Tax on gifts

[killerbyte]

I was having a discussion with some friends and a hypothetical idea came up.

What if a friend decided to buy you a house and a car. What would the tax implications of it be.

It took some effort to get an answer regarding the house (first R100k is tax free, the rest is 20%). But I think the car is just a regular item that is purchased and therefore subject to 15% VAT.

I cant find any information on SARS' website that either confirms what I have found or contradicts it.

Anyone know the ins and outs. Worth considering if I ever win the lotto and want to spoil a friend.

 

[Snyper564]

I was having a discussion with some friends and a hypothetical idea came up.

What if a friend decided to buy you a house and a car. What would the tax implications of it be.

It took some effort to get an answer regarding the house (first R100k is tax free, the rest is 20%). But I think the car is just a regular item that is purchased and therefore subject to 15% VAT.

I cant find any information on SARS' website that either confirms what I have found or contradicts it.

Anyone know the ins and outs. Worth considering if I ever win the lotto and want to spoil a friend.

This is what you are looking for: http://www.sars.gov.za/TaxTypes/DonationsTax/Pages/default.aspx

Not going to get into the details but that should cover everything.

Its the first R10000, so everything over that gets hit essentially. Not just property all assets.


A donation will be exempt if the total value of donations for a year of assessment does not exceed:
•The first R100 000 of property donated in each year by an individual is exempt from donations tax.
•In the case of a taxpayer who is not an individual, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total. In other words, these are casual gifts by companies and trusts: R10 000 (section 56(2)(a)).
•Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
•Donations by individuals: R100 000 (from 2008 to 2017 years of assessment) (section 56(2) (a) and (b)).
Also qualifying for exemption is so much of any bona fide contribution made by the donor towards the maintenance of any person. While not limited to a specific amount, this exemption is limited to what the Commissioner considers reasonable (section 56(2)(c)).

 

[Vegeta]

You're over complicating it. No difference to buying yourself a house and car. How would the seller or sars know that your friend gave you the money? I'm talking about individuals here.

Hey son here's R50000 from daddy's salary that has already been taxed, go buy yourself a motorbike... Happy birthday

I'm over simplifying and talking about small amounts, but it could be that simple in some cases. The income has already been taxed and it is assumed to be the dad's the registration papers will be in the son's name, simple

 

[killerbyte]

This is what you are looking for: http://www.sars.gov.za/TaxTypes/DonationsTax/Pages/default.aspx

Not going to get into the details but that should cover everything.

Its the first R10000, so everything over that gets hit essentially. Not just property all assets.


A donation will be exempt if the total value of donations for a year of assessment does not exceed:
•The first R100 000 of property donated in each year by an individual is exempt from donations tax.
•In the case of a taxpayer who is not an individual, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total. In other words, these are casual gifts by companies and trusts: R10 000 (section 56(2)(a)).
•Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
•Donations by individuals: R100 000 (from 2008 to 2017 years of assessment) (section 56(2) (a) and (b)).
Also qualifying for exemption is so much of any bona fide contribution made by the donor towards the maintenance of any person. While not limited to a specific amount, this exemption is limited to what the Commissioner considers reasonable (section 56(2)(c)).

Further down that page I read the following:
The person making the donation (donor) is liable for the tax but if the donor fails to pay the tax within the set period the donor and donee are jointly and severally liable for the tax (section 59).

 

[Snyper564]

Further down that page I read the following:
The person making the donation (donor) is liable for the tax but if the donor fails to pay the tax within the set period the donor and donee are jointly and severally liable for the tax (section 59).

Yip, that's how it works.

The R100 000 is basically there saying you can give gifts to people but should they be more extravagant then you are going to be hit with tax. Donations tax is there so that you cant just circumvent estate duty.

 

[ToxicBunny]

You're over complicating it. No difference to buying yourself a house and car. How would the seller know that your friend gave you the money? I'm talking about individuals here.

Hey son here's R50000 from daddy's salary that has already been taxed, go buy yourself a motorbike... Happy birthday

I'm over simplifying and talking about small amounts, but it could be that simple in some cases. The income has already been taxed and it is assumed to be he dad's the registration papers will be in the son's name, simple

Not that simple really...

If I give someone R1m to buy a home as a donation, then R900k of it is liable to be hit with Donations tax.. regardless of whether it was previously taxed or not.

The seller/buyer etc don't need to know the source of the money but SARS may ask or know and they will want their 20% pound of flesh.

 

[Snyper564]

Not that simple really...

If I give someone R1m to buy a home as a donation, then R900k of it is liable to be hit with Donations tax.. regardless of whether it was previously taxed or not.

