A non-profit organization (NPO) in Singapore is a legally formed group that focuses on activities for public or private interest without making commercial profit. If NPOs make a profit, known as a surplus, they keep it for future activities instead of distributing it to members like profit making companies do. In Singapore, NPOs are often called Voluntary Welfare Organizations (VWOs) and can be registered as a public company limited by guarantee, a society, or a charitable trust. Let's learn further on how to establish a non-profit organization in Singapore.

Key Features of Non-Profit Organizations in Singapore:

• Managed by a board of trustees or a governing council, usually serving in a trustworthy role.
• Operate independently from the government.
• Provide benefits to people outside of their own membership.
• Do not make profits; they cannot share leftover money with members and can get full tax exemption only after gaining charity status.

Benefits of Registering Your Non-Profit Organization

While it's not required to register your NPO in Singapore, doing so makes it much easier to conduct meaningful and sustainable activities. Here’s why:

• Legal Agreements:
  Only registered entities can enter into contracts (like leases or purchase agreements). If your organization isn't registered, individuals may need to take on these obligations personally.
  
• Fundraising: 
  Raising funds is almost impossible without being a registered entity.
  
• Clarity and Formality: 
  Registering your NPO provides clear, legally binding rules that help both members and stakeholders understand the organization better.
  
• Donor Trust: 
  Most donors prefer to fund registered entities because registration shows public accountability and establishes trust.

Types of Non-Profit Entities in Singapore

When registering your non-profit organization in Singapore, you can choose from three types of entities:

1. Public Company Limited by Guarantee
2. Society
3. Charitable Trust

The best type for your non-profit depends on factors like size, complexity, potential legal liabilities, and fundraising plans. To decide which one is right for you, review the details of each type below and choose the one that fits your needs the best.

Registering as a Public Company Limited by Guarantee

Forming a non-profit as a company limited by guarantee has several advantages. It creates a separate legal entity and limits the liability of its members. This type of structure is advanced and highly desirable for non-profits. These companies usually focus on charitable, religious, scientific, or artistic activities and do not engage in trading.

What is a Company Limited by Guarantee?

• A public company limited by guarantee is one that conducts non-profit activities benefiting the public interest, such as promoting art or charity.
• This type of company does not have shares.
• Instead of shareholders, it has members who agree to contribute a fixed amount towards the company's liabilities if it is wound up. This contribution can be as low as SGD 1.
• When incorporated in Singapore, a public company limited by guarantee must include "Limited" in its name. However, it can later request to remove "Limited" from its name, provided it does not distribute profits.
• A company limited by guarantee is a separate legal entity, similar to a person in the eyes of the law. It can enter contracts, own property, and be sued or sue others in its own name.

Pros and Cons of Public Company Limited by Guarantee:

• Has its own legal identity.
• Limits liability for members.
• However, it must meet ongoing public disclosure rules and follow statutory regulations.
• Setting up and maintaining it requires professional help.
• Complex annual reporting might be challenging for smaller groups.

Tax exemptions

Associations registered as company limited by guarantee in Singapore are exempt from income tax if surplus funds are from members’ contributions; or if over 50% of gross revenue receipts are from members and are not tax-deductible for members. For full tax exemption, the company must apply for Charity status after its registration.

Key Facts Simplified:

• Requires at least 2 directors, 2 members, and a qualified Company Secretary. One director and secretary must be Singaporean residents.
• Foreigners acting as local directors need an Employment Pass or Dependant Pass.
• Need to draft a Memorandum & Articles of Association outlining the organization's objectives and rules.
• Must audit accounts annually and hold Annual General Meetings.
• Must file Annual Returns with ACRA.
• Public companies limited by guarantee are registered with ACRA and follow the Singapore Companies Act. Professional assistance is recommended for registration.

Registering as a Society

A society is like a club, group, or association with at least 10 members. It's a good choice for smaller groups with strong community ties and not heavily reliant on donations or external funding.

Advantages and disadvantages:

• Quick, easy, and cheap to set up.
• Donors usually prefer more formal business structures like public companies limited by guarantee.
• Doesn't have a separate legal identity, so members may face liability issues.

Statutory Requirements:

• You need at least 10 people to start a society.
• You must have 3 key office bearers: President, Secretary, and Treasurer, who must be Singapore Citizens or Singapore Permanent Residents.
• Annual audits of accounts are mandatory.
• Annual Returns must be filed with the Registrar of Societies.
• You must create a Constitution that governs the society.
• Societies are registered with the Registrar of Societies (ROS) and are regulated by the Singapore Societies Act. If you want to register a Society in Singapore, it's best to seek professional advice.

Registering as a Charitable Trust:

A trust is a written agreement, known as the trust deed, where the owner or founder transfers property or funds to a group of people called trustees. These trustees manage the assets for the benefit of others, known as beneficiaries, to achieve a specific goal. A charitable trust is a type of trust that serves a purpose and aims to benefit the community rather than specific individuals.

Who Should Register a Charitable Trust?

