Clubs or Similar Institutions

A club or similar institution refers to a not-for-profit association or society formed for social, recreational or leisure purposes.

Members of Clubs or Similar Institutions

Members are persons who are entitled to vote at the general meeting of the body. During the general meeting, effective control is exercised over the affairs of the club or similar institution.

Tax Treatment of Clubs or Similar Institutions

Clubs or similar institutions are examined under S11(1) of the Income Tax Act. This Section provides the basis of determining whether a club or similar institution may be carrying on a business.

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. However, 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.

Determining 50% Gross Revenue Rule

  Income and Expenditure Account of Club ABC      
  $ 
 Salaries and Wages42,000 Entrance Fees 4,000 
Administrative expenses 5,000 Donations (members) 

10,000 

 Utilities5,000 Annual subscriptions 35,000 
Property repairs 8,000 Sale of D&D tickets:   
 D&D expenses10,000  Members5,000 
   Non-Members7,000 
   Bar & catering 16,000
   Rent10,000 
   Dividends (gross)2,000 
Surplus 22,000  Interest3,000 
 92,000 92,000

To determine if Club ABC satisfies the 50% requirement, we must compare receipts between members and non-members.

Comparison of Receipts from Members and Non-Members
ReceiptsMembers (in $)Non-Members (in $)
Entrance fees  4,000         0
Subscriptions35,000         0 
Donations10,000         0
Sale of D & D tickets  5,000  7,000
Bar & catering  8,000  8,000
(Assume 50/50)          0         0
Rent          010,000
Dividends (Gross)          0  2,000
Interest          0          3,000
 62,00030,000
Percentage67.4%
(62,000 / 92,000)
32.6%
(30,000 / 92,000)

Club ABC is not deemed to be carrying on a business because more than 50% of the receipts are from members. But, it will be taxed on the other sources of income derived from dealings with non-members:

Taxable Income of Club ABC$
Rent10,000
Dividends (Gross)2,000
Interest3,000
Taxable Income15,000

 


     Income and Expenditure Account of Club DEF
  $ $
 Salaries and wages42,000 Entrance fees 4,000
Administrative expenses 5,000Annual subscriptions 15,000 

 

 

 

 

5,000 Sale of D & D tickets: 
Repairs8,000Members 5,000
Dinner & Dance expenses 10,000Non-Members 7,000 
  Rent58,000
Surplus22,000Interest 3,000
 92,000 92,000

To determine if Club DEF satisfies the 50% requirement, we must compare receipts between members and non-members.

Comparison of Receipts from Members and Non-Members
Receipts Members Non-Members
  $ $
 Entrance fees4,000 0
 Subscriptions15,000 0
 Sale of D & D tickets5,000 7,000
 Rent0 58,000
 Interest0 3,000
 24,00068,000
   
 Percentage26.1%

(24,000 / 92,000)
 73.9%

(68,000 / 92,000)

 

Club DEF is deemed to be carrying on a business because more than 50% of the receipts are from non-members:

 Taxable of Club DEF $
 Net Surplus 22,000
 Less: Rent                     58,000 
 Interest                   3,000 61,000
 Adjusted Trade Deficit(39,000)
 Add:  Rent58,000
 Interest 3,000
 Total Income  22,000

 

Tracking Income from Voting / Non-Voting Members

Use this spreadsheet (29 KB) to tabulate the source of revenue receipts from voting and non-voting members. You can determine if your club/society/MCST satisfies the 50% requirement under section 11(1) of the Income Tax Act.

 

Trade Associations

A trade association refers to a body of traders, businessmen or professionals who come together to promote and protect the common interest of the group.

Members of Trade Associations

Members are persons who are entitled to vote at the general meeting of the body. During the general meeting, effective control is exercised over the affairs of the trade association.

Singapore Members of Trade Associations

  1. Persons, other than companies, resident in Singapore;
  2. Companies incorporated in Singapore (excluding branches or offices located outside Singapore); or
  3. Branches or offices of the companies located within Singapore (for companies incorporated outside of Singapore).

Tax Treatment of Trade Associations

Trade associations are deemed to be carrying on a business if more than 50% of their receipts, by way of entrance fees and subscriptions from Singapore members are from those who claim or 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 not more than 50% of the receipts by way of entrance fees and subscriptions from Singapore members are from those who claim or are entitled to claim deductions for tax purposes, only income from transactions with non-members will be chargeable to tax.

Management Corporations

A 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.

The subsidiary proprietors share the cost of maintenance, insurance and any other common expenses.

Tax Treatment of Management Corporations

For tax purposes, the MC is to be regarded as a taxable body of persons separate from the subsidiary proprietors or flat owners.

IRAS taxes MCs in the same way as a club or similar institution.

Town Councils

Town Councils are established under the Town Council Act to control, manage, maintain and improve the common property in housing estates.

Tax Treatment of Town Councils

For tax purposes, Town Councils are regarded as taxable persons separate from the tenants and owners of properties in the housing estate. Based on the principle of mutuality, receipts from tenants/owners of properties are not subject to tax.

Town councils are taxed as bodies of persons. This means tax is charged on the income of the town councils after tax-deductible expenses.

Taxable Income

  1. 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
  2. Income derived from investing monies from "sinking funds"
  3. Agency fees derived from acting as agents for other town councils
  4. Receipts from third parties i.e. other than residents/owners in the town
  5. Liquidated damages received from contractors for poor performance of service agreement
  6. Grants received the HDB/Government to enable the town council to perform mandatory and non-mandatory functions

Non-Taxable Income

  1. Service/conservancy charges/fees received from residents/owners of properties in the towns for maintaining and using common property of residential and commercial properties as defined in the Town Council Act
  2. 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.

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