The seller/buyer etc don't need to know the source of the money but SARS may ask or know and they will want their 20% pound of flesh.

Exactly! Look you can do things the right way or structure things in a certain way for example donating a R100k for 10 years perfectly legit. or just flat out not declare anything but you are in for big trouble then as this is tax avoidance...

 

[Vegeta]

Not that simple really...

If I give someone R1m to buy a home as a donation, then R900k of it is liable to be hit with Donations tax.. regardless of whether it was previously taxed or not.

The seller/buyer etc don't need to know the source of the money but SARS may ask or know and they will want their 20% pound of flesh.

Sure in that case. I just wanted to illustrate that you have simple gifts, buying your girlfriend a 50k engagement ring and far more complicated scenarios, companies donating millions to each other or individuals.

It could be simple is all im saying assuming it's a simple gift not knowing what the OP is thinking of.

 

[Snyper564]

Sure in that case. I just wanted to illustrate that you have simple gifts, buying your girlfriend a 50k engagement ring and far more complicated scenarios, companies donating millions to each other or individuals.

It could be simple is all im saying assuming it's a simple gift not knowing what the OP is thinking of.

Agreed, the R100k is pretty much there to cover "most" situations beyond that it does become more complex.

 

[ToxicBunny]

Sure in that case. I just wanted to illustrate that you have simple gifts, buying your girlfriend a 50k engagement ring and far more complicated scenarios, companies donating millions to each other or individuals.

It could be simple is all im saying assuming it's a simple gift not knowing what the OP is thinking of.

Of course, but people also need to be aware that the R100k is not a per donation, its for the total for a tax year....

 

[SauRoNZA]

Sure in that case. I just wanted to illustrate that you have simple gifts, buying your girlfriend a 50k engagement ring and far more complicated scenarios, companies donating millions to each other or individuals.

It could be simple is all im saying assuming it's a simple gift not knowing what the OP is thinking of.

It's right there in the OP...he is referring to cars and property which aren't simple gifts and are easily tracked by SARS due to the other stuff attached to it.

A ring they'd never know of sure, but a car and a house isn't so simple.

 

[Vegeta]

It's right there in the OP...he is referring to cars and property which aren't simple gifts and are easily tracked by SARS due to the other stuff attached to it.

A ring they'd never know of sure, but a car and a house isn't so simple.

I read that as a bit tongue in cheek, he also mentioned winning the lotto...

 

[Vegeta]

It's right there in the OP...he is referring to cars and property which aren't simple gifts and are easily tracked by SARS due to the other stuff attached to it.

A ring they'd never know of sure, but a car and a house isn't so simple.

No expert but maybe registering a company, investing in it. Buy property, vehicles in the company name. Issue some shares to the parties.

Would that work better? Think it would make more sense.

That way the friend can get his stuff back when you die if he's the other shareholder and it's setup that way.

 

[SauRoNZA]

No expert but maybe registering a company, investing in it. Buy property, vehicles in the company name. Issue some shares to the parties.

Would that work better? Think it would make more sense.

That way the friend can get his stuff back when you die if he's the other shareholder and it's setup that way.

Not really gifts any more then.

Might as well just do a trust then.

What I would rather do is fund an investment account that pays out to said person.

Can do 100k a year and they can buy stuff with the interest.

In five years it will bring it a bit of bucks.

 

[Snyper564]

No expert but maybe registering a company, investing in it. Buy property, vehicles in the company name. Issue some shares to the parties.

Would that work better? Think it would make more sense.

That way the friend can get his stuff back when you die if he's the other shareholder and it's setup that way.

You are now delving into the realm of estate planning and a world that is quite complex...

 

[Vegeta]

Surely seems like the territory the OP is talking about rather than gifts. "Gifting" houses and cars

You are now delving into the realm of estate planning and a world that is quite complex...

 

[Snyper564]

He was talking about a hypothetical situation. If its plain gifting its donations tax if he wants to get the most bang for the buck and structure things in a more tax efficient manner. Seek professional advice. I got the idea he was just talking about getting a car and gifting it...

 

[killerbyte]

He was talking about a hypothetical situation. If its plain gifting its donations tax if he wants to get the most bang for the buck and structure things in a more tax efficient manner. Seek professional advice. I got the idea he was just talking about getting a car and gifting it...

No, I may possibly be the recipient of a house and car as a gift, from a non-family member.
Wanted to know the tax ramification.

 

[Snyper564]

No, I may possibly be the recipient of a house and car as a gift, from a non-family member.
Wanted to know the tax ramification.

Well then in short.

Still living -> Donations tax.
Passed away -> Estate duty.