Company A (with a 31 Dec financial year end) sends its employees to provide volunteering services to IPC X and IPC Y during the year 2020. Assuming that the expenditures do not qualify for Section 14(1) deduction, the following table illustrates the application of the expenditure caps:
IPC | Expenditure incurred | Qualifying expenditure for BIPS | Tax deduction granted |
---|
X# | $40,000 | $40,000 | $40,000 x 250% = $100,000 |
Y# | $70,000 | $50,000* | $50,000 x 250% = $125,000 |
| | $90,000^ | |
* The qualifying deduction is capped at $50,000 per IPC per calendar year.
# Due to the $50,000 cap imposed on each IPC per calendar year, no tax deduction under BIPS will be given to other businesses that provide volunteering services to IPC Y in 2020. A further tax deduction of $10,000 ($50,000-$40,000) under BIPS can be given on qualifying expenditure incurred by other businesses that provide volunteering services to IPC X for year 2020.
^ As the qualifying expenditure is capped at $250,000 per business per YA, Company A can claim another $160,000 ($250,000 - $90,000) in qualifying expenditure under BIPS in YA 2021.