Tax Guide for Clubs & Associations Loke Qi Min Edna Tan Wei Qian Pang Wei Ying Huang Xiaoqi
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