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Running My Business

How Charity Can Help Your Tax Bill: Charitable Deductions in Singapore

How Charity Can Help Your Tax Bill: Charitable Deductions in Singapore

Giving is receiving, they say, but in Singapore it is brought to the level of national policy: one can make a donation to eligible charities and claim a tax relief on donations — for every dollar spent you’ll be deducted 2.5 dollars off your taxable income. In other words, you will get a 250% deduction.

Finance Minister Heng Swee Kiat announced at the Budget 2021 that this 250% tax deduction on donations to Institutions of a Public Character (IPC) would be extended for another two years till 2023. This extension means you have more years to claim tax relief! Make sure you donate not only for the right cause but also in a proper way by reading our article. However, if you receive a benefit in the course of your donation to a charity, you are only allowed to claim tax relief for the difference between what you have donated and the value of benefit received.

This guide is enough for you to understand the concept and make informed decisions, but we do not explain the actual corporate charity tax deductions procedure — dealing with it is the responsibility of your Singapore accounting services provider. Do not hesitate to contact them if you have additional questions.

What donations are tax-deductible?

Reduce your taxable income

You can reduce your company’s taxable income and pay less tax to IRAS by writing off some of your business expenses.

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.

So what does that mean? Apart from the above contributions, these are also other form of tax-deductible donations:

  • Donations to name IPCs, IPC facilities, events or programmes;
  • Donations to name facilities of approved beneficiaries, such as artefacts and public sculptures under approved donation programmes
  • Donations under any of the approved donation programmes where IPC or approved beneficiary acknowledges the donor’s name in their publicity collaterals, like programme booklets.

Eugene Chen is a businessman and philanthropist. Last year, he donated S$2 million to support a department in his alma mater, National University of Singapore. Apart from his donation, he has requested to have a scholarship under his preferred department to be named under his name. He hopes to support those students who are underprivileged. As such, his donation is also a tax-deductible donation.

However, do bear in mind that if the tax-deductible donation is more than the income for that particular year, the donor can carry forward this unutilised tax-deductible donation for a maximum of five years.

Does it matter to which charity I donate?

Charity in Singapore provides an avenue for individuals and companies to do their part in building a caring and inclusive society. According to a charities report in 2019 by the Ministry of Culture, Community and Youth, there were 2,280 registered charities in Singapore. With so many charity organisations in Singapore, it is important to donate to an organisation that aligns with your vision. So how do I know the type of donation I’ve made to charities is tax-deductible?

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.

List of tax deductible charities of Singapore

Below you will find some of the organisations eligible for charity tax relief. If you decide to donate money to their causes, you can also benefit from optimising your tax payable.:

The above organisations are some of the great examples for charity tax relief. But there are plenty of charities that are tax deductible. To find out more about the list of charities in Singapore, you may refer to this portal. If you are searching for a charity organisation to donate and help with your tax bill in the coming year, it’s good to research further by looking at the list of charities in Singapore. Apart from obtaining tax relief, it’s always good to donate to these charities for a good cause!

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.

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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.

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 income tax charity 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.

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