If you are wondering how to set up a non-profit organization in Singapore, our guide below covers all the basics. Non-profit organizations exist to make a difference, and they are ideal vehicles for bringing about constructive change.
Starting a Non-Profit Organization is an exciting prospect, whether on a local or global scale.
Singapore is an excellent area to start because it already has many organizations that promote a wide range of issues. The key aspects of the incorporation of a non-profit organization in Singapore can be seen below.
WHAT IS A NON-PROFIT ORGANIZATION IN SINGAPORE?
Non-profits organizations (NPO) present an intriguing conundrum: not all NPO are charities, but all are NPOs. Aside from the concerns, charities have a distinct legal structure and regulatory requirements from non-profits. Furthermore, NPOs exist independently of the government.
NPOs are legal entities that generate profits or excess from their operations but direct these revenues or surpluses to the organization’s purpose. While they may work in comparable areas or for similar causes, NPOs are not the same as for-profit organizations.
The fundamental contrast is that for-profit organizations pay their members dividends or profits directly from their revenues. For-profit organizations must also meet stricter tax and compliance obligations.
WHY SHOULD I SET UP A NON-PROFIT ORGANIZATION IN SINGAPORE?
Singapore is a worldwide commercial center and will remain so indefinitely. Its stable economic and political stability fosters investor trust, making it a good location to launch a new enterprise. World-class infrastructure and connections, as well as a varied personnel pool, contribute to the company’s international reputation for excellence. To top it all off, Singapore is an excellent entry point into Southeast Asian markets.
WHAT ARE THE LEGALITIES OF A NON-PROFIT ORGANIZATION IN SINGAPORE?
A non-profit organization, like any other business in Singapore, obtains legal status by registration or incorporation. There are a few considerations for non-profit organizations, particularly when it comes to Singapore incorporation. In general, an NPO can function in Singapore without a legal framework. Most non-profits do this until they become too large or profitable to continue in their current form. A legal framework is required when a group of ten or more people participates.
Having a legal framework offers advantages since it projects a professional image to stakeholders. It helps your NPO to remain compliant, organize events, and benefit from tax breaks and subsidies, among other things. Overall, formally establishing an NPO adds a level of validity that will appeal to potential contributors.
KEY FEATURES OF A NON-PROFIT ORGANIZATION IN SINGAPORE
Among the key features of a non-profit organization in Singapore are as follows: –
- Are self-governed by a board of trustees or ‘managing committees or governing councils made up of individuals who act in a fiduciary role?
- Provide benefits for individuals who are not members of the organization.
- They are ‘non-profit-making,’ which means they are not permitted to distribute monetary earnings to their members and are only eligible for complete tax exemption after gaining charity status.
TYPES OF ENTITIES THAT ARE AVAILABLE FOR A NON-PROFIT ORGANIZATION IN SINGAPORE
1. Company limited by guarantee
An application for a new company name with the Accounting and Corporate Regulatory Authority (ACRA) and an application for the incorporation of a company limited by guarantee are needed.
The approval of the company name can take up to 14 days (or longer, depending on the circumstances), but incorporation can take as little as 15 minutes when all payments have been made.
- A public company limited by guarantee engages in non-profit operations related to national or public objectives, such as supporting art, philanthropic purposes, etc. A company with no share capital and members rather than shareholders guarantees to contribute a fixed sum to the firm’s obligations if the company is wound up. The amount set aside as a guarantee might be as little as S$1.
- A company limited by guarantee is a legal entity that exists in its own right, independent and distinct from the persons who are connected with it. t has the right to sue or be sued in its name, to engage in contracts, and to hold property in its name.
Key features of a company limited by guarantee in Singapore
- Must be formed by a minimum of 10 people.
- Must consist of:
- 2 directors (1 of the director must be a Singaporean or permanent resident).
- 2 members
- 1 Company secretary (Must be a Singapore citizen or permanent resident).
- A foreigner who intends to serve as a company’s local director must already have an employment pass or a dependant pass.
- Must have a Memorandum and Articles of Association that outlines the organization’s objectives and laws.
- Must audit accounts yearly
- Must hold Annual Grand Meetings
- Must file annual returns with ACRA
Advantages of a company limited by guarantee
- Its members have separate legal personalities, and it can enter into contracts, agreements, leases, etc.
- Member’s liability is limited.
Establishing a trust for an NPO is done in accordance with the Trustees Act.
- A trust is a legal agreement (the trust deed) in which an owner or founder donates property or money to a Board of Trustees who administer the assets for the benefit of other individuals (beneficiaries) for a declared purpose. A charitable trust is a purpose trust that promotes a cause rather than providing advantages to people.
- Except for some outliers, such as when the organization buys or leases real estate, gets into contractual arrangements to purchase professional services, and so on, it normally has few substantial risks or obligations stemming from its activities and transactions.
