Give Back and Save on Taxes: How Singapore's Tax-Deductible Donations Encourage Charitable Giving

Tax-deductible charities help you give — and receive

• Gratitude is made economically feasible with tax deductions on donations.
• The Government provides 250% of the income spent on charity as tax relief until 2023 (extended from 2021, as announced in the Budget 2021).
• Contributions can take various forms like cash, land, artefacts, shares and so on, with just one condition: the organisation has to be approved as an Institute of Public Character!

Ever thought of making cash donations, but you feel your pocket doesn’t allow you? The Singapore Government knows that many of us face that situation, so to encourage Singaporeans to give back to the community and provide strong support for the charity sector, the Ministry of Finance allows for tax-deductible donations. It’s a great way to express your gratitude while receiving returns in the form of tax deductions.

What Is a Tax Deduction?

Singapore tax residents can donate to charities and claim tax relief. In fact, for every dollar spent as a donation to approved charities, your taxable income will be reduced by $2.50. In other words, you will get a 250% deduction.

For instance, if you donate $200 to an Institution of a Public Character (or IPC), i.e. an approved charity) in 2020, you’ll get a 250% tax deduction for the year of Assessment 2021. That’s a $500 deduction!

This is one of the most tangible financial benefits of giving because donors get "discounts" on their tax returns. As such, tax deductions help inculcate the habit of giving among individuals who have the desire to create an impact.

To benefit from this, when donating, individuals and businesses must furnish their names and tax reference numbers (e.g. NRIC/FIN/UEN) to the approved IPCs. The IPC supplies your donation details to the IRAS to make the donation eligible for a tax deduction, which will be automatically included in your tax assessment.

If a deduction for a donation is larger than the income you claim, the unutilised amounts can be put forward. You can claim the deduction up to five years into the future.

What Sort of Donations Can One Make?

Contributions can take the following forms:

Which Charities Does This Apply To?

With over 2,200 charities spread throughout the island, making a positive impact is easier than ever. However, note that only donations made to the charities approved by the Government as Institutes of Public Character (IPCs) qualify for 250% tax deductibility. 

These charities include:

To find out more about IPC Approved charities and to check if a charity you are interested in is approved, refer to the charity portal.

There are exceptions to the tax-deductible benefits. For example, if the donor receives a benefit in return for the donation made to a charity. In that case, the deduction is limited to the difference in value between the donation and the value of the benefit received.

These donations are also not tax-deductible:

• A donor essentially advertising, meaning displaying banners, products, or other collaterals, at an IPC event, facility or programme to which it has donated is deemed advertising or marketing expenses and not a donation.
• Donations or gifts for a "foreign charitable purpose" (e.g. donations made to some overseas relief funds managed by an approved IPC).

Conclusion

Giving is further incentivised with a 250% tax deduction on each dollar spent on donations. With five-year provisions to accrue the benefits of your donations, charities eligible for tax deductions may become the donation of choice for every Singaporean who aims to give back to their community. Contributions can take various forms ranging from cash to artefacts. The only eligibility condition for such charities is to be approved by the IPC, which can be checked on the charity portal.

TAX-DEDUCTIBLE CHARITIES. COMPLETED ✅

Sources: 

• https://www.iras.gov.sg/irashome/Other-Taxes/Charities/Donations-and-Tax-Deductions/

• https://home.kpmg/us/en/home/insights/2021/05/tnf-singapore-tax-treatment-of-charitable-donations-when-benefits-received-by-donor.html