It literally pays to be kind! Here’s how donating to charity can increase your tax relief
April is here, which means it’s time for us to pay our annual taxes to the Inland Revenue Authority of Singapore (IRAS).
But if you don’t already know, you can actually donate to a registered charity (specifically, an approved Institution of a Public Character) and get a sizeable tax deduction in return. What tax deduction means is you get a portion of your assessable income knocked off, so you’re taxed less. So not only can you do a good deed and possibly make someone’s day, you actually can save some cash. For full information, head to the IRAS website. But if you’re strapped for time, read on as we tell you how.
5 Things You Should Know First
1. Not all cash donations made to charities in Singapore are tax deductible. Specifically, the donation would have to go to an approved Institution of a Public Character (IPC) or the Singapore Government for “causes that benefit the local community,” according to IRAS, to be tax deductible.
2. Ensure that the cash donation is attached to your name and registered with your NRIC/FIN/UEN at the time of donation. The receipt would also indicate the words “Tax-Deductible”. Your details will be sent by the IPCs to IRAS to include in your tax assessment.
3. The donation must not entail a material benefit to you. Some of the benefits that exclude tax deduction include advertising space, charity auctions and lucky draws. IRAS has detailed various scenarios that could arise from your donation and whether it can be deductible, which you can access here. This applies to both individual and corporate donors.
4. Anonymous donors who don’t want to claim tax deductions do not need to provide their tax details to the IPCs. However, if you wish to claim deduction subsequently, you ought to provide the necessary details to the IPCs who would then resubmit to IRAS.
5. If the tax deduction is more than your income for the year, the donor (i.e. individuals, companies, trusts, bodies of persons) can carry forward the unutilised deductions for a maximum of five years. Corporate donors however, need to complete and satisfy a shareholding test first, to certify that there has been no substantial change in the shareholders and their shareholdings.
How Much Do You Get Back?
During his 2018 Budget Speech, Finance Minister Heng Swee Keat declared that the 250 per cent tax deduction for qualifying donations will be extended till December 31, 2021, in order to encourage locals to give back. This means that if you had donated S$10,000 in a year, you can get a tax deduction of 10,000 x 2.5 = S$25,000.
However, for donations done in 2015 (Jan 1 to Dec 31, both dates inclusive), the tax deduction rate has been increased to 300 per cent in conjunction with the SG50 celebrations.
The 2019 Budget has also stated that “businesses also enjoy a 250 per cent tax deduction on qualifying expenditure when their employees volunteer or provide services to IPCs under the Business and IPC Partnership Scheme,” as reported in The Straits Times.
Where Can You Donate?
With over 600 IPCs in Singapore, you’re literally spoiled for choice on where to donate for tax relief. Below, we’ve rounded up some of these institutions: