Tax Deduction for Donations & Charity


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.

Deduction for Shares Donations:

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).

Deduction for Cash Donations:

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:

  • The benefit is provided in return of the donation.
  • The benefit doesn’t have resale value.

Deduction for Artefact Donations:

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:

  • The museum has the “Approved Museum Status” from NHB (National Heritage Board).
  • The artefact you’re planning to donate should be considered worthy enough for collection by the National Heritage Board.

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.

Deduction for Donations under PATIS
(Public Art Tax Incentive Scheme):

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
  • When you make a donation either via services or in the form of money with respect to the installation/maintenance of the work of art or sculpture for public exhibit.
  • When you make a sculpture donation to an authorised receiver for an indoor public exhibit.
  • A public art piece which is 2 or 3 dimensional and comes with heritage and/or artistic merits as preferred by NHB.

Deduction for Computer Donations:

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:

  • Your computer donation has to be made to a “prescribed educational, research, or other organisations and all IPCs”.
  • The kind of computer hardware and/or software you donated needs to have an approval from IDA (Infocomm Development Authority of Singapore). As a donor, you need to apply to the Infocomm Development Authority of Singapore through [email protected] in order to evaluate the value of the equipment you donated.

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:
  • Capital allowance refers to a deduction which is claimable for wear & tear of eligible assets (office equipment, signboards, and industrial machinery) that were purchased and utilised in your business or trade. In general, capital allowance is approved in lieu of depreciation, which is not tax deductible.
  • When the sale proceeds are higher in comparison to the TMDV (Tax Written Down Value), the difference is termed as a balancing charge (BC).

Deduction for Land & Building Donations:

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.

Deduction for Other donations (effective 1 January 2005):

  • A donation which is done in order to name an IPC, IPC facility, programme, or event.
  • A donation which is done for naming a facility of an approved beneficiary (inclusive of public sculptures and artefacts) according to any other authorised donation programmes.
  • A donation which is done as per any of the authorised donation programmes in which either an approved beneficiary or an IPC accepts the donation. The donation has been acknowledged by mentioning the name of the donor or logo in the collaterals of an IPC such as advertisements, banners, publications, etc.

When Will a Donation Fall Under the “Non-Tax Deductible” Category

  • When a donor is using a donation essentially for advertisement purposes at an event/programme/IPC facility. When a donor displays his or her products/banners/other collaterals at a programme/event/IPC facility to which he or she has donated will be considered as marketing or advertising expenditure (not as a donation).
  • A donation or a gift which is meant for a “foreign charitable cause”, for example a donation was made to an overseas relief fund which is monitored by an approved IPC.

Tax Deduction Claim Process for Qualifying Donations

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.

Donations Made Via Different Modes

You make a donation to an IPC through payroll The donation gets added into your tax assessment automatically provided:
  • Your employment organisation is part of the AIS (Auto-inclusion Scheme) for Employment Income.
  • You have made required arrangements to ensure that the donations are deducted via payroll.
If your employer is not a part of AIS for Employment Income, you can make a donation claim via your income tax returns.
You make a donation to an IPC through GIRO The donation is added into your  tax assessment automatically provided:
  • You have made necessary arrangements to make sure the donations are deducted through GIRO option.
  • you have provided either the FIN or NRIC number to the concerned IPC at the time of making a donation.
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:

  • Clubs or institutions of similar nature
  • Trade associations
  • Town councils
  • Management corporations

Is There an Option to Carry Forward Unused Tax Deduction for a Donation Made?

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 Amount for Approved Donations

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   ?  

How is the tax deduction calculated for a donation you’ve made?

Illustration example:

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
Donation amount S$15,000
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)

Stamp Duty Remission & Estate Duty Exemption

  • Any donation in relation to immovable buildings & shares made to authorised IPCs on/post 1 March 2003 will be suspended from stamp duty.
  • Any donation made by an estate to approved IPCs/Singapore government (irrespective of whether it is mentioned in the will or not) on or post 1 January 2002 will be eligible for estate duty exemption.
  • Upon receiving a written notice from an approved IPC, the Commissioner of Estate Duty will factor out the donation that was made by the estate’s administrator while calculating the estate duty liability. No donation can be made via the estate soon after the estate duty assessment is made.

What is a Registered Charity?

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:

  • Poverty relief.
  • Educational development.
  • Religion advancement.
  • Other purposes which renders benefits to the community, a few recognised ones include:
  • Promotional activities related to health.
  • Advancement of community development/citizenship.
  • Advancement of science, heritage, or arts.
  • Improvement of environmental protection.
  • Rendering relief to those in need because of their age, disability, ill-health, financial hardship or other factors which are disadvantageous.
  • Improvement of animal welfare and
  • Development of sports, wherein the sport nurtures health via exertion and physical skill.
What is Considered as an Institution of a Public Character?

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.

What Should an IPC do After Receiving a Tax Deductible Donation?

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:

  • To mention: "This receipt is for your retention. This donation is tax deductible and the deduction will be automatically included in your tax assessment as you have provided your Tax Reference number (e.g. NRIC/FIN/UEN). You do not need to claim the deduction in your tax form."
  • The Sector Administrator’s name should be mentioned (if applicable).
  • Should have serial numbers.
  • Should have the signature of either the IPC’s treasurer or a person who has been delegated for providing a signature by the concerned IPC’s administrative board members.

An IPC can also opt to utilise an electronic medium which is given by IRAS for issuing a tax deduction receipt.

What are the Other Responsibilities of an IPC?

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:

  • Receipt number (in a numerical sequence).
  • Donor’s name.
  • Donation date (a date on which it was received).
  • Value/amount of the donation received.
  • Either the identification number or the business/corporate registration number of the donor.
  • Donation type received.

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.

Charity Income Tax Exemption

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.

Role of of a Charity With Respect to GST

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.

How can a charity claim input tax?

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).

How is GST charged on taxable supplies?

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.


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