Tax Guide for Clubs & Associations

Loke Qi MinEdna Tan Wei Qian

Pang Wei YingHuang Xiaoqi

Agenda• Classification of Persons• Taxation of Clubs or Similar Institutions• Deductions• Capital Allowances• Loss Carry-Back System• Tax Rate• Tax Computation• Tax Rates & Tax Exemption Schemes (Companies)

Taxation - Clubs & Associations

Classification of Persons

Classification of Persons

• Clubs or similar institutions– Organized as a Not-for-profit association/society– Formed for social, recreational or leisure purposes

• Members– Persons entitled to vote at the general meeting

Taxation for Clubs or Similar Institutions

Taxation for Clubs or Similar Institutions

Taxation for Clubs or Similar Institutions

Taxation for Clubs or Similar Institutions

Taxation for Clubs or Similar Institutions

• Club ABC Example– More than 50% receipts are from members– Subject to tax on other sources of income derived

from dealings with non-members– Tax is payable on the following income:

Taxation - Clubs & Associations

DEDUCTIONS

A deduction is a cost of earning income from a particular source which is deductible in arriving at the net income from that source.

DEDUCTIONS

Type Rental Dividend Total

Income $10,000 $5,000 $15,000

Expense $12,000 - $12,000

Chargeable income $0 $5,000 $3,000

DEDUCTIONS

DEDUCTIONS

DEDUCTIONS

Case : The taxpayer was a transport company. One of

its drivers died of accident. The taxpayer contested a claim for compensation by the deceased’s family.

The taxpayer eventually paid a sum to the family and sought to claim a deduction for both the compensation and the legal fees incurred.

DEDUCTIONS

Held: The compensation was deductible.

The legal costs incurred were not deductible because it were not for income earning purpose.

DEDUCTIONS

Special deductions: As incentives to encourage and promote

desirable economic activities.

Research & Development

Building modifications for disabled employees

1. 2.

DEDUCTIONS

CAPITAL ALLOWANCES

In place of capital expenditure, a company may claim for a deduction for the wear and tear of the fixed asset known as ‘capital allowance’.

CAPITAL ALLOWANCES

Examples:

Intellectual property

rights

Industrial buildings and structures

Machinery and plant

CAPITAL ALLOWANCES

The person must carry on a trade, business or profession

Has incurred capital expenditure on acquiring the plant and machinery

Put to use in his trade, business or profession

CAPITAL ALLOWANCES

Capital expenditure is incurred by the person before the date of commencement of his tradeRegarded as having been incurred by that

person on the first day on which he in fact carries on that trade.

CAPITAL ALLOWANCES

Taxation - Clubs & Associations

Loss Carry-back System

• Loss carry-forward:– allowed to carry forward unutilized CA & trade

losses to offset future incomes– Conditions:

• Deemed to be carrying on a business• The business is under S11(1) and S11(2)

Not applicable for clubs that are not deemed to be carrying on a business

Loss Carry-back System (con’d)

• YA 2006 onwards, losses incurred in current year can be carried back

• Main features:– Only current year unutilized CAs & trade losses

are allowed to be carried back for 1 YA preceding current YA

– Amount: Up to SGD100k– carry on the same trade or business– Given on due claim

Tax RateChargeable Income ($) Rate (%) Gross Tax Payable ($)

On the first 2500 6 150

On the next 2500 9 225

On the first 5000 375

On the next 2500 12 300

On the first 7500 675

On the next 2500 15 375

On the first 10000 1050

On the next 5000 20 1000

On the first 15000 2050

On the next 5000 23 1150

On the first 20000 3200

On the next 5000 25 1250

On the first 25000 4450

On the next 10000 30 3000

Tax Rate (con’d)Chargeable Income ($) Rate (%) Gross Tax Payable ($)

On the first 35000 7450

On the next 15000 40 6000

On the first 50000 13450

On the next 50000 50 25000

On the first 100000 38450

On the next over $100,000 @ 55%

Let X = Effective Tax Rate = 100% x Tax Payable on Chargeable Income

Chargeable Income

Let Y = Effective Tax Rate = 100% x

Tax Payable on Corporate Tax Rate

= 18 %Chargeable Income

If X > Y, the effective rate of tax will be capped at Y.

ExampleClub ABC has chargeable income of $36,000 for YA2007. Tax payable :

Chargeable Income Tax Payable

$35,000 $7,450

$1,000 @ 40% $400

$36,000 $7,850

Effective Tax Rate = 100% x

7850= 21.8055%36000

Under Corporate Tax Rate,

Normal chargeable income 36,000

Less: Exempt Amount 20,500

Adjusted Chargeable income 15,500

Tax Payable (18%) 2,790

Effective Tax Rate = 100% x

2790= 7.75%36000

Taxation - Clubs & Associations

• Flat Rate• YA 2005 – YA 2007: 20%• YA 2008: 18%

Tax Rates

Tax Exemption Schemes

• Partial Exemptions• New start-up companies

YA 2008 Partial Exemptions

• Up to $300,000• Companies on normal chargeable income

(excluding Singapore franked dividends)

First  $  10,000 @ 75% = $7,500

Next  $290,000 @ 50% = $145,000

Total $300,000      $152,500

YA 2008 Partial Exemptions

First  $  10,000 @ 75% = $7,500

Next  $100,000 @ 50% = $50,000

Total $110,000      $57,500

YA 2008 Partial Exemptions

Company A’s chargeable income: $110,000

First  $  10,000 @ 75% = $7,500

Next  $290,000 @ 50% = $145,000

Total $300,000      $152,500

YA 2008 Partial Exemptions

Company B’s chargeable income: $500,000

Tax Exemptions for new start-up companies

YA 2005• Full tax exemption on first $100,000 of normal

chargeable income (excluding Singapore Frank Dividends)

• First 3 YAs

YA 2008• Further 50% exemption on next $ 200,000 of

normal chargeable income (excluding Singapore Frank Dividends)

• Up to $300,000 of chargeable income

Tax Exemptions for new start-up companies

First  $100,000 @ 100% = $100,000

Next  $200,000 @  50% = $100,000

Total $300,000      $200,000

Tax Exemptions for new start-up companies

Tax Exemptions for new start-up companies

• Companies that do not qualify for tax exemptions under this category will be given partial tax exemptions

THE END