Allowable deductions for donations in the determination of taxable income

Businesses and individuals often make donations to meet their Corporate Social Responsibility (CSR) goals or just out of goodwill. Donations by their nature are not incurred for the purposes to further trade and neither are they incurred for producing income but out of compassion or passion. Hence, some of them are not allowed as a deduction for tax purposes. However, the law provides for the deduction of certain donations under prescribed conditions. The law stipulates the circumstances and conditions in which donations are allowed as deductions and the maximum amounts allowed. The donations referred to by the law should be free contributions made without any consideration whatsoever.

Donations made by the taxpayer, during the year of assessment, to:

• The National Scholarship Fund
• The National Bursary Fund
• A charitable trust administered by the Minister responsible for Social Welfare or the Minister responsible for Health.

Donations made by the taxpayer during the year of assessment, to the State or to fund any one of the following purposes approved by the Minister responsible for Health:

• purchase of medical equipment for a hospital operated by the State, Local authority or religious organisation
• construction, maintenance  or extension of  a hospital operated by the State, Local authority or religious organisation
• procurement of drugs to be used by a hospital operated by the State, Local authority or religious organisation

The maximum allowable deduction for this type of donation is US$100 000.

Donations made by the taxpayer, during the year of assessment, to a research institution approved by the Minister responsible for Higher and Tertiary Education.

This deduction is also limited to a maximum of US$100 000.

Donations made by the taxpayer during the year assessment, to the State or to fund any one of the following purposes approved by the Minister responsible for Education:

• purchase of educational equipment for a school operated by the State, Local authority or religious organisation
• construction, maintenance  or extension of  a school operated by the State, Local authority or religious organisation
• procurement of books  and other educational materials to be used in a school operated by the State, Local authority or religious organisation

This deduction is also limited to a maximum of US$100 000.

Donations made by the taxpayer during the year of assessment, to the Public Private Partnership Fund This deduction is limited to a maximum of US$50 000.

Donations made by the taxpayer, during the year of assessment, to the Destitute Homeless Persons Rehabilitation Fund (Fund established under the Ministry of Finance).

This deduction is also limited to a maximum of US$50 000.

NB: It is important for our valued clients to note that the burden of proof as to whether a donation has been approved or not rests with the taxpayer.