Why you should donate R100K to your trust owned company
Our CRM system recently sent reminders to all of our trust clients to donate R100 000 to their trust owned company before the 28th of February. Here’s why –
Every natural person is allowed to donate a total of R100 000 each tax year free of Donations Tax (which otherwise is 20%).
If you (and perhaps your spouse) donate R100 000 on loan account for the next 5 years, you will then owe the company R500 000 and have shifted R500 000 out of your future deceased estate.
Say the company then wants to raise a bond to buy an investment property and needs a deposit of R300 000. You have the money, but instead of lending it to the company, with the complication of interest charges deemed by SARS, you simply partly repay your debt. You now only owe the company R200 000 and it can buy the property.
So, how to effect the donation? It does not have to be done by 28 February, but it must be dated before 1 March in order to fall into the right tax year. It is a simple document “Ï, ……, hereby donate R100 000 on loan account to ….. (Pty) Ltd”, signed by the donor and received on behalf of the company by a Director. It doesn’t go anywhere, just gets filed and a copy sent to whoever does your company tax returns as the donation must reflect on the return, and Income Statement and Balance Sheet as non-taxable income.
Do it. It’s a no-brainer.