View the list of IPCs.
Who Can Qualify
All businesses carrying out a trade or business in Singapore are eligible for BIPS when they send their employees* to volunteer and provide services at IPCs. These businesses are:
- Companies, sole proprietorships, partnerships (including limited partnerships and limited liability partnerships) and registered business trusts; and
- Bodies of persons, e.g. clubs and trade associations, that are deemed to be carrying on a business.
* Exclude owners of businesses i.e. sole-proprietors, partners and shareholders who are also directors of the company.
To encourage more corporate volunteerism, it was announced in Budget 2021 that the BIPS will be extended for another two years, until 31 Dec 2023.
Qualifying expenditure includes:
- Basic wages
- Other related expenses incurred by the business that were necessary for the provision of services to IPC
All qualifying expenditure must meet the following requirements:
- Not reimbursed by the IPCs at anytime;
- Incurred only because of the volunteer services;
- Not considered as personal, living, or family expenses; and
- Not capital expenditure.
For ease of claiming BIPS tax deduction, the following enhancements have been made. From 2 Dec 2019, businesses are allowed:
- Tax deduction on wage of part-time employees who volunteer with IPCs under BIPS; and
- An option for businesses to claim tax deduction on wage expenditure based on fixed hourly rates in lieu of actual salary: at $10 per hour for general volunteering and $20 per hour for skills-based volunteering. Skills-based volunteering refers to services which necessitate a qualifying employee to apply work-related expertise, as required by the IPC.
Businesses will in total receive a 250% tax deduction on the qualifying expenditure incurred, subject to the receiving IPC's agreement.
|Qualifying Expenditure||Tax Deduction Given|
|Currently deductible under Section 14(1) of the Income Tax Act|
|Currently not deductible under Section 14(1) of the Income Tax Act|
The qualifying expenditure is subject to a cap of $250,000 per business per Year of Assessment (YA). A qualifying expenditure cap of $50,000 is also imposed on each IPC per calendar year.
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|
$40,000 x 250% = $100,000
$50,000 x 250% = $125,000
* 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.
How to claim BIPS
Before provision of service - Agreement on the scope of service
Business and IPC should agree on the type and duration of volunteer service, as well as the estimated expenditure, before the business provides the service, taking into account the respective expenditure caps applicable to the business and the IPC. Thereafter, the business is to download and complete the BIPS Service Giving Form A and Declaration for the IPC’s endorsement.
After provision of services - Submission
After the business carries out its volunteering service, it shall seek the IPC’s endorsement on the completed BIPS Service Giving Form B with the actual expenditure. Thereafter, the IPC can submit the endorsed Form A, Declaration and Form B electronically to IRAS via mytax.iras.gov.sg using the BIPS Service Giving Declaration Form Submission e-Service by the end of January of the following year.
From 2 Dec 2019, businesses need not submit documentation proof for the IPCs’ verification for related expenses that make up less than 5% of the total qualifying expenditure for that volunteering project. However, businesses should retain documentation for usual record-keeping purpose and for verification by IRAS for tax claims.
Claim in Tax Computation
Businesses can claim BIPS tax deduction in its tax computation based on the amount endorsed by the IPC in the Form B when submitting its income tax return.
Do non-resident businesses qualify for BIPS?
As BIPS aims to encourage employers to give back to society, there is no requirement that the qualifying business must be a tax resident in Singapore. However, the qualifying business must be carrying on a trade or business in Singapore.
Non-resident businesses which are subject to final withholding tax will not qualify for BIPS as they are currently taxed at reduced final withholding tax rates on gross income, and not on net income.
Do investment holding companies qualify for BIPS?
Investment holding companies do not qualify for BIPS as they derive only passive income such as dividend, interest or rental, and are not regarded to be carrying on a trade or business for tax purposes.
Do trusts qualify for BIPS?
Trusts are generally used as passive investment vehicles with no active business operations. Hence, they do not qualify for BIPS. However, a Registered Business Trust, which is treated as a company for tax purposes, qualifies for BIPS.
Do service companies qualify for BIPS?
Service companies render services to/ on behalf of their related companies.
Service companies that derive arm's length fees will qualify for BIPS if they prepare their tax computations under the normal tax rules. If a service company elects to use the cost plus mark-up basis of assessment, the company will not qualify for BIPS. This is because an acceptance of mark-up as the chargeable income of the company is net of all available deductions and allowances (including BIPS).
What are qualifying wages?
Qualifying wages consist of basic wages, including the monthly variable component but excluding employer's contributions to CPF, bonuses, benefits-in-kind, allowances and other components of wage costs.
When are qualifying wages considered to be wages for time spent volunteering?
Only wages for the time spent volunteering during working hours at the IPC's premises will qualify for BIPS. For volunteering events which are provided outside the IPC's premise, only wages for time spent at the volunteering event will qualify for BIPS.
Wages for time spent preparing for and spent travelling to and fro for the voluntary event will not qualify for BIPS.
How do we allocate monthly wages to the time spent in volunteering?
Any reasonable apportionment method is acceptable (e.g. to apportion using the number of working days or working hours spent performing the service for the IPC or on secondment with the IPC.)
From 2 Dec 2019, businesses are given an option to claim tax deduction on wage expenditure based on fixed hourly rates in lieu of actual salary: at $10 per hour for general volunteering and $20 per hour for skills-based volunteering.
