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Setting Up a Non-Profit Entity in Singapore

Setting up a non-profit entity Singapore, registered with ACRA, brings forth and eradicates the issues related to religious, scientific or artistic origin. In Singapore, an NPO can be set up any one of the three forms, and can be known as Voluntary Welfare Organizations (VWOs).

Non-profit organizations (NPOs) are legal entities in Singapore. Their main activities are focused on the public or social welfare. Profit making is not the goal of these organizations. If they make profit or are in surplus funds, it is reserved for future activities. It is not distributed among their members.

In Singapore, an NPO can take form of a;

  1. Public Company Limited by Guarantee
  2. Society
  3. Charitable Trust

A Public Company Limited by Guarantee as an NPO

A few like-minded individuals can form an NPO in the form of a Public Company Limited by Guarantee. This welfare entity may take up religious, scientific, or artistic activities as its area of activities.

These entities are covered under the Singapore Companies Act and they are registered with Accounting and Corporate Regulatory Authority (ACRA).

Characteristics of a Company Limited by Guarantee as an NPO

  1. Members of NPO agree to contribute some amount to the liabilities of the company. When it is time to wind up this entity, the promised amount which can be as small as S$1 becomes due.
  2. It is operated by a board of trustees, managing committee or the governing council.
  3. It must submit Memorandum & Articles of Association at the time of registration.
  4. The law mandates it to have at least 2 directors, 2 members, and a qualified Company Secretary.
  5. It is a legal binding that a director and a company secretary must be Singaporean citizens or permanent residents. A foreigner must possess Employment Pass or a Dependant Pass to act in such a position.
  6. The entity files its annual returns with ACRA like any other companies.
  7. It is mandated to hold its annual general meeting (AGM).
  8. The name of the company includes ‘Limited’ as a suffix to indicate its status.
  9. This company must obey rules regarding public disclosures and statutory controls.
  10. For setting up Public Company Limited by Guarantee in Singapore as an NPO, professional help is required.

Taxation for an NPO

The company is exempted from income tax if;

  1. Its members contribute heavily and it results in profit or surplus funds; or
  2. Fifty percent of its gross tax receipts are in the name of its members and the receipts are not tax-deductible.

Such a company, after its incorporation, can submit an application to authorities for full charity status which automatically makes it eligible for full tax exemptions.

NPO registration as a Society

An NPO as a society is useful to form a club, company, partnership or an association. A group of ten or more persons can form a society by applying to the Registrar of Societies (ROS) under the Singapore Societies Act. Formation of a society to promote public welfare is mostly preferred by smaller groups which are financially independent of donations or external funding to some extent. It is preferable to use professional services for registering a Society in Singapore.

Statutory Requirements Imposed by ACRA

  1. Legally, a society is not a separate entity from its members.
  2. The law demands from a society to elect only Singapore citizens or permanent residents as its President, Secretary and Treasurer.
  3. For a society, annual audit of its accounts is mandatory and it must file annual returns with the Registrar of Societies.
  4. A society must have a framework or constitution to help govern its activities.
  5. A society is easy to register, but a public company limited by guarantee attracts more donations than a society.

Taxation for Societies

A society is exempted from income tax,

  1. If it is in profit or in surplus funds because of the generous contributions from its members; or
  2. Half of its revenue receipts are from its members and if those receipts are not tax-deductible for the members.

A society with full charity status is fully tax exempted.

A Charitable Trust as an NPO

An NPO in the form of a charitable trust is created to promote a specific purpose. It is not like a traditional trust, because it does not bring any benefits to a specific individual or to a group of individuals. A trust can apply to Commissioner of Charities in Singapore for the charitable status.

Features of a Charitable Trust

  1. A board of trustees is appointed to plan and manage the activities of a charitable trust.
  2. A trust deed or the constitution of trust acts as a framework for them.
  3. It is not an independent legal entity. Trustees are responsible for the liabilities of the trust.
  4. Even though its disclosers are limited, they are public.
  5. Trustees control its activities; however, they are not accountable to any of its other members.
  6. The charity trusts are governed by the Singapore Charities Act and they have to take license from Monetary Authority of Singapore (MAS).
  7. Under the Charities Act, anyone can register a charity trust and it requires no money.
  8. A charity must file its annual financial statements and returns.
  9. It needs to file reports about its activities and future plans.
  10. It is required to retain records of donations and accounts.
  11. Holding an annual general meeting (AGM) is mandatory.
  12. It must disclose its fund raising activities on the internet.

Taxation for a Charity

Singapore authorities have acknowledged importance of charities and their work by exempting them from taxes.

Institutions of a Public Character (IPC) status

Any non-profit organization can apply to the Commissioner of Charities for a charity status. The IPC status is awarded only to those entities which work for the benefits of communities without excluding anyone. On an average, 2 months are required to process an application for an IPC status.

An IPC can receive tax-deductible donations. A large number of these entities are charities or the sports associations.

Statutory Compliance for IPC

All IPCs must:

  1. Supply receipts for tax deduction purposes to donors in receipt of tax free donations.
  2. Retain records of donations.
  3. Disclose its financial and non-financial information online using internet.
  4. File its audited financial statements and annual returns of donations to proper Singapore authorities.
  5. File annual reports detailing use of donation money and future plans of organization.
  6. Have independent trustees.

Tax deductible donations

Donations given to a non-profit organization with Institution of a Public Character status are tax deductible. Donations to other registered charities without IPC status are not tax deductible. The donations given for a foreign charitable purpose are not tax deductible, even if, they are deposited with an IPC.

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