• A charitable trust or foundation in Singapore can be established by anyone who wants to dedicate some of their assets or income to charitable purposes and prefers a structured approach to giving.
• A common purpose of a charitable trust is to manage scholarships or bursaries.
• However, it may not be suitable if there's a high risk of liability from its activities, like owning property or entering many contracts.
• It's beneficial when trustees mainly hold and invest funds or other assets and distribute the income to support charitable causes.

Pros and Cons

• Limited public disclosure – Auditors or audited financial statements aren't necessary unless stated in the trust deed.
• Expensive and time-consuming to set up, often requiring professional help.
• No separate legal identity.
• Trustees have control, with no accountability to a broader membership base.

Statutory Requirements

• Need a board of trustees.
• Need a trust deed – a document outlining the framework for trustees' operations.

Trusts are licensed by the Monetary Authority of Singapore (MAS) and follow the Singapore Trust Companies Act. Consider seeking professional advice for registering a Charitable Trust in Singapore.

Obtaining Charity Status

Once your non-profit entity (society, company limited by guarantee, trust) is registered and legally recognized in Singapore, you can apply for charitable status. The Commissioner of Charities will assess whether your organization's objectives align with charitable purposes when reviewing the application.

Being recognized as a charity is about your status, not just your organizational setup. Charity status offers several advantages:

• All registered charities in Singapore are automatically exempt from taxes.
• It enhances the organization's reputation and credibility.
• Charity status is helpful for fundraising. Many trusts and foundations that provide grants can only support officially recognized charities. The word "charity" has a strong emotional appeal and can motivate the public to donate.

Charitable purposes fall into four main categories:

• Helping those who are poor.
• Supporting education.
• Promoting religion.
• Benefiting the community in various ways.
• Additionally, these purposes are also recognized as charitable:
  - Improving health.
  - Fostering citizenship or community development.
  - Supporting arts, heritage, or science.
  - Protecting or enhancing the environment.
  - Aiding people in need due to factors like youth, age, illness, disability, financial hardship, or other disadvantages.
  - Promoting animal welfare.

Every charity in Singapore follows the rules of the Singapore Charities Act and needs to register with the Commissioner of Charities within three months of starting. It usually takes around three months to complete the registration process, and there is no fee for registering under this Act.

Statutory compliance

Once a charity obtains charity status, it must follow these rules:

• Submit financial statements and an annual report showing what activities were done and any plans for the future.
  • Keep accounting and donation records in good order.
  • Submit annual returns.
  • Hold Annual General Meetings (AGMs).

• Share fundraising details online.

Statutory compliance

Once a charity obtains charity status, it must follow these rules:

• Submit financial statements and an annual report showing what activities were done and any plans for the future.
• Keep accounting and donation records in good order.
• Submit annual returns.
• Hold Annual General Meetings (AGMs).
• Share fundraising details online.

Tax exemptions

All registered charities in Singapore now automatically qualify for tax exemption, aiming to develop Singapore as a hub for philanthropy.

Applying for Institutions of a Public Character (IPC) status

An approved IPC is a non-profit organization (NPO) with charity status that benefits the entire community in Singapore. It's not limited to specific groups based on race, religion, or other beliefs. IPCs are authorized by the Commissioner of Charities to receive donations that qualify for tax deductions. Most IPCs are charities, while others are sports associations. The application process for IPC status typically takes around two months

Who can apply for IPC status?

• Hospitals that aren't run for profit.
• Public or benevolent institutions that aren't operated for profit.
• Public authorities, societies, or organizations engaged in disease research or prevention, not operated for profit.
• Universities or funds supporting them.
• Educational institutions not run for profit or funds supporting them.
• Funds providing scholarships, exhibitions, or prizes for universities or educational institutions.
• Funds established to relieve public distress.
• Charitable institutions, trusts, or bodies established solely for charitable purposes.
• Organizations promoting culture, arts, or sports, not primarily for profit.

Meeting Statutory Requirements

After obtaining IPC status, all IPCs must follow these rules:

• Provide Tax Deduction Receipts to donors for tax-deductible donations.
• Keep records of donations.
• Publish financial and non-financial information online.
• Submit audited financial statements annually.
• File an annual return of donations.
• Present an annual report showing how donation money was used and future plans.
• Have a board of independent trustees for administration, ensuring independent oversight.

Tax Deductible Donations

Only donations to charities approved as Institutions of a Public Character (IPC) are tax deductible. This means donors can claim a tax deduction for their donations to these organizations. Not all registered charities have IPC status, so donations to charities without IPC status are not tax deductible.

The following types of donations usually qualify for a tax deduction:

• Cash donations
• Donations of shares
• Donations of computers
• Donations of artifacts
• Donations under the Public Art Tax Incentive Scheme
• Donations of land and buildings

Donations for "foreign charitable purposes" are not tax deductible, even if made to an approved IPC.

Professional Help

Seeking professional assistance is advisable if you're interested in starting a non-profit organization in Singapore. A professional services firm can help you with the registration process and ongoing compliance requirements.

Clooud Consulting specializes in setting up non-profit organizations and foundations with various philanthropic objectives. Whether it's humanitarian work, conservation efforts, supporting underprivileged families, or addressing environmental issues, we have the expertise to assist you. Contact us for a quote.