Businesses to receive a 250% tax deduction on wages for voluntary work at IPCs

On By taxsgIn Corporate Tax, Deductions, Latest Tax News

5 July 2016

Under the Business and IPC Partnership Scheme (BIPS), a total of 250% tax deduction on wages and related expenses will be given to businesses wef 1 July 2016 to 31 December 2018 for voluntary services that their employees provide to Institutions of a Public Character (IPCs). An IPC is an organisation approved by the Commissioner of Charities to receive tax-deductible donations.

These volunteer services will however be subject to the agreement of IPCs, and will include:

  • professional services in various areas, such as legal, human resources, and accounting; or
  • general voluntary services for IPCs.

Companies, sole-proprietors, partnerships, registered business trusts, clubs and trade associations that are deemed to be carrying on a business can qualify for the scheme.

The qualifying expenditure includes:

  • basic wages, excluding employers’ contributions to CPF, bonus, benefits-in-kind, allowances and other components of wage costs.
  • incidental expenses incurred directly in connection with the services provided to IPCs.

Additionally,

  • only wages for the time spent volunteering during working hours and for the time spent at the IPC’s premise will qualify for BIPS.
  • for volunteering events provided outside the IPC’s premise, only wages for time spent at the volunteering event will qualify for BIPS. Wages for time spent preparing for the volunteering event, as well as wages for time spent travelling to and fro for the voluntary event will not qualify for BIPS.
  • as per existing tax treatment for business expenses, any unutilised tax deductions from BIPS form part of business loss and can be carried forward, carried back, and transferred under the Group Relief system, subject to existing rules.

The qualifying expenditure will be subject to a yearly cap of $250,000 per business and $50,000 per IPC. Any unutilised cap cannot be carried forward to the following year.

As the actual expenditure needs to be endorsed by the IPC before filing of the tax returns, both the IPC and business are to agree on the types of services and/or secondment to be provided, duration, and estimated qualifying expenditure before commencement of the service.

Anyone found claiming fraudulent BIPS tax deductions will be subject to penalties of up to 400% of the amount of tax undercharged and a fine not exceeding $50,000 or to imprisonment or both.

BIPS, introduced in Budget 2016 is part of the Singapore Government’s efforts to promote philanthropy by encouraging employee volunteerism through businesses.

Further details and FAQs for those in participating in the BIPS can be found on the Ministry of Finance (MOF) and Charity Portal websites.

Source: MOF, IRAS