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.
No Supply
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
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:
- The benefit is given in acknowledgement of the donation; and
- 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).
Sponsorship refers to financial support or support in the form of goods and services given by third parties.
Determining if GST Applies
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.
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:
- Provides the support voluntarily with no obligations imposed on the recipient; and
- Does not receive any tangible benefits in return (e.g. recipient merely provides an acknowledgement of the sponsor's contribution).
Sponsorship in cashNo GST needs to be accounted by the recipient of the cash sponsorship.
Sponsorship in kindFor 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 :-
- the total cost of goods sponsored is more than $200; and
- 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.