Can salary expenditure incurred for services that fall outside of employees’ working hours qualify for BIPS?
No, expenditure incurred as a form of overtime pay is not allowed under BIPS. However, if time off in lieu is given to the employee for the period during which services are provided outside working hours instead of overtime pay, the salary expenditure can be prorated and allowed accordingly.
Can donation of goods qualify for BIPS? If so, how should the deduction be computed?
A pure donation of goods will not qualify for BIPS. If it is necessary for goods to be given to IPCs in the course of volunteering, the expenditure incurred on these goods will qualify for BIPS.
A company sends its employees to organise a Christmas party and incurs cost to purchase toys to be given to beneficiaries as presents. This cost will qualify for BIPs. If this company manufactures toys and supplies its toys for the party, the qualifying amount will be the manufacturing cost and not the selling price of the toys.
In addition, expenditure incurred on goods consumed in the process of volunteering are allowable, as long as there is an accompanying service provided, and all qualifying conditions are met.
Can expenditure incurred on food consumed, decorations and goodie bags provided during an event in the course of volunteering qualify for BIPS?
Yes, expenditure incurred on food consumed, decorations and goodie bags provided during an event in the course of volunteering are allowable, given that the expenditure was incurred only because of the volunteer services.
Can expenditure incurred on transport provided during an event in the course of volunteering qualify for BIPS?
Yes, expenditure incurred on transport (e.g. hiring of buses) provided during an event in the course of volunteering are allowable, given that the expenditure was incurred only because of the volunteer services. However, if private cars are used as a mode of transport, these private car expenses have to be excluded as they are disallowed for deduction under section 15 of the Income Tax Act.
Can expenditure incurred to reimburse employees for transport to and fro the IPC in the course of volunteering qualify for BIPS?
No, expenditure incurred to reimburse the employees to travel from his/ her home to the IPC premises and vice versa does not qualify for BIPS as it is considered as a personal expense of the employee.
Can expenditure incurred by a business for sending employees to perform volunteering services overseas for a local IPC qualify for BIPS?
No, expenditure incurred by a business for sending its employees to perform volunteering services overseas for a local IPC does not qualify for BIPS as BIPS is intended to support local volunteer activities only.
Are we able to claim BIPS benefits on expenditure incurred to engage external vendors to provide services in the course of providing the volunteering services (e.g. engagement of musicians to liven up the atmosphere of the fun fair organised for IPC)?
IPCs have the right to determine the expenditure items they wish to endorse as long as the expenditure meet the 4 requirements.
IPCs can also decide to endorse an amount lower than the actual cost incurred by the business if they consider it reasonable, subject to the IPC's entitlement cap. In the event of disagreement, IRAS will allow the deduction based on the amount endorsed by the IPCs.
To avoid uncertainty, the business and IPC should agree upfront on the type of expenditure and estimated expenditure that it wishes to claim under BIPS.
Are we able to claim BIPS benefits on actual expenditure which may be higher than the market rate (e.g. the company pays $20 per hour for packing services instead of market rate of $12 per hour)?
IPCs have the right to endorse any lower amount they consider reasonable, subject to the IPC's entitlement cap. In the event of disagreement, IRAS will allow the deduction based on the amount endorsed by the IPCs. To avoid uncertainty, the business and IPC should agree upfront on the type of expenditure and estimated expenditure that it wishes to claim under BIPS.
Application of business cap
In the case of a sole-proprietor who owns multiple businesses, how will the expenditure cap of $250,000 per YA be applied?
The business expenditure cap of $250,000 per YA will be applied at the sole-proprietor level, which means that the expenditure cap is the same regardless of the number of businesses owned by the sole-proprietor.
In the case of a partnership, how will the expenditure cap of $250,000 per YA be applied?
Secondment of employees
What is considered as a secondment under BIPS?
A secondment is a temporary transfer of an employee to work for an IPC over a few days, weeks, months, or years and can be done in an interspersed manner.
Types of services performed
Can BIPS tax deductions which cannot be fully utilised be carried forward, carried back, or transferred via Group Relief?
As per existing tax treatment for business expenses, any unutilised tax deductions from BIPS will form part of the business loss and can be carried forward, carried back, or transferred under the Group Relief system, subject to existing rules.
If my business is taxable at the prevailing rate and concessionary rate, how will the tax deduction under BIPS be allowed on qualifying expenditure in relation to income streams taxed at different tax rates?
Qualifying expenditure for BIPS are considered to be common expenses to be apportioned to each income stream using an appropriate basis (e.g. turnover basis).
What are the GST implications for expenses incurred in the course of volunteering?
Under the GST Act, input tax is claimable if it is incurred to make a taxable supply. A supply exists only when a consideration is received in return for the provision of goods or services. Hence, services performed for free (e.g. volunteering) is not considered a supply. As for wage expenses incurred in volunteering, there is no GST on them and hence, no input tax claim arises. On the other hand, any GST on incidental expenses incurred in the course of volunteering is not claimable as volunteering is not a taxable supply.
Interaction with other schemes
Abuse of BIPS
What is the penalty for abusing BIPS?
IRAS takes a serious view of any non-compliance or abuse of BIPS.
Offenders who are convicted of fraudulent tax deductions under BIPS can face penalties of up to 400% of the amount of tax undercharged; a fine not exceeding $50,000; and/or imprisonment.