A non-profit entity in Singapore is defined as an organization that does not distribute its surplus income amongst its members. The surplus is in turn used to further expand the organization and its efforts. The main purpose of a non-profit entity is to work towards the interests and benefit of the public.
Setting up a non-profit entity in Singapore allows it to function like a traditional organization. It can also claim a tax exemption. Listed below are the three types of registration that a non-profit entity can opt for. Each of them has its own benefits.
Public Company Limited by Guarantee
Registering a non-profit entity as a public company limited allows it to function like any other organization. It enjoys independence and can enter contracts and make deals with other organizations like an individual entity. A member’s liability is considerably lower in this type of registration. However, members of the organization need to guarantee an amount that will cover the liabilities of the organization in case the situation calls for it. In certain cases, that amount could be as low as S$1.
To run a public company limited by guarantee, at least 1 director and 1 member are needed, plus a company secretary. Another stipulation is that the company secretary and at least one of the directors must be a resident of Singapore.
A non-profit entity registered as a society is a little less formal than a public company limited by guarantee. A society is easy to establish but has some drawbacks. For one, it isn’t allowed to function as an independent legal entity, which makes its members more liable. A group of at least ten people are required to form a society, out of which the President, Secretary and Treasurer need to be residents of Singapore. Registering as a society is feasible for small groups that function on the basis of volunteers.
On the bright side, societies registered with the Registrar of Societies enjoy income tax exemption if the surplus come from members.
A charitable trust is an entity that is set up by an individual and managed by a group of trustees. The trustees follow a deed that defines their role within the trust. The deed is a guideline that the trustees must adhere to and uphold. The administrative power of the trust is in the hands of the trustees and they manage the funds. Setting up a charitable trust in Singapore can be quite expensive. Once the non-profit entity is registered under any of the three types, it’s possible to claim full tax exemption by applying for charitable status.
Applying for charity status is beneficial to a non-profit entity, because it provides automatic tax exemption. Acquiring charity status makes it possible for your organization to receive donations from charitable trusts. In order to receive this status, the actions undertaken by your organization must be charitable in nature. This means it’s should be geared towards the assistance of the poor and the needy. There are certain stipulations that this status entails – one of which is that the organization needs to be more transparent with its fund raising activities by making the information available online.
Institutions of a Public Character Status
Non-profits entities that already possess charity status can apply for an ‘Institutions of a Public Character’ status. This means that the organization is working towards the upliftment of Singapore and not just a particular cause or a group of people. Donations made to an organization that has an IPC status are tax deductible. It’ll be easier for your organization to secure funds due to this fact.
In essence, registering your non-profit organization is beneficial. The benefits that you receive by registering your organization will help it function more effectively.
Public company limited by guarantee is quite a popular type of registration, due to the individual identity that it provides to your organization. This allows it to function like any other company. The other two types of registration have their own benefits, but mainly to smaller organizations. Once your organization is registered you should apply for charity status, as it will help you get tax exemption. If you want your donors to get tax deduction on their donations, then you should get the IPC status.
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