When you make a contribution to a charity or an Institution of a Public Character (IPC), you might qualify for a tax deduction when you meet certain qualifying conditions. So what are the various types of donations you can make? What exactly is a registered charity? Do all donations come under the tax- deductible category? Find answers to these questions you have and more with the help of this comprehensive article.
This donation is applicable only to individual donors. With this donation option, you can either donate public shares that are listed on SGX (Singapore Exchange) or units (via unit trusts) which are part of trading in Singapore as gifts to authorised IPCs.
An approved Institution of a Public Character (IPC) will evaluate the worth of the shares/units you have donated. The share value will be determined depending on the price of similar kind of units or shares in the open market, during the final transaction of such units/shares on the donation date.
According to this donation scheme, you’ll not be able to donate shares or units which either have a limitation or a holding period. The donation date will be the date on which the legal rights (of donated units and shares) are transferred to an approved Institution of a Public Character (IPC).
A cash donation which is made either to an approved IPC or to the Singapore government with an intention to help the local community will be considered as a tax-deductible donation. Nevertheless, if you make a donation to a charity which does not have the IPC approved status, it will not be considered as tax-deductible. Cash donations are applicable to individual as well as corporate donors.
A cash donation will be considered as tax-deductible only when it doesn’t offer any material benefit to the concerned donor. But, as an exception, specific donations which were made on/post 1 May 2006 to approved IPCs will be regarded as pure donations even though a donor received a benefit for a donation he or she made. In order to be eligible for the concessionary tax treatment, donations which earn benefits in return will be considered as pure donations provided the benefits have no commercial value tagged to them.
Benefits are considered to have no value of commercial nature if:
You can make this donation either as an individual or a corporate donor. With an artefact donation, you can donate gifts to a museum and it will be considered as tax-deductible only when the following conditions are met:
To find out the value of the artefact you’ve donated you will need to either apply to the museum or NHB.
When a museum is owned by a public organisation, the museum authorities can apply for the Approved Museum Status and NHB will sanction it accordingly. Effective 1 April 2006, the Approved Museum Status might be provided to a non-profit organisation that was established to procure artefacts and display them to the public.
NHB (National Heritage Board) administers this scheme. You can make this donation either as a corporate or an individual donor. Effective 1 April 2006, a company or an individual who donates either a work of art or a sculpture to NHB or any of its authorised recipients for public display will be eligible for tax deduction. You (as a donor) have to apply to NHB in order to get the value of your work of art/sculpture assessed.Qualifying Donations Includes
With this donation scheme, you can donate computer-related gifts (inclusive of computer hardware/software/peripherals/accessories/scanners/monitors/printers, etc.). You can make this donation only as a corporate donor. A computer donation will be considered as “tax-deductible” when 2 conditions are met:
When a firm incurred capital expenses on computers purchased only for donation purposes, the firm will not be allowed to make a capital allowance* claim for this purchase.
When a firm decides to donate computers that were used by the company initially for its business-related needs, the firm should request IDA to evaluate the donation value. As the company would have claimed capital allowance on these computers it’s necessary to claw back the value as a balancing charge*.Note:
Effective 1 April 2003, gifts in the form of buildings or land to an approved Institution of Public Character will be considered as a tax-deductible donation. This donation can be done either as an individual or a corporate donor.
The evaluation of the donated land/building needs to be done as per the market value in the presence of a property valuer as arranged by an approved IPC or yourself (you being the donor). The concerned IPC will need to apply to IRAS in order to get a market value confirmation of the donated property.
The value of the donation will depend on the property’s market value as confirmed by IRAS. The valuation cost will not be considered as tax-deductible. For tax deduction claim purposes, your donation date will be the date on which the legal rights of the donated property was transferred to an approved IPC.
Tax deduction is provided for a donation that was made in the previous year. As in, if a donation was made by you in 2017, you’ll be given tax deduction in your tax bill for the YA 2018.
Effective 1 January 2011, all businesses & individuals are supposed to give their identification number such as FIN/NRIC/UEN while making a donation to an IPC. These details are requested by IRAS so that tax deduction can be allowed to donors based on the donation they have made. When a donation made is tax deductible, the donation receipt issued by an approved IPC will indicate this in words "Tax-Deductible".
