Clubs or similar institutions
What is a club or similar institution?
A club or similar institution refers to a not-for-profit association or society formed for social, recreational or leisure purposes.
Who are the members?
Members are persons who are entitled to vote at the general meeting of the body at which effective control is exercised over the affairs of the club or similar institution.
How are clubs or similar institutions taxed?
- Where more than 50% of the gross revenue receipts on revenue accounts are from members, the clubs or similar institutions are not deemed to be carrying on a business. Nevertheless, they will be liable to tax on income from other sources derived from dealings with non-members such as interest, rent and dividends.
- Where less than 50% of the gross revenue receipts on revenue accounts are from members, the clubs or similar institutions are deemed to be carrying on a business. They will be taxed on their operating surplus (total receipts of income less tax-deductible operating expenses), in addition to the income from other sources derived from dealings with non-members such as interest, rent and dividends.
How is the 50% rule determined?
Example 1 (Club deemed not to carry on business)
Income and Expenditure Account of Club ABC |
| |
$ |
|
$ |
| Salaries and wages |
42,000 |
Entrance fees |
4,000 |
| Administrative expenses |
5,000 |
Donations (members) |
10,000 |
| Utilities |
5,000 |
Annual subscriptions |
35,000 |
| Property repairs |
8,000 |
Sale of D & D tickets: |
|
| Dinner & Dance expenses |
10,000 |
Members |
5,000 |
| |
|
Non-members |
7,000 |
| |
|
Bar & catering |
16,000 |
| |
|
Rent |
10,000 |
| |
|
Dividends (gross) |
2,000 |
| Surplus |
22,000 |
Interest |
3,000 |
| |
92,000 |
|
92,000 |
In order to determine if Club ABC satisfies the 50% requirement, we need to make a comparison of receipts between members and non-members.
Comparison of Receipts from Members and Non-Members |
| Receipts |
Members |
Non-Members |
| |
$ |
$ |
| Entrance fees |
4,000 |
0 |
| Subscriptions |
35,000 |
0 |
| Donations |
10,000 |
0 |
| Sale of D & D tickets |
5,000 |
7,000 |
| Bar & catering |
8,000 |
8,000 |
| (assume 50/50) |
0 |
0 |
| Rent |
0 |
10,000 |
| Dividends (gross) |
0 |
2,000 |
| Interest |
0 |
3,000 |
| |
62,000 |
30,000 |
| |
|
|
| Percentage |
67.4% |
32.6% |
| |
|
|
As more than 50% of the receipts are from members, Club ABC is not deemed to be carrying on a business. However, it will be taxed on the other sources of income derived from dealings with non-members. Thus, tax is payable on the following income:
| |
$ |
| Rent |
10,000 |
| Dividends (gross) |
2,000 |
| Interest |
3,000 |
| |
15,000 |
Example 2 (Club deemed to carry on business)
Income and Expenditure Account of Club DEF |
| |
$ |
|
$ |
| Salaries and wages |
42,000 |
Entrance fees |
4,000 |
| Administrative expenses |
5,000 |
Annual subscriptions |
15,000 |
| Utilities |
5,000 |
Sale of D & D tickets: |
|
| Repairs |
8,000 |
Members |
5,000 |
| Dinner & Dance expenses |
10,000 |
Non-Members |
7,000 |
| |
|
Rent |
58,000 |
| Surplus |
22,000 |
Interest |
3,000 |
| |
92,000 |
|
92,000 |
In order to determine if Club DEF satisfies the 50% requirement, we need to make a comparison of receipts between members and non-members.
Comparison of Receipts from Members and Non-Members |
| Receipts |
Members |
Non-Members |
| |
$ |
$ |
| Entrance fees |
4,000 |
0 |
| Subscriptions |
15,000 |
0 |
| Sale of D & D tickets |
5,000 |
7,000 |
| Rent |
0 |
58,000 |
| Interest |
0 |
3,000 |
| |
24,000 |
68,000 |
| |
|
|
| Percentage |
26.1% |
73.9% |
| |
|
|
As more than 50% of the receipts are from non-members, Club DEF is deemed to be carrying on a business. Thus, tax is payable on the following income:
| |
$ |
| Net Surplus |
22,000 |
| Less: Rent 58,000 |
|
| Interest 3,000 |
61,000 |
| Adjusted Trade Deficit |
(39,000) |
| Add: Rent |
58,000 |
| Interest |
3,000 |
| Total Income |
22,000 |
Trade Associations
What is a trade association?
A trade association refers to a body of traders, businessmen or professionals who come together in order to further, promote and protect the common interest of the group.
Who are the members?
Members are persons who are entitled to vote at the general meeting of the body at which effective control is exercised over the affairs of the trade association.
How are trade associations taxed?
Trade associations are deemed to be carrying on a business if more than 50% of their receipts, by way of entrance fees and subscriptions, are from Singapore members who are entitled to claim deductions for tax purposes. They will be taxed on their operating surplus (total receipts of income less tax-deductible operating expenses) and their investment income. Income from transactions with foreign members is not subject to tax.
When less than 50% of the receipts are from Singapore members and the trade associations are not deemed to be carrying on business, income from transactions with non-members will be chargeable to tax.
Management Corporations
What is a Management Corporation?
Management Corporation (MC) is set up by the legal owners under the Building Maintenance & Strata Management Act 2004 to provide for the proper maintenance and operation of the building and the common areas. Thus, the cost of maintenance, insurance and any other common expenses are shared amongst the subsidiary proprietors.
How are MCs taxed?
For tax purposes, the MC is to be regarded as a taxable body of persons separate from the subsidiary proprietors or flat owners. It is taxed in the same way as a club or similar institution.
Town Councils
What is a Town Council?
Town Councils are established under the Town Council Act to control, manage, maintain and improve the common property in housing estates.
How are Town Councils taxed?
Town councils are taxed as bodies of persons.
Type of income that is not taxable: -
- Service/conservancy charges/fees received from residents/owners of properties in the towns for the purpose of maintenance and use of common property of residential and commercial properties as defined in the Town Council Act;
- Fees, rents and other charges received from residents/owners of properties in the towns for the maintenance and use of car parks, market/food centres and industrial properties if the Town Council opts to maintain and manage such properties.
Type of income that is taxable: -
- Fees, rents and other charges received from persons who are not residents/owners of properties in the town for the maintenance and use of car parks, market/food centres and industrial properties where the Town Council opts to manage and maintain these properties. Non-season parking lots are considered to be used by persons who are not residents/owners of properties in the town;
- Income derived from investing monies from "sinking funds";
- Agency fees derived from acting as agents for other Town Councils;
- Receipts from third parties (i.e. other than residents/owners in the town);
- Liquidated damages received from contractors for poor performance of service agreements.
Tax is charged on the income of the Town Councils after tax-deductible expenses.
Grants
Grants received by a Town Council from the HDB/Government to enable it to perform mandatory and non-mandatory functions are revenue in nature and hence liable to tax. However, the Minister for Finance has granted tax remission for such grants.