Receiving Donation and Sponsorship

Outright donations, with no benefits given to the donor, are not subject to GST.

Donations

Donations will be subject to GST when the recipient of the donation provides direct benefits to the donor in order to receive the donation i.e. a supply took place.

Determining if GST Applies

No Supply

Donor (e.g. company) gives a sum of money but recipient of donation (e.g. charity, IPC) does not provide any benefits to the donor in return (i.e. pure donation).

When the recipient does not provide any benefit in return to the donor, there is no supply made to the donor. Thus, the donation does not attract GST. However, the donation will be regarded as "non-business receipts" and may affect your input tax claimable.

 

For more information on input tax claiming rules, please refer to the GST: Guide For Charities and Non-profit Organisations.

Supply Exists

Donor (e.g. company) gives a sum of money and recipient of donation (e.g. charity, IPC) provides benefits to the donor in return.

When the recipient provides direct benefits in return to the donor in the form of goods or services, there is a supply to the donor. Thus, the donation is subject to GST.

Accounting for GST on Benefits

The recipient has to account for output tax at the prevailing tax rate on the open market value (OMV) of the benefits.

When the OMV is not available, the recipient should account for GST at tax fraction (7/107) on the donation amount.

Donations to Registered Charities & Institutions of a Public Character (IPC)

Notwithstanding that there are direct benefits given in return for the donations, certain donations to registered charities or IPC are deemed to be pure donations. These recipients need not account for GST on such donations.

To apply the concessionary tax treatment on the donations, the benefits are treated as having no commercial value if the following conditions are met:

  1. The benefit is given in acknowledgement of the donation; and
  2. The benefit has no resale value.

The following are examples of events organized by registered charities and IPC where the benefits provided are regarded as having no commercial value (i.e. donations are treated as pure donations and no GST needs to be accounted):

  • Charity dinners where the donation includes tickets to attend dinner;
  • Charity shows where the donation includes ticket to attend show;
  • Complimentary tickets (e.g. entry to Singapore Zoo); and
  • Golf tournament where donation includes golf games for the donor.

For more information, please refer to IRAS circular Tax Treatment on Donations with Benefits (106KB).

Common Forms of Donation and Fund Raising Activities

Recipient has to account for GST at tax fraction (7/107) on the gross donations received after deduction of the cash payout to the lucky draw winner.

As no rewards are given to donors, GST is not chargeable on the donations received.

The recipient has to account for GST at tax fraction (7/107) on the amount of funds raised through ticket sales less cash payout. If non-cash prizes are given, the recipient cannot deduct the value of such prizes from the funds raised.

Recipient has to account for GST at the prevailing tax rate on the market price of the auctioned item. If the amount paid is higher than market price, the difference represents a pure donation and is not subject to GST.

Recipient has to account for GST on the price of the advertising space.

For fund raising activities where flags containing logo of the organisation are given as appreciation, such donation is not subject to GST.

GST is accountable at the prevailing tax rate on the market price of the souvenirs given.

No GST needs to be accounted for by the registered charity and IPC if the souvenirs are not sold commercially (e.g. bearing small logos of organiser, fund raising messages or made particularly for the event and not for market sale).

GST is accountable at the prevailing tax rate on the open market value of the benefits given.

Sponsorship

Sponsorship refers to financial support or support in the form of goods and services given by third parties.

Determining if GST Applies

Sponsor (e.g. company) gives monetary or non-monetary support and recipient of sponsorship (e.g. charity, IPC) provides benefits to the sponsor in return.

To ascertain whether any sponsorship received attracts GST, you need to determine whether a supply exists for GST to be chargeable on.

Generally, a supply exists when the recipient has done something for the sponsor in return for the sponsorship (monetary or non-monetary form) received.

Accounting for GST on Benefits

Sponsorship with no benefits provided by recipient

Sponsorship received in monetary or non-monetary form by the recipient does not attract GST if the sponsor:

  1. Provides the support voluntarily with no obligations imposed on the recipient; and
  2. Does not receive any tangible benefits in return (e.g. recipient merely provides an acknowledgement of the sponsor's contribution).
Sponsorship in cash

No GST needs to be accounted by the recipient of the cash sponsorship.

Sponsorship in kind

For sponsorship in the form of goods where no tangible benefits are provided by the recipient in return, the sponsor is required to account for deemed output tax on the goods sponsored if :-

  1. the total cost of goods sponsored is more than $200; and
  2. the sponsor has claimed input tax on the sponsored goods. 

For sponsorship in the form of services where no tangible benefits are provided by the recipient in return, the sponsor is not required to account for deemed output tax on the services.

The recipient of the above sponsored goods or services does not have to account for output tax since it does not provide any benefit to the sponsor (i.e. no supply).

Sponsorship with benefits provided by recipient

Sponsorship in cash
If the sponsor's cash contributions are made on certain conditions, based on verbal or written agreements, and these conditions confer benefits on the sponsor, the recipient is treated as making a supply to the sponsor.

The recipient (e.g. charity) has to account for output tax at the prevailing tax rate on the open market value (OMV) of the benefits it provides. If the OMV of the benefits is lesser than total sum sponsored, the difference is considered as the pure donations and no GST needs to be accounted on this amount. However, if the OMV is not available, the recipient should account for GST at tax fraction (7/107) on the cash received.

Sponsorship in kind
For sponsorship in the form of goods or services where tangible benefits are provided by the recipient in return, the GST implications are as follows:

(i) Recipient of sponsorship: The recipient will have to account for GST at the prevailing tax rate on the OMV of the benefits it provided to the sponsor. If the OMV of the benefits cannot be determined, the recipient should account for GST on OMV of the sponsored goods or services.

(ii) Sponsor: If the sponsor is GST-registered, it is also required to account for GST at the prevailing tax rate on the OMV of the goods or services it gave to the recipient.

Please refer to the e-tax guide "GST: Guide For Charities and Non-profit Organisations" for the GST rules on sponsorship.

  • I am in charge of organising a food festival and rent stalls to food retailers. Customers of these participating retailers get a chance to win a car. A third party sponsors the car. In return for the prize, I provide an advertising banner for the car sponsor. Do I have to account for GST?

    Yes, you have to account for GST on the advertising services you provide to the sponsor. The value is based on the open market value of the advertising services. The sponsor has to account for GST on the car if he is GST-registered.
  • How do I account for GST (output tax) on gifts?

    Please refer to our webpage on Gift and sample .
  • I am a organising a charity show where donors can call our hotline to donate. Are the administrative fees imposed by my telephone operator subject to GST?

    For each call or SMS message to a specific hotline to make donation, the telephone operator may impose an administrative fee for the service rendered.

    As the telephone operator is a GST-registered person, the administrative fee is subject to GST. This is similar to other local telephone call charges.

  • I receive non-monetary sponsorships (i.e. in the form of goods and services) where I do not provide any benefits in return. Do I have to treat such sponsorships as non-business receipts to be included in the input tax apportionment formula?

    You can exclude non-monetary sponsorships from your input tax apportionment formula. Only grants, pure donations and cash sponsorships received without direct benefits provided to the sponsor would be regarded as non-business receipts to be included in your input tax apportionment formula.

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