Bodies of persons
Under the Income Tax Act 1947, a body of persons refers to any body, corporate or unincorporate, other than a company or partnership. Thus, bodies of persons include:
1. Clubs or similar institutions
2. Management corporations
3. Trade associations
4. Town councils
The income of bodies of persons are taxed at 17% (the prevailing corporate income tax rate) from the Year of Assessment 2020.
Tax lifecycle
Clubs or similar institutions
A club or similar institution is a not-for-profit association or society formed for social, recreational or leisure purposes.
Members of clubs or similar institutions are persons who are entitled to vote at the general meeting of the body, where they exercise effective control over the affairs of the club or similar institution.
Tax treatment of clubs or similar institutions
Where 50% or more of the gross receipts on revenue accounts are from members, you are not deemed to be carrying on a business and will not be taxed on income arising from your club's operations. However, you will be taxed on income from other sources derived from dealings with non-members such as interest, rent and dividends.
Where less than 50% of the gross receipts on revenue accounts are from members, you are deemed to be carrying on a business. You will be taxed on your operating surplus (total receipts of income less tax-deductible operating expenses), as well as the income from other sources derived from dealings with non-members such as interest, rent and dividends.
| Proportion of gross revenue receipts received from members | Tax treatment |
|---|---|
| ≥50% | Not deemed to be carrying on a business:
|
| <50% | Deemed to be carrying on a business:
|
How to track income from voting / non-voting members
Use this spreadsheet (29 KB) to tabulate the source of revenue receipts from voting and non-voting members and determine if your club satisfies the 50% requirement under section 11(1) of the Income Tax Act.
How to determine whether a club is deemed to carry on a business (50% rule)
Example 1: Club ABC deemed not to be carrying on a business (More than 50% of gross revenue from members)
| Income and expenditure account of Club ABC | |||
|---|---|---|---|
| $ | $ | ||
| Salaries and Wages | 42,000 | Entrance Fees | 4,000 |
| Administrative expenses | 5,000 | Donations (members) | 10,000 |
| Utilities | 5,000 | Annual subscriptions | 35,000 |
| Property repairs | 8,000 | Sale of D&D tickets: | |
| D&D expenses | 10,000 | Members | 5,000 |
| Non-Members | 7,000 | ||
| Bar & catering | 16,000 | ||
| Rent | 10,000 | ||
| Dividends (gross) | 2,000 | ||
| Surplus | 22,000 | Interest | 3,000 |
| 92,000 | 92,000 | ||
Compare gross receipts between members and non-members to determine if Club ABC is deemed to be trading.
| Comparison of gross revenue receipts from members and non-Members | ||
|---|---|---|
| Receipts | Members (in $) | Non-Members (in $) |
| Entrance fees | 4,000 | 0 |
| Subscriptions | 35,000 | 0 |
| Donations | 10,000 | 0 |
| Sale of D & D tickets | 5,000 | 7,000 |
| Bar & catering | 8,000 | 8,000 |
| (Assume 50/50) | 0 | 0 |
| Rent | 0 | 10,000 |
| Dividends (Gross) | 0 | 2,000 |
| Interest | 0 | 3,000 |
| 62,000 | 30,000 | |
| Percentage | 67.4% (62,000 / 92,000) | 32.6% (30,000 / 92,000) |
Club ABC is not deemed to be carrying on a business because more than 50% of the receipts are from members. But, it will be taxed on the other sources of income derived from dealings with non-members:
| Taxable income of Club ABC | $ |
|---|---|
| Rent | 10,000 |
| Dividends (Gross) | 2,000 |
| Interest | 3,000 |
| Total Chargeable Income | 15,000 |
Example 2: Club DEF deemed to be carrying on a business (Less than 50% of gross revenue from members)
| Income and expenditure account of Club DEF | |||
|---|---|---|---|
| $ | $ | ||
| Salaries and wages | 42,000 | Entrance fees | 4,000 |
| Administrative expenses | 5,000 | Annual subscriptions | 15,000 |
| Utilities | 5,000 | Sale of D & D tickets: | |
| Repairs | 8,000 | Members | 5,000 |
| Dinner & Dance expenses | 10,000 | Non-Members | 7,000 |
| Rent | 58,000 | ||
| Surplus | 22,000 | Interest | 3,000 |
| 92,000 | 92,000 | ||
Compare receipts between members and non-members to determine if Club DEF is deemed to be trading.
| Comparison of receipts from members and non-members | ||
|---|---|---|
| Receipts | Members | Non-Members |
| $ | $ | |
| Entrance fees | 4,000 | 0 |
| Subscriptions | 15,000 | 0 |
| Sale of D & D tickets | 5,000 | 7,000 |
| Rent | 0 | 58,000 |
| Interest | 0 | 3,000 |
| 24,000 | 68,000 | |
| Percentage | 26.1% (24,000 / 92,000) | 73.9% (68,000 / 92,000) |
Club DEF is deemed to be carrying on a business because more than 50% of the receipts are from non-members:
| Taxable income of Club DEF | $ | |
|---|---|---|
| Net Surplus | 22,000 | |
| Less: Rent | 58,000 | |
| Interest | 3,000 | 61,000 |
| Adjusted Trade Deficit | (39,000) | |
| Add: Rent | 58,000 | |
| Interest | 3,000 | |
| Total Chargeable Income | 22,000 | |
Trade associations
A trade association refers to a body of traders, businessmen or professionals who come together to promote and protect the common interest of the group.
Members of trade associations are persons who are entitled to vote at the general meeting of the body, where they exercise effective control over the affairs of the trade association.
