Business and IPC Partnership Scheme (BIPS): How Companies Enjoy Tax Deductions While Volunteering with Charities

Businesses play a crucial role in giving back to society and encouraging their employees to kickstart their journey to give back. Unfortunately, the difficult economic environment due to COVID-19 in 2020 resulted in less being given back to charities. 

According to the Corporate Giving Survey 2017, only 1 in 2 Singapore businesses give back. In 2020, then-Deputy Prime Minister and Minister for Finance Heng Swee Keat stressed that many charities and social services agencies saw even less being given back. Even when it comes to giving back, majority – 89% –  of Singapore businesses tend to do so via philanthropy, while only 39% of businesses gave back through volunteering.

To encourage more corporate volunteerism, he initially announced that the Business and IPC Partnership Scheme (BIPS) will be extended for another two years, until the end of 2023, during his Budget 2021 speech.

In 2023, current Finance Minister Lawrence Wong extended the existing BIPS, which will be incorporated into a broader Corporate Volunteer Scheme for another three more years, to 31 December 2026.

Read Also: Singapore Budget 2021: 10 Things Business Owners Need To Know

What Is The Business and IPC Partnership Scheme (BIPS)?

Under the Business and IPC Partnership Scheme (BIPS), businesses enjoy a 250% tax deduction on qualifying expenditure incurred from 1 July 2016 to 31 Dec 2023 when they send employees to volunteer and provide services, including secondments, to Institutions of a Public Character (IPCs).

The existing BIPS will be renamed to Corporate Volunteer Scheme (CVS) and will come in effect from 1 January 2024. Furthermore, the scope of volunteering activities will also be extended to those that are conducted virtually (like online mentoring and tuition support for children) or outside of the IPCs’ premises (refurbishment of rental flats).

IPCs are essentially registered charities who are able to issue tax deduction receipts to donors. Companies who wish to partner and volunteer with IPCs will be able to choose a charity that aligns best with their company’s core values and beliefs from an extensive list.

Read Also: What Is The Difference Between a Charity and a Social Enterprise?

Who Qualifies for The Business and IPC Partnership Scheme (BIPS)?

All businesses that carry a trade or run a business in Singapore are eligible for the Business and IPC Partnership Scheme (BIPS) or Corporate Volunteer Scheme (CVS) when they send employees to volunteer and provide services at IPCs. 

Employees who are owners of businesses, for example, sole-proprietors, partners and shareholders who are also directors of the company are excluded from BIPS.

Qualifying businesses include companies, sole proprietorships, partnerships (including limited partnerships and limited liability partnerships), registered business trusts and bodies of persons. 

Read Also: 11 Businesses That Were Mentioned by DPM Heng in Budget 2021 (And What They Do)

Do note that a single Corporate Social Responsibility initiative may benefit from BIPS or the matching grant under the Share as One programme, but not both.

What Are The Qualifying Expenditure And Cap?

Qualifying expenditure refers to an amount of money spent that can be claimed under a certain scheme.

For BIPS, qualifying expenditure includes the basic wages of employees and other related expenses incurred by the business that were necessary for the provision of services to the IPC. 

All qualifying expenditure must meet the following requirements:

  1. Not reimbursed by the IPCs at any time; 
  2. Incurred only because of the volunteer services;
  3. Not considered as personal, living, or family expenses; and
  4. Not capital expenditure  

Here’s a scenario to better illustrate “qualifying expenditure”. 

Company X is a florist. They partnered and volunteered at Alzheimer’s Disease Association for a day. Employees of company X took a shutter bus to and from the charity. At the charity, employees held a flower arranging class. 

Company X’s qualifying expenditure will include their employees’ wages for that day, transport fees and the amount they spent to organise the flower arrangement class (that includes the cost of flowers, wrapping paper, etc).

The time that employees of company X spends travelling to and from the charity will not qualify for BIPS. Generally, if the time spent volunteering falls outside of an employee’s working hours, it will not qualify for BIPS. However, if companies provide their employees time off in lieu, it can qualify for BIPS.

BIPS was enhanced on 2 Dec 2019 for easier claiming of tax deductions. Businesses are now allowed:

  • Tax deduction on wage of part-time employees who volunteer with IPCs under BIPS; and 
  • An option for businesses to claim tax deduction on wage expenditure based on fixed hourly rates in lieu of actual salary: at $10 per hour for general volunteering and $20 per hour for skills-based volunteering.

Skill-based volunteering refers to services that require working professionals to apply work-related expertise, as required by the IPC.

An example of skill-based volunteering would be employees from a tech company teaching kids that are housed at a children’s charity how to code.

Subject to receiving IPC’s agreement, businesses may claim 250% tax deduction in total on the qualifying expenditure incurred. 

Businesses should take note that the qualifying expenditure is subjected to a cap of $250,000 per business per Year of Assessment (YA). A qualifying expenditure cap of $50,000 is also imposed on each IPC per calendar year.

[Update]: As announced in Budget 2023, the qualifying expenditure cap of $50,000 for each IPC per calendar year will be increased to $100,000 from 1 January 2024.

How Can Businesses Make BIPS Claims?

Below is a step-by-step guide to how businesses can make their BIPS/CVS claim:

Step 1: Come to a mutual agreement with the IPC on the type and duration of volunteer services, as well as the estimated expenditure, before your businesses provides the service.

Step 2: Download and complete the BIPS Service Giving Form A and Declaration for the IPC’s endorsement.

Step 3: Seek the IPC’s endorsement on the completed BIPS Service Giving Form B with the actual expenditure after the completion of your business’ volunteering service.

Step 4: The IPC can submit the endorsed Form A, Declaration and Form B electronically to IRAS through the BIPS Service Giving Declaration