A nonprofit organization in Singapore is a legally formed organization whose primary motive is to contribute towards the welfare of the public or private interest without receiving any commercial or monetary profit in return. Whenever a nonprofit organization obtains a profit, also called a surplus. That profit is successfully retained by the organization itself for future NPO-related operations. It’s just the opposite of the profit-making organization, as it does not distribute the surplus funds among the members or shareholders. Non-profit organizations are commonly known as Voluntary Welfare Organizations (VWOs), registered in Singapore as a public company limited by guarantee, society, or charitable trust. Continue reading the guide to get complete details related to Non-Profit Organizations in Singapore.

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Key Characteristics

Non-profit organizations in Singapore:

• The characteristics of the Non-profit organization in Singapore are the organization self-governed by the board of trustees or ‘managing committee/ governing council, consisting of those individuals basically serving in a fiduciary capacity;
• NPO offers benefits to all the people, basically those individuals who are not a part of the organization;
• This organization work independently from the government.
• It is a non-profit organization, which means these organizations are restricted from distributing the remaining money among the organization members and get liable for all the tax exemption benefits once getting registered as a charitable trust.

Registration Benefits

However, every individual doesn’t have to register as a non-profit organization in Singapore. This is because it might be hectic for most of them to deal in any sustainable and meaningful activities until you develop into a registered entity. Some of its examples are as follows:

• It is essential for each individual to bear in mind that only legal entities are granted to enter into contractual agreements (such as leases, purchasing contracts). Therefore, if your organization is not legally registered, then all the individuals who are part of the entity will require to handle the contractual obligations/liabilities through personal capacities only.
• If you do not have registered organizations, you will not receive tax exemptions on the funds raised from the people.
• Getting your non-profit organization registered provides you with greater formality and clarity. However, working with the registered entity also brings a sense of trust for all the people working within the organization and the stakeholders outside the organization.
• A registered entity is one of the essential things that every individual considers while evaluating the request for the funds. After the organization is successfully registered, it becomes publicly accountable and provides a sense of trust to all the people out there.

Types of Entities

In order to establish a non-profit organization in Singapore, you have the options to choose from any of the following three types.

• Public company limited by guarantee
• Society
• Charitable Trust

Opting to establish a non-profit organization in Singapore is based on several factors like potential legal liabilities, methods to raise funds, size and complexity of the organization, etc. If you intend to establish a non-profit organization in Singapore, you should keep all the factors in mind. Therefore, keep the note of each detail of the entity mentioned below and then decide which entity will be the most suitable as per your requirements.

Registration as a Public Company Limited by Guarantee

Chosen to opening a company limited by guarantee for setting up a non-profit organization in Singapore comes with several advantages. It provides the benefit of a separate legal entity with limited liability for all its members. From all other choices of setting up non-profit organizations available, this type of entity is considered one of the most desirable and advanced types of structure. Company limited by guarantee mainly deals in non-trading charitable, artistic activities, scientific, or religious.

What is a Company Limited by Guarantee?

• A public company limited by guarantee is one of the types of a non-profit organization that comes with some basis of national public interest, like promoting charity, art, etc.
• This company does not require any share capital.
• A company limited by guarantee comprises members instead of shareholders. All the company members have the responsibility to contribute some amount of money to the company’s liabilities, which later on becomes due once the company, gets wound up. The lowest sum of money that is kept aside as a guarantee is SGD 1.
• Singapore Company registered as a public company limited by guarantee has the option to include “limited” in its name. Moreover, after the company’s registration, the company can approach the relevant Singapore authorities to remove the word “Limited” from its name. While doing this, the only thing that needs to be considered is that companies should not distribute profits among their members.
• A company limited by guarantee is defined as the legal entity which exists in its own name as per the law; it is separated from the individuals involved in it. This company can sue or can be sued in its own name under which it was registered. However, this company has the right to enter into the contract and purchase the property in its own name.

Benefits and Drawbacks

• This type of company for non-profit organizations enjoys the benefit of an independent legal personality.
• In this type of organization, the liability of the members is prohibited.
• Addressed to ongoing public disclosure obligations and statutory control
• It requires more complex annual reporting requirements, which is not always preferable for small groups.
• In this type of company, professional assistance is needed to incorporate and comply with ongoing statutory regulations.

Tax exemptions

Those organizations registered as a company limited by guarantee in Singapore enjoy the exemption from the income tax only if the surplus funds are raised from the member’s contribution or if more than 50% of the gross revenue receipts are from the member of the organization and are not tax-deductible for members. For enjoying a complete tax exemption, the associations are required to apply for charity status after registration.

