Tax Deductions for Donations in Singapore

As Tax Partner and Chairman of EY Corporate Responsibility in Singapore, I would like to share some thoughts about Singapore’s approach to tax deductions for donations, as well as the common misconceptions. 

Singapore currently provides 2.5 times the qualifying donation as a deduction against the taxable income. Individuals with donations exceeding the income for the year can carry forward the unutilised deductions for up to 5 years. This is very generous compared to many other countries. In many countries, deductions on donations made by individuals are capped. For example, in Hong Kong, tax deduction for donations is capped to 35% of adjusted income. It is common for countries to restrict the deduction to only qualifying charitable organisations approved by the government. Singapore is no different, tax deductions are only allowed for donations to charities that qualify as Institutions of Public Character (IPCs). There is a dedicated website that provides details of the current qualifying IPCs (https://www.charities.gov.sg/Pages/Home.aspx).  Information on donations made to an IPC are remitted directly to the IRAS by the IPC. In this way, the donation is automatically included in the Singapore tax returns of the donors, reducing the administrative burden on the individuals during the tax filing season.  

Tax deductions on share donations are available to individuals; the process for claiming the tax deduction is the same, and the donor is able to claim 2.5 times the amount as tax deduction. Donors who make donations of artefacts and artwork, money or services under the Public Art Tax Incentive Scheme, will have to apply to the museum or National Heritage Board to value the donation prior to claiming any tax deductions. Donations in the form of land and building also require either the donor or the IPC to have the property appraised, followed by an application to the IRAS for endorsement of the market value.

Common misconceptions about tax deductions in Singapore

Not all donations are tax deductible because not all charities are granted the IPC status. Only donations made to IPCs are tax deductible. It is possible for a charity’s IPC status to be revoked. If the status is suspended or revoked, any donation made to the charity will not qualify as tax deductible and the entity cannot issue any tax deduction receipts following the suspension or withdrawal. Donations made after the suspension or revocation of the status but before the general public has been informed will be refunded upon request from the donor

The other misconceptions is that the donations are deducted against the actual tax payable. In actual fact, qualifying donations are deductible against an individual’s taxable rather than the actual tax payable. In other words, the 2.5 times of donation is effectively a deduction against the taxable income prior to the computation of tax liability. While Tax Reliefs work in the same way, we also see that individuals confuse the cap on reliefs with the cap on total deductions and reliefs. This is not the case. The cap of S$80,000 per Year of Assessment is applicable on the personal reliefs only. Deductions claimed on donations, employment expenses and rental expenses are not included under this cap.

Crowd funding

Crowd funding platforms typically allow anyone to create a fundraising initiative, and it can be for a variety of reasons, including profit driven projects, social projects or charitable projects. Given the nature of the initiatives, these may or may not be approved IPCs. Individuals should be aware. Earlier this year, the Singapore government introduced a Code of Practice for Online Charitable Fundraising aimed at increasing the accountability of such online platforms and the individuals and charities participating. As of January 2018, Give.asia, Giving.sgRay of Hope Initiative and SimplyGiving have committed to adopting the code. The Charity Portal provides information on the charities are granted the IPC status. We understand that the Charity Portal will also include a list of platforms that are compliant with the Code of Practice as well as those that are non-compliant.

Individuals can check the charity portal if they would like more information on such online charitable initiatives.