There is often confusion about these donations, so let’s try to clarify the whole story

• Every natural person can make donations totalling R100  000 each tax year free of the normal 20% Donations Tax.
• If you have a trust then you and your spouse must remember to make these donations every year.
• You do not have to have the money.
• You say I hereby donate R100 000 to xxxxx on loan account.
• In other words you then owe xxxxx the R100 000.
• If, as should always be the case, the trust owns a company which holds the wealth, then xxxxx should be the company, not the trust.
• Let’s say that, after 3 years you have, between you, donated R600 000 to the company. You now owe it R600 000.
• Now the company wants R250 000 for the deposit on an investment property. You have the R250 000 (otherwise you wouldn’t be thinking of doing the deal).
• Normally, you would have had to lend the R250 000 to the company (and that’s complicated by s7C of the Income Tax Act that says you have to charge interest).
• But, because you owe the company R600 000, you simply repay R250 000 of that debt and now owe only R350 000.