Key facts at a glance

• The company requires a minimum of two directors, an eligible company secretary and two members. One of the Director and Company secretaries should be a permanent resident in Singapore, i.e. Singapore permanent resident, Singapore citizen. However, those foreign individuals willing to work as a local director of the company needs to be a person who has been provided with a dependent pass or an employment pass.
• Must create a memorandum and articles of association comprising of the objects and the laws of the organization.
• The association is required to audit the accounts annually.
• Must regularly organize the annual general meetings.
• Associations are required to regularly file the annual returns with Accounting and Corporate Regulatory Authority.

The public company limited by guarantee must be registered with the accounting and corporate regulatory authority and is governed by the Singapore companies act. If you are also willing to opt for a company limited by guarantee to set up a non-profit organization in Singapore, it’s better to get professional assistance.

Registration as Society

Society is the second option to choose from in order to set a non-profit organization in Singapore. It is the Company, partnership, Association and club of 10 or more people. This type of entity is liable for the membership or volunteer groups, mainly for smaller organizations with more significant community links and do not rely on donations and external funding.

Benefits and drawbacks

• It is effortless, quick and less expensive to establish
• The donors especially choose to contribute in more formal business structure arrangements like public company limited by guarantee.
• This type of association does not enjoy the benefits of separate legal entity status, which therefore leads to liability issues.

Tax exemptions

The society registered with the registrar of societies enjoys the benefit of tax exemption only. The surplus funds received from the member’s contribution or more than 50% of the gross revenue receipts are non-tax-deductible for members. As mentioned above, in this type of business also, you must also apply for charitable status after the registration to get liable for a complete tax exemption.

Statutory Requirements

Some of the statutory requirements for registering as a society for a non-profit organization in Singapore are listed below:

• The minimum criteria for the members are 10 in order to form a society.
• You need to appoint at least three office bearers, i.e. President, Secretary and Treasurer, who must be Singapore Citizens or Singapore Permanent Residents.
• The account of your association must be audited annually.
• Society is required to make constitutions governing the society.
• You are required to file annual returns with the registrar of societies.

The society must be registered with the registrar of society and must be governed by the Singapore societies. In order to set up a non-profit organization as a society, you must seek professional advice.

Registration as a Charitable Trust

A charitable trust is defined as the arrangement, which is mentioned in a written document, also known as a trust deed under which the owner or the founder of the trusted hand over all the significant activities, properties or funds to the group of people (commonly known as trustees). These trustees manage all the trust assets for the benefit of other people known as beneficiaries for the constituted objective. A charitable trust is defined as the type of purpose trust where it administers the purpose and does not intend to benefit the specific individuals.

Who should register a charitable trust?

• A charitable trust or foundation in Singapore is defined as a legal entity formed by anyone who intended to contribute some of the assets or income for charitable causes and is willing to take the initiative and ongoing approach to giving.
• The primary and most common use of a charitable foundation is for administering the scholarship or bursary.
• This type of business structure is unsuitable if it gets prone to the significant risk of liabilities arising from its operations and transactions. For example, when the entity wishes to own or lease real estate properties (like sports facilities), get into the number of contracts etc.
• This type of entity is only useful when trustees approach holding and investing a significant amount of funds or other similar property and expanding the income from the available funds.

Benefits and drawbacks

• In this type of business structure, you will only get liable to limited public disclosure. This means there is no requirement for any auditor or audited financial statements unless specified in the trust deed.
• This type of business entity proves to be the expensive one, and it takes lots of time to establish a non-profit organization in Singapore. However, it also requires professional assistance.
• There is no requirement of any independent legal personality.
• The complete control of the charitable trust rests in the hands of the trustees. However, there is no accountability to the wider membership base.

Statutory Requirements

Some of the statutory requirements of the charitable trust in Singapore are given below:

• The charitable trust must have a board of trustees.
• It is essential to draft a trust deed. It is usually defined as the Constitution of the charitable foundation, which mentions all the frameworks under which these trustees of the foundation have to operate.
• This type of charitable trust needs to be acquired a license from the Monetary Authority of Singapore and is governed by the Singapore trust companies Act. In order to successfully register as a charitable trust in Singapore, you must seek professional advice.

Applying for charity status

Once the non-profit entity (i.e., society, charitable trust, a company limited by guarantee) has been successfully registered and acquired legal status in Singapore, the entity can acquire charitable status. However, at the time of reviewing the application of the charity status, the commissioner of charities will thoroughly check whether all the objectives of the organization are considered charitable or not.

