Extension of Concessionary Tax Treatment for Registered Charities and IPC
The IRAS has updated the e-Tax Guide on “Tax Treatment on Donations with Benefits” on 19 March 2021.
To support philanthropic giving and to ease compliance, the IRAS continues to apply the administrative concession of granting the donor 2.5 times tax deduction of the amount donated even if the donor receives the following benefits in return for donating to the Institution of a Public Character (“IPC”) or registered charities:
- Charity gala dinner;
- Charity show;
- Golf tournament;
- Not-intended-for resale complimentary tickets; and
- Souvenir and gifts (must not be available for sale in the market, bears the logo of the recipient and carries the fundraising message)
In providing the above benefits, the IPC or registered charities also need not account for GST on the benefit provided.
Latest Updates on the e-Tax Guide
1. Lucky Draw
What is new in this e-Tax guide is that the IRAS will extend the concessionary tax treatment to include the benefit of taking part in a lucky draw if the following conditions are satisfied:
- The lucky draw is incidental to the fundraising events of charity gala dinner, charity show or golf tournament; and
- The value of the top prize of the lucky draw does not exceed S$2,000.
In other words, with effect from 19 March 2021, the donor will enjoy tax deduction on the full donation to IPC or registered charities even if such donation comes with a Charity Gala dinner and lucky draw (where the top prize does not exceed S$2,000).
The IPC or registered charities also need not account for GST on the lucky draw (unless the IPC has claimed the GST incurred on the purchase of the prizes which is more than S$200).
2. Acknowledgement of donation is not a supply of advertising
The IRAS has also clarified that an acknowledgement of donation via the display of the donor’s company’s logo and/or name on the IPC’s collaterals (regardless of size of display) will not be seen as a supply of advertising if the following conditions are satisfied:
- The acknowledgement is a display of the donor’s logo and/or name on the IPCs’ or charities’ collaterals;
- Accompanied with the words such as “with compliments from”/ “in acknowledgement of”/ “special thanks to”/ “with appreciation to”, or the equivalent, regardless of the size of the display;
- There are no comparative or qualitative descriptions, slogans, locations, contact details, or a description (including displays or visual depictions) of donor’s products or services; and
- There are no links or tags to donor’s website and social media platform e.g. Instagram/ Facebook/ Twitter/ LinkedIn.
This is a good move by the IRAS as it removes the uncertainty of whether the displaying of Company’s logo as a form of acknowledgement could be seen as a form of advertisement for the donor. In the past, some IPC or registered Charities may have taken the prudent approach of charging 7% GST (as a supply of advertising) when there is any form of acknowledgement of donations.
It is also time for the IPCs and Charities to be creative (i.e. think along the line of different banner size for different amount of acknowledgement) about the fund-raising activities as donors may want their money to work harder in times of uncertainty.
The GST returns for IPCs and Charities are complicated due to the fact that they have non-business activities, received grants and donations which are usually subject to input tax apportionment*.
It is advisable to conduct a periodical GST review to ensure compliance and if errors are noted, make a voluntary disclosure to the IRAS to enjoy reduced penalties.
Speak to us to see how we can help.
*You are encouraged to refer to the IRAS e-Tax Guide on "GST: Guide on Non-Business Receipts - Business test and the effect of non-business receipts on input tax claims"
Eddie is the co-founder and Tax Director of Jed Tax Consulting Pte Ltd. Jed Tax Consulting is an independent GST consulting firm in Singapore, provides support to clients with all aspects of GST matters (e.g. MES renewal, ASK and ACAP review, IRAS audit queries, tax codes review and set-up, GST advisory, GST return filing and in-house training etc). Jed Tax Consulting is supported by a team of accredited tax practitioners and advisors with vast experience in IRAS and Big 4 accounting firms.
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