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Since NPOs generally receive a combination of direct donations, grants, sponsorships and miscellaneous nominal income from their heavily funded activities, it can be difficult to track and many of them may not be aware that they need to register for GST.
Goods and Services Tax ("GST") is a transactional-based tax applicable on sale and purchase of goods and services. When a not-for-profit/charity/Institution of a Public Character (“NPO”) has annual taxable receipts that exceed or is expected to exceed S$1 million, it becomes liable for GST in Singapore. Since NPOs generally receive a combination of direct donations, grants, sponsorships and miscellaneous nominal income from their heavily funded activities, it can be difficult to track and many of them may not be aware that they need to register for GST. Even after they become GST-registered, NPOs will often face a different set of challenges when trying to accurately ascertain the correct amount of input tax claimable.
Considering its unique focus on an individual transaction (i.e. sale and purchase), GST-registered NPOs that have been managing GST risk on a broad level could face a mismatch in expectations and GST compliance level against that of the authorities.
Additionally, accountants often believe that expenses incurred by NPOs are low in risk. However, it has been shown that such transactions are where input tax apportionment are frequently not considered or incorrectly applied.
GST pain points
In line with most NPOs' intent to maximise its resources for events or activities as well as ensure smooth operations with minimal disruption (e.g. avoid handling an unplanned IRAS GST audit), targeted GST risk management in the following areas are recommended for NPOs:
- Segregation of activities into business (i.e. taxable) and non-business in nature (i.e. outside the scope of GST). For non-GST registered NPOs, this facilitates GST registration. For GST-registered NPOs, this helps them with input tax claims.
- Accurate tagging of relevant GST treatment(s) to the income/receipts captured.
- Receipt of goods from donors with no benefits conferred (while they are not subject to GST, the subsequent sale of such goods to raise funds attracts 7% GST).
- Recovery of expenses paid on behalf of another party.
- GST implications arising from certain payroll deductions made from its employees salary (e.g. co-share of insurance, recovery of meals and transport paid on behalf).
- The need to reverse GST claims made on expenses should its accounts payable aging records indicates payment to the specific supplier is more than 12 months outstanding.
Your GST compliance partner
By tapping into our in-house GST Analytics expertise, the GST Assisted Self-help Kit (“ASK”) and GST Assisted Compliance Assurance Programme (“ACAP”) initiatives, we assess NPOs' GST compliance frameworks and shed light on gaps that may lead to penalties. We help them take advantage of the Voluntary Disclosure Programme ("VDP"), allowing them to disclose incorrect classifications confidently with lower or no penalties. Our team of GST specialists also offers advisory and compliance support to minimise GST risks.
Contact our team of GST professionals:
Richard Ong
Partner
T +65 6594 7821
[email protected]
Seraphina Qiu
Senior Manager
T +65 6594 7372
[email protected]
Melanie Soh
Senior Manager
T +65 6594 7380
[email protected]