Developing into a charity is a matter of status, not an organizational structure. However, several benefits are acquiring the charity status are listed below:

• All the registered entity who has acquired the charity status in Singapore gets liable to enjoy automatic complete tax exemptions.
• It provides creditability and standing to the entity.
• It is one of the essential statuses for raising funds for the benefit of the people.
• Some several grant-giving foundations and trusts can only provide funding to certified charities. A charity is defined as an emotive word and can be cheerful enough in encouraging the general public to donate towards the welfare of the people.

The purpose of the charity is categorized into four different categories:

• The relief from the poverty in the country
• Providing advancement of religion
• Providing advancement of education

It is also established for several other purposes whose primary benefit goes to the community with several below given purposes explicitly recognized as charitable:

• Looking over the health of the people and providing all possible health measures
• Providing advancement in the heritage, science, or arts
• The advancement of the animal welfare
• It also provides advancement of citizenship for community development.
• Providing relief for those in need because of ill health, disability, youth, age, financial hardship, and several other possible situations.
• It also contributes to the environment and development of the country.

All the charitable trust and foundations in Singapore are being governed by the Singapore charities act and needs to be registered under the Commissioner of charities within the time period of three months following the date of setting up. So it basically takes up to 3 months to successfully register as a charitable trust. Luckily, there are no charges for registering a charity under the charities act.

Statutory compliance

In order to obtain charitable status, every business structure needs to comply with needed requirements. All the charities must follow the below-given requirements:

• It is a charitable foundation that will require submitting the financial statement and the annual report specifying the complete activities conducted and all the further plans.
• Disclosing the fundraising methods online
• Submitting the required annual returns from time to time
• Hold AGMs

Tax exemptions

Luckily, Singapore has now made automatic tax exemptions available for all the recognized authorities.

Applying for Institutions of a Public Character (IPC) status

The approved institution of public character is the non-profit organization holding the charitable status. All the operations are for the benefit of the community in Singapore without any bias of caste, creed, religion, or religion. The Commissioner of charities approves the institution of a public character to receive tax exemption donations (i.e. donors are provided tax deduction facilities only for the donations made to these charitable organizations). The majority of the institution of public character are charities, and the rest are sports Associations. It basically takes up to 2 months to approve the IPC status in Singapore.

Who can apply for IPC status?

• Those hospitals not conducted or operated for profit-making
• That public authority or society can apply for the institution of public character established in Singapore, operating not for profit and engaged in research or other work associated with charitable causes.
• Those public authorities whose primary purpose is to prevent or cure disease in human beings without expecting any profit in return;
• A public funding organization or the university who have been established basically for the improvement, maintenance and enlargement of the university
• The educational institutions can also apply for the institution of a public character not operating or conducting for the profit-making or the public funding organization that is into operation for maintenance, enlargement and improvement of the educational institutions in Singapore.
• A public or private fund for the provision, establishment or endowment of a scholarship, exhibition or prize in a university, or an educational institution not operated or conducted for profit;
• A charitable institution gets liable for applying for the institution of a public character whose primary motive is to contribute for the charitable purpose only.
• Those public organizations who have been established and managed for distress among the members of the public
• All those organizations are not operating or conducted for profit-making that basically deals in or associated with promoting the culture or arts or promoting sports.

Statutory Compliance

To obtain the institution of a public character status, the following criteria need to be met. All the IPCs must:

• Providing the tax deduction receipt to all the donors after obtaining the text deductible donations
• Maintaining the complete record of the donation received from the members or general public.
• Must submit all the audited financial statements and annual returns of the donations.
• The associations are required to upload financial and non-financial details online.
• Must submit the annual report specifying the use of donation money and plans for the future.
• The foundation must be administered by the independent trustees, which means there must be independent control over the foundation.

Tax-deductible donations

Only those donations that have been done for the charity that has been approved institution of a public character status enjoy the tax-deductible option (i.e. all the donors are provided with a tax-deductible option for giving donations to these organizations). Not all the charities in Singapore are approved by the institution of public character. However, donations done to the charity which does not hold approved IPC status does not receive tax-deductible option on the donations.

Mentioned below are the types of donations that usually get you to qualify for the tax deduction:

• Cash Donations
• Shares Donations
• Computer Donations
• Public Art Tax Incentive Scheme
• Land and Building Donations
• If the donation or gifts are for a foreign charitable purpose, such a donation tax is not deductible even if the gift is sent to the approved Institution of a Public Character (IPC).

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