There is no need for you to make a declaration of your donation amount in your ITR (income tax return). A tax deduction for a qualifying donation will reflect automatically in your tax assessment depending on the details provided by the IPC. Information can include details such as your name, date on which the donation was made, and donation amount that is mentioned on the tax deduction receipt. Also, please note IRAS no longer acknowledges a tax deduction claim which is done based on a donation receipt.
|You make a donation to an IPC through payroll||The donation gets added into your tax assessment automatically provided:
|You make a donation to an IPC through GIRO||The donation is added into your tax assessment automatically provided:
|A donation which is made either by bodies of persons* & corporations||All firms/bodies of persons must give their tax reference number and names to the concerned IPCs when they intend to make tax deduction claims on the donations they have made.|
|An anonymous donor||There is no need for disclosure of tax reference numbers to an IPC if you don’t want to disclose your identity and subsequently, don’t want to make a tax deduction claim either. But, if you wish to make a tax deduction claim, you should provide your tax reference number to the intended IPC after which the IPC will re-submit the required information to IRAS.|
*Here, “Bodies of Persons” may attribute to any of the following:
When tax deduction for a donation you’ve made exceeds your annual income, you’re permitted to carry forward the unused tax deduction for up to 5 years.
Let’s consider you made a donation in 2016 and you were given tax deduction in the YA 2017, you’ll be allowed to carry forward unused tax deduction (provided tax deduction exceeds your income in 2017) up to the YA 2022.
In case you’re a corporate donor and you intend to deduct the unused tax deduction for a donation you made versus your income in the future, you will need to complete the shareholding test. An unused donation will rank for tax deduction post capital allowances and trade losses.
|Tax deduction||Approved donations (inclusive of donations done during a naming occasion) made between 1 January 2009 and 31 December 2014 (inclusive of both dates)||Approved donations (inclusive of donations made during a naming occasion) made from 1 January 2015 to 31 December 2015 (inclusive of both dates)||Approved donations (inclusive of donations made during a naming opportunity) made within a time frame of 1 January 2016 to 31 December 2021 (inclusive of both dates)|
|250% of the donation made||?||?|
|300% of the donation made||?|
Assume you donated S$15,000 to an approved Institution of a Public Character (IPC). In this case, let’s consider for the YA 2018, S$150,000 is your total statutory income (that is in 2017 you earned S$150,000) and you made a donation of S$15,000 to an Institution of a Public Character in 2017.
Take a look at the table below to see how your assessable income will be computed:
|Statutory income (total)||S$150,000|
|Amount corresponding to deductible donations||S$37,500 (S$15,000 x 2.5)|
|Assessable income for the Year of Assessment 2018||=S$112,500 (S$150,000 - S$37,500)|
It is an organisation which is registered by the Commissioner of Charities as per the Charities Act (Cap. 37) and is set up for charity-related purposes.
Here, charitable purposes comprise:
An organisation which has an approval from the Commissioner of Charities to receive donations which fall under the tax-deductible category. As in, when a donor makes a donation to an IPC, he or she will qualify for tax deduction.
An IPC has been authorised to issue a tax deduction receipt soon after it receives a tax-deductible donation from a donor. Effective 1 January 2011, a tax deduction receipt which is issued by an IPC should comprise the following details:
An IPC can also opt to utilise an electronic medium which is given by IRAS for issuing a tax deduction receipt.
An IPC should maintain a donation record mentioning all details pertaining to each and every tax deductible donation it has received. Every donation record should have the following details:
These donation records should be retained for a minimum of 5 years from the completion of a Year of Assessment with respect to the year during which the IPC received the donation.
Effective Year of Assessment 2008, a registered charity will qualify for income tax exemption automatically under section 13(1)(zm) of ITA (Income Tax Act). It is not necessary for a registered charity file any income tax.
When a property is utilised only for charity-related causes, the concerned property might be exempted from paying property tax completely or partially. This decision will depend on the submitted application by the concerned property owner as well as the review done by the Comptroller of Property Tax.
A charity needs to register for GST (Goods and Services Tax) if the taxable supplies of the charity annually are more than S$1 million all though it was engaging with non-business activities for the most part.
A charity which is registered with GST can claim for input tax it has incurred in relation to business-related activities which yield taxable supplies (conditions will be applicable to make an input tax claim).
When a charity is done with GST registration, it has to charge & account for GST which is applicable to taxable supplies. Here taxable supplies comprise donations, sponsorships, and grants wherein benefits are rendered to the donor/giver in return versus services/goods or for the sum of money.
So apart from making a donation, what are the other ways via which you can save on your taxes? Well, IRAS renders different types of tax reliefs, (eg: NSman (Self) Relief, Earned Income Relief, etc.) special tax schemes such as NOR Scheme, Area Representative Scheme, and more which provides various other tax-related benefits.