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You've Heard It Before: Charitable Donations Can Help Your Business With Your Taxes. But How?
Corporate Tax Deduction For Charitable Donations
Ever wondered how you can enjoy tax deductions for your businesses by making community donations?
Well, it's possible! If you are a small business owner or an entrepreneur in Singapore who is looking to make charitable contributions for the first time, then you may be wondering what kind of tax benefits you will get from donating money to charity.
The good news is that there are many ways in which your donations can help you with your taxes and even save you some money on your taxes. In this article we will discuss how you can use your monetary donations to reduce your taxable income and also enjoy certain deductions.
Let's continue reading to get a proper breakdown on the different kinds of donations and their respective tax deductibility, and how you can claim each donation for tax deductions.
What Are Tax Deductible Donations?
Tax-deductible donations are donations of money or goods to a tax-exempt entity, such as a charity, that can help lower your taxable income.
Prominent types of tax-deductible contributions from businesses include:
Let's Look At Each In Depth.
1. 'Tax Deductible Donations' Category
Note: Donors should be aware that their charitable contributions will not be tax deductible if they are made to an organization that is not approved by the Institution of Public Character (IPC) or the Singapore government.
The list is pretty forward looking: anything monetary is considered eligible for tax deductible donation including both corporate and individual levels in a business. For instance, you could asset them as in:
Contributions can be made as cash donations (individual and corporate donors), shares (individual and corporate donors), historical artifacts (individual and corporate donors), Artwork under the Public Art Tax Incentive Scheme (administered by the National Heritage Board), or land and structures (individual and corporate donors).
2. List of Benefits-in-Kind That Qualifies For Concession
Benefits-in-Kind is simply a form of benefit an employer can give to an employee. However, if you have received such benefits and you want to claim them as income for tax purposes, then you need to follow certain procedures. You can also claim these benefits as deductions on your income tax return.
For example, to encourage charitable giving, the IRS has since 2006 allowed donors to claim a full tax deductible donation if they donate to charities through fundraising activities and are deemed to have no commercial value (such as charity gala dinners, shows, golf tournaments, complimentary tickets, and not-for-sale souvenirs or charitable gifts).
The IRAS has now allowed raffle tickets for charitable purposes to be sold at any time during the fiscal year, effective from 19 March 2021. However, this relief doesn't apply to standalone raffle sales that aren't part of a fundraising campaign.
You may read a full list of Benefits-in-Kind that are exempt from taxation on IRAS website here.
3. What percentage of donations is tax deductible?
3a.Taxable Income Examples And Their Impacts: A Comparison Chart
Take a look at an example of Corporate Taxable Income with/without donations made to charitable organization under IPC as stated in the following table to compare and better understand their impacts.
Corporate A: Made a donation of SGD 35,000
Corporate B: Did not make any donation
(Assuming there is no outstanding relief or rebates)
|Example||Corporate A (in SGD)||Corporate B (in SGD)|
Tax deduction Amount (250%)
|Tax payable on chargeable income less: Exempt Amount||137,700||152,575|
4. How do i claim my tax deductible donations
Requirements for claiming tax deductions for charitable contributions
If you donate any values in monetary earning during 2021, you may be able to deduct them from your taxes for 2022.
Unused tax deductions
Did you know you may be able to carry forward unused charitable donations to future years? Yes, indeed. If your charitable contributions exceed your taxable earnings for the current year, you can carry them forward for up to 5 years. This applies to individual taxpayers, corporations, and trust funds.
For example, if you donate $1,000 in 2020 that is deductible in 2021, then you may carry that $1,000 forward until 2026 (assuming the donation’s tax deduction exceeds the income for 2020).
5. How Do You Check If A Charity Organization are IPC Approved charities
First of all, what is an IPC?
An IPC is a status conferred upon a charitable organization for a specified period of time. It allows the organization to enjoy certain income and property taxes benefits, and it enables it to issue its own tax receipt for qualifying donations.
IPCs are required to conduct exclusive local activity that benefits the local communities and are not restricted to sections of people based on their race, beliefs or religions unless they're given permission from the minister to conduct these types of events. This means that IPCs cannot conduct overseas events that would be beneficial to the overseas communities.
How one can search on approved IPC on it: Donations To Charities
There are a few number of ways to check whether a charity organization is IPC-approved. First, you can check with the Commissioner of Charities to see if it has been registered as an IPC-approved charity. Alternatively, you can check with the organization directly to see if it has been registered as an IPC-approved charity.
If you want to do this yourself, you can visit the Charity Portal on this website and click on "Perform Advanced Search" at the near bottom of the page or simply click this. Then, type in the name of the charity you are looking for and click "Search". The results will include all charities that have been approved by the Charity Commissioner's Office to receive donations from Singaporeans.
Frequently Asked Questions:
Is the company required to report the donation on its tax returns?
No, the company does not need to report the corporate donation on their tax returns.
What must your company do when making a donation?
Your business must provide business details inclusive of tax reference numbers such as NRIC/FIN/UEN to the approved IPCs when making a donation (i.e. corporate donor). After that, the respective charity will give your donations'information to IRAS which will then automatically deducttaxesfrom your income.
Does your company have to pay for GST?
If you're a GST-registered company, it means that you must include GST into the prices of the goods and service you sell and then claim GST credit for them as business expenses. Non GST-registerd companies won't be able to do so, unless they register for GST themselves.
As a business, your company donated $15,000 to an IPC for their charity event. In return for doing this, you are given advertising space at their event. Can you still claim a deduction afterwards?
For above scenarion, it means the benefit of the advertising space is a commercial value, and the corporate donor is eligible for a tax credit on the amount donated nett off the cost of the advertising space.
Do i need to pay stamp duty if my donations are of immoveable properties and shares nature?
All donations of above nature will be remitted from stamp duty if it is made on or after 1 Mar 2023
Do i need to pay Estate Duty
All donations to IPCs or the Singapore Government made on or after 1 Jan 2002 by an estate will be exempted from estate duty.
They are currently conducting Limitless Run (10 Oct - 30 Nov 2022) which the funds raised help to provide counselling sessions for youths in need of mental health treatement and the best thing is all proceed from the run will be Dollar to Dollar matched by the Government!