Key features of trust in Singapore
- Must consist of a Board of Trustees
- Must have a trust deed and the trust’s constitution, which outlines the framework within which the trustees and the organization must manage.
- Governed by the trustee’s act and licensed by the Monetary Authority of Singapore (MAS).
Advantages of trusts
- There are few obligations for public disclosure, and no audits are required unless mandated by the trust deed.
- There is no autonomous legal personality.
- Control stays with the trustees, allowing for greater flexibility; usually, the primary person engaged with the family or individual putting up the trust, thus no public or member approval is necessary for the execution or administration of such trust.
- A “society” is defined as a club, corporation, partnership, or organization of ten or more people, regardless of its form or aim, not previously registered under another legislation.
- Societies are appropriate for membership or volunteer-based organizations, particularly smaller ones that are not highly reliant on contributions and external support.
- Registration for a Society can be done via the Registry of Societies (ROS) website.
Key Features Of The Society In Singapore
- It must be formed by a minimum of 10 people.
- Must consist of three main office bearers who are Singapore citizens or permanent residents:
- The President
- Must establish a constitution that regulates the community.
- Must audit accounts yearly.
- Must file annual returns with the ROS.
- Members are subject to liabilities since they do not have a separate legal identity.
Advantages of societies
The establishment is quick, simple, and economical. It allows more flexibility, enabling donors the freedom to enter into agreements without being bound by the constraints of a public corporation limited by guarantee.
Once your NPO has been registered and achieved legal status in Singapore, the Commissioner of Charities may award it “charity” status if it meets the conditions.
Charitable purposes can be divided into four categories, which are:
- Poverty alleviation
- Promotion or support of education
- The spread of a certain religion
- Other community-beneficial purposes such as: –
- The advancement of wellbeing.
- The advancement of community development.
- The advancement of arts, science, and heritage.
- The advancement of environmental preservation.
- The relief of those in need, such as the young, the elderly, people in poor health, the crippled, and those experiencing financial difficulties or other disadvantages, and the advancement of animal welfare.
Key features of a charity in Singapore
- Must submit financial statements and annual reports detailing the activities and plans.
- Must submit annual returns.
- Must ensure all accounting and donation records are properly maintained.
- Must hold Annual Grand Meetings
- Governed by the Singapore Charities Act and must be registered with the Commissioner of Charities.
Advantages of charities
- Tax exemption is automatic.
- Benefits of fund-raising because many grant-giving trusts and foundations are only permitted to donate cash to recognized charities having “charity” status. Furthermore, the phrase “charity” may be quite convincing in persuading people to donate.
What is an Institution of a Public Character (IPC)?
An authorized IPC is a non-profit organization with “charity” status whose activities benefit the Singapore community as a whole, rather than just group interests based on ethnicity, views, or religion/faith.
The Commissioner of Charities has permitted IPCs to accept tax-deductible donations. The majority of IPCs are charitable organizations, while some may be sports organizations.
Who are eligible to apply for an IPC?
- A hospital that is neither run nor operated for profit.
- A charitable or public institution that is not run for profit.
- A public body or organization that is not for profit and is engaged in research or other activity related to the causes, treatment, or cure of disease in humans.
- A university or a public fund for a university’s founding, upkeep, expansion, or enhancement.
- A non-profit educational institution or a public fund for the formation, upkeep, expansion, or enhancement of such an educational institution.
- A governmental or private fund established or endowed to provide, establish, or endow a scholarship, exhibition, or award in a university or educational institution that is not administered or conducted for profit.
- A public fund was established and managed to relieve the people’s distress.
- A charity institution, a group of people, or a trust founded only for philanthropic reasons.
- An organization is not run or conducted primarily for profit but is involved in or linked with the promotion of culture, the arts, or sports.
Key Characteristics of an IPC in Singapore
- Must be governed by a panel of unbiased and independent trustees.
- Must keep donation records.
- Must publish financial and non-financial information online.
- Must submit audited financial statements.
- Must submit annual donation return.
- Must submit an annual report that outlines how donor funds were spent and the future goals.
- Must issue tax deduction receipts when receiving tax-deductible donations.
How long does it take for an IPC to be approved?
Generally, the processing time for applying for an IPC status will take at least 2 to 3 months.
What are the tax regulations for an IPC?
Registered charities enjoy automatic income tax exemption under section 13(1) of the income tax act. They do not need to file income tax returns.
For an IPC in Singapore, donors should be aware that not all registered charities are IPCs. Therefore, only gifts to charities that are approved IPCs are tax-deductible. Aside from monetary contributions, the following sorts of contributions to IPCs usually qualify for a tax deduction:
- Donation of shares or stocks.
- Donation of IT equipment such as computers.
- Donation of artifacts.
- Donation of land and buildings.
Additionally, even if the donations or gifts are sent to an approved IPC in Singapore, they are not tax-deductible if they are for a “foreign charitable purpose.”