Giving is receiving, they say, but in Singapore it is brought to the level of national policy: one can make a donation to a charity and claim a tax deduction — for every dollar spent you’ll be deducted 2.5 dollars off your taxable income. In other words, you will get a 250% deduction.
The incentive of the Singapore Government will be in effect for two more years and may be extended after 2021 as well. Make sure you donate not only for the right cause but also in a proper way by reading our article.
This guide is enough for you to understand the concept and make informed decisions, but we do not explain the actual deductions procedure — dealing with it is the responsibility of your Singapore accounting services provider. Do not hesitate to contact them of you have additional questions.
ContentsWhat are tax-deductible donations
How much will be deducted and how to claim the deduction
Sometimes IRAS refuses a deduction if a company profits from the donation — but there are exceptions
You can’t reduce your tax by quickly making a donation before the end of the tax year
What donations are tax-deductible?
Contribution to a registered charity with an approved status of IPC (Institution of a Public Character) or the Government of Singapore is deducted from tax. The forms of contribution can be different:
- cash (corporate and individual donors)
- shares (individuals only)
- artefacts (corporate and individual donors)
- art (under the Public Art Tax Incetive Scheme)
- land and buildings (corporate and individual donors)
The donation only counts for a tax reduction if it doesn’t give a material benefit to the donor.
Does it matter to which charity I donate?
Only the donations made to the charities approved by the Government as Institutes of Public Character (IPCs) are tax-deductible. You can find out if a charity is approved on the website of the Commissioner of Charities (COC) which is part of the Inland Revenue Authority of Singapore (IRAS). Make sure the organization you want to support has a valid license. If it has been revoked, you’d better reach out to the IRAS for more information.
How does it work with the shares?
You can donate the shares of an entity listed on the Singapore stock exchange (also units in unit trusts traded in Singapore). The Approved IPC will determine the value of the donated shares or units. It will be calculated according to the quote of these or similar kinds of stocks at their last transaction on the date when the shares are transferred to the IPC. Because of such a way of defining the value, the options and shares with the restriction on a holding period are not considered tax-deductible donations.
What if I want to donate my property? How it will be appraised for the tax deduction?
The market value of the land and property will be appraised by a special entity specializing in that. The donor or the IPC should reach out to IRAS for endorsement of this valuation. Get prepared that the fees for appraiser’s work won’t be deducted, so it’s an extra cost on you.
I have some art that I might want to donate. Can it help to reduce my tax?
Yes, you can donate it under two schemes: as artefacts or using the Public Art Tax Incentive Scheme (PATIS). As an artefact you can donate it to a museum or any other cultural institution approved by National Heritage Board (NHB). This status might be given to a nonprofit acquiring art for the public display. Tax-deductible are also donations of sculptures and 2D and 3D art for public display under the Public Art Tax Incentive Scheme (PATIS). NHB will define if the donated art has artistic merit and will assess the worth. Qualifying as tax-deductible donations are money or services provided to support the installation and maintenance of the art exhibitions.
I want to make a donation and stay anonymous. Can I get my tax deduction?
It is still possible, the state just needs to be sure it was you who donated. You do not have to make the information public, but If you want to claim a tax deduction, you should provide your tax references to the IPCs (Institutions of a Public Character).
Will I get deducted 2.5x amount of my donation off my tax? How much will I eventually pay?
Technically it is not a deduction from your tax. For each donation, there is a 250% deduction which means the Government will deduct 2.5x amount of your donation off your taxable income (not from the tax payable). To be more specific, your statutory income minus expenses and donations will give you the amount of the assessable income. You’ll get the amount of your chargeable income when deducting all the applying personal reliefs.
If the deduction for my donation is bigger than the income you claim, you can put forward the unutilized amounts and claim the deduction in the following years to a maximum of 5 years.
Should I claim my charitable deduction to IRAS?
In most cases, you don’t have to. As long as you donate to one of the registered charities, once the transaction is done, the IPC will forward your data to IRAS automatically and the information will be considered when your tax is going to be billed.
A company wants to make a donation to an educational institution in exchange for having a building named after it. Can it be tax-deductible?
In fact, it will be, unless there are certain benefits for the company. The Government of Singapore gave some concessions to the donations with benefits made on or after May 1, 2006. The main condition is such donations shouldn’t have a commercial value. It means that the benefit is given in acknowledgement of the donation and it has no resale value. In a nutshell, you will still qualify for a tax deduction if you get an honour to name an IPC, its facilities, artefacts, events, and programs in exchange for your donation. Even if your name or logo is included in the IPC’s promo and ad materials as an acknowledgement, your tax deduction is still secured. More information on the tax treatment of donations with benefits can be found at the IRAS e-Tax Guide.
We donated to a charity and want to make some publicity. Can it affect the tax-deductible status of the donation?
If it is your company that initiates the publication of the materials, it can be deprived of a tax deduction — especially if the business pays for the placement. Giving your company any advertising or marketing exposure with the charity (e.g. putting banners at the charity event or rolling your ads on the screens) will make the authorities consider your expenses marketing, not charity.
We purchase computers and other hardware and donate them to a charity. It’s deductible, isn’t it?
No. Effective February 21, 2017, all the donations in the form of computer software and hardware are no longer subject to the tax deduction.
I want to reduce my taxes by making a donation until the end of the year. Will it help?
No, it won’t, as for the current year of assessment (YA) only the donations made in the preceding year count. If you make a donation now, you will not be able to influence the amount of tax you owe to the state until the next tax season. You can still donate right now to help the people in need, though.