction, particularly if the company has made other donations.
When to get tailored advice
Get advice before a company transfers property or shares, forgives a shareholder or group-company loan, donates to an organisation, disposes of an asset for less than market value or undertakes a restructuring. Specialist input is needed when debt, property, non-residents or a claimed group exemption are involved.
TaxProof can help organise the transaction file and value evidence checklist. We cannot give a donations-tax or debt-tax opinion without reviewing the agreements, value and group facts.