In Singapore, donating to charities, namely Institutions of a Public Character (IPCs), provides substantial tax benefits designed to encourage philanthropy. Donations to the Community Chest will also attract the same tax benefits. Here are the main tax benefits of charitable donations in Singapore:

Please note that this applies to both personal as well as corporate taxes.

 

1. Enhanced Tax Deduction Rate

  • Benefit: Donations to IPCs or the Singapore Government are eligible for a 2.5 times tax deduction on the donated amount. For example, if you donate SGD 1,000, you can claim SGD 2,500 as a deduction against your taxable income.
  • How It Works: The deduction lowers your taxable income significantly, which can reduce your overall tax liability.

2. Offsetting a High Percentage of Income

  • Benefit: The deduction for donations can be claimed up to 100% of your statutory income in the year of the donation.
  • How It Works: This allows high-income earners to potentially eliminate their taxable income for the year, significantly reducing or even nullifying tax owed.

3. Carrying Forward of Unused Deductions

  • Benefit: If your total tax-deductible donations exceed your income in the year of donation, any unused deductions can be carried forward for up to five years. This allows flexibility for donors making large donations in a single year.
  • How It Works: To qualify for this benefit, you must have no outstanding income tax liabilities when you file the donation.

4. Automatic Inclusion of Tax-Deductible Donations

  • Benefit: Donations made to IPCs are automatically included in your tax assessment if you provide your NRIC/FIN/UEN number when making the donation.
  • How It Works: This streamlines the process, as you won’t need to manually include donations on your tax return or worry about retaining proof of donation.

5. No Capital Gains Tax on Asset Donations

  • Benefit: While Singapore does not have a capital gains tax, donating certain types of assets like shares, computers, land, and buildings to IPCs can still provide tax deductions at 2.5 times the market value of the asset.
  • How It Works: This benefit allows you to avoid any taxes on the asset’s appreciation while still receiving a substantial deduction based on its current value.

The combination of a 2.5 times deduction rate, high-income offset, five-year carry forward, and automatic inclusion make Singapore’s tax benefits for donations especially appealing. These incentives encourage both individuals and corporations to support charitable causes while reducing their tax liability.

 

Yours sincerely,

The editorial team at Raffles Corporate Services