On or about 19 Mar 2021, the Inland Revenue Authority of Singapore (IRAS) has published a revised edition of the IRAS e-Tax Guide on
Tax Treatment On Donations With Benefits (Donations made on or after 19 Mar 2021). It replaces the first edition published on 1 May 2006.
This e-Tax Guide sets out the concessionary tax treatment applicable for cash donations with certain types of benefits received in return, where the donations are made on or after 19 March 2021. It is only applicable for donations, a voluntary gift where the donor’s contribution is not motivated by a benefit-in-return. This guide is relevant to an Institution of a Public Character (IPC) or a registered charity.
When a donor receives a benefit in return for the donation made to an IPC, a 2.5 times tax deduction is granted only on the difference between the donation and the value of benefit and GST is to be accounted for by the recipient of donation. However, IRAS applies an administrative concession to certain benefits listed in paragraph 6.4 of the guide that are given out in connection with a fundraising activity and are deemed to have no commercial value. As a result, the donor receives a 2.5 times tax deduction on the full amount of his donation and the recipient of the donation does not have to account for GST on the benefit given.
This list of benefits in paragraph 6.4 of the guide is exhaustive, the concession does not apply to benefits outside of this list.
Paragraph 6.6 of the guide lays out some common benefits that are not eligible for the concessionary tax treatment. Examples include advertising space (where separate priced with no donation component), advertising space (made together with donation, with exceptions), goods offered at charity auction, sales of artefact (e.g., paintings).
An outright sale of goods and services is not regarded as a bona fide donation. Consequently, the 2.5 times tax deduction would not be allowed for such transactions for income tax purposes. Similarly, GST is to be accounted on the total consideration received for the sale of goods or services.
IPCs are to note the above tax treatment in conducting their fundraising activities.
Source: IRAS, 22 Mar 2021