The following types of members are considered Singapore trade association members:
- Persons, other than companies, resident in Singapore
- Companies incorporated in Singapore (excluding branches or offices located outside Singapore)
- Branches or representative offices of foreign companies (i.e. companies incorporated outside of Singapore) located within Singapore
Tax treatment of trade associations
When more than 50% of your receipts derived through entrance fees and subscriptions from Singapore members are claimable as tax-deductible expenses1, you are deemed to be carrying on a business. You will be taxed on your operating surplus (total receipts of income less tax-deductible operating expenses) and other sources of income. However, income from transactions with foreign members is not subject to tax.
When less than 50% of your receipts derived through entrance fees and subscriptions from Singapore members are claimable as tax-deductible expenses, you will only be taxed on income from transactions with non-members.
1 Subscription fees are generally claimable as tax-deductible expenses for Singapore members, while entrance fees are capital in nature, and are not claimable as tax-deductible expenses. Thus, the formula for the determination of tax treatment is:
Subscriptions received from Singapore members ÷ Entrance fees and subscriptions received from Singapore members
| Proportion of entrance fees and subscriptions from Singapore members that are claimable as tax deductions | Tax treatment |
|---|---|
| ≤50% | Only income derived from dealings with non-members are taxable |
| >50% | Deemed to be carrying on a business:
|
How to determine whether a trade association is deemed to be carrying on a business (50% rule)
Example 1: Trade Association ABC not deemed to be carrying on a business (Less than 50% of entrance fees and subscriptions derived from Singapore members are claimable as tax deductions)
| Income and expenditure account of Trade Association ABC | |||
|---|---|---|---|
| $ | $ | ||
| Salaries and Wages | 24,000 | Entrance Fees (Singapore members) | 20,000 |
| Administrative expenses | 5,000 | Annual subscriptions (Singapore members) | 4,000 |
| Utilities | 5,000 | Seminar fees (members) | 6,000 |
| Seminar fees (non-members) | 4,000 | ||
| Rental income (non-members) | 20,000 | ||
| Surplus | 30,000 | ||
| 64,000 | 64,000 | ||
Compare proportion of entrance fees and subscriptions received from Singapore members that are claimable as tax deductions:
Subscriptions received from Singapore members ÷ Entrance fees and subscriptions received from Singapore members
= $4,000 ÷ ($4,000 + $20,000)
= 16.7%
Trade Association DEF is not deemed to be carrying on a business because less than 50% of the entrance fees and subscriptions received from Singapore members are claimable as tax deductions. In this case, only income derived from non-members are subject to tax.
| Taxable income of Trade Association ABC | $ |
|---|---|
| Income received from non-members | |
| Seminar fees (non-members) | 4,000 |
Less: Expenses attributable to non-members [4,000 / (20,000 + 4,000 + 6,000 + 4,000) X 34,000] | (4,000) |
| Add: Rental income (non-members) | 20,000 |
| Total Chargeable Income | 20,000 |
Note: any losses incurred by the trade association will be disregarded, and cannot be carried forward, as the trade association is not deemed to be carrying on a business.
Example 2: Trade Association DEF deemed to be carrying on a business (More than 50% of entrance fees and subscriptions derived from Singapore members are claimable as tax deductions)
| Income and expenditure account of Trade Association DEF | |||
|---|---|---|---|
| $ | $ | ||
| Salaries and Wages | 42,000 | Entrance Fees (Singapore members) | 4,000 |
| Administrative expenses | 5,000 | Annual subscriptions (Singapore members) | 35,000 |
| Utilities | 5,000 | Seminar fees (members) | 6,000 |
| Seminar fees (non-members) | 4,000 | ||
| Rental income | 10,000 | ||
| Surplus | 7,000 | ||
| 59,000 | 59,000 | ||
Compare proportion of entrance fees and subscriptions received from Singapore members that are claimable as tax deductions:
Subscriptions received from Singapore members ÷ Entrance fees and subscriptions received from Singapore members
= $35,000 ÷ ($4,000 + $35,000)
= 89.7%
Trade Association DEF is deemed to be carrying on a business because more than 50% of the entrance fees and subscriptions received from Singapore members are claimable as tax deductions:
| Taxable income of Trade Association DEF | $ |
|---|---|
| Net Surplus | 7,000 |
| Less: Rental income | (10,000) |
| Adjusted Trade Surplus (Deficit) | (3,000) |
| Add: Rental income | 10,000 |
| Total Chargeable Income | 7,000 |
Management corporations
A management corporation (MC) is set up by the legal owners of a strata development (e.g. condominiums and shopping complexes) under the Building Maintenance & Strata Management Act 2004 to provide for the proper maintenance and operation of the building and the common areas.
The subsidiary proprietors2 share the cost of maintenance, insurance, and any other common expenses by making contributions to the funds which are managed by the MC.
____________________
2 Subsidiary proprietors are purchasers to whom a developer has transferred ownership of a unit in the strata development.
Tax treatment of management corporations
An MC is regarded as a taxable body of persons separate from the subsidiary proprietors or flat owners. The tax treatment of an MC is the same as a club or similar institution.
Town Councils
Town Councils are established under the Town Council Act to control, manage, maintain and improve the common property in housing estates.
Tax treatment of town councils
Town Councils are taxable persons separate from the tenants and owners of properties in the housing estate.
The tax treatment of various payments depends on:
(a) Whether the income is received from residents/owners of the properties in the town; and
(b) Whether the income is received for the common purpose for which the Town Council is established.
| Taxability | Income derived from | Examples |
|---|---|---|
Not subject to tax | Residents/owners of properties in the town | Fees received for the common purpose for which the town council is established such as:
|
| Subject to tax | Residents/owners of properties in the town | Fees received for other services performed that are not aligned with the common purpose for which the town council is established such as:
|
| Third parties who are not residents/owners of properties in the town |
|
Where a town council receives payments that are not within the examples listed above, clarification should be sought from IRAS as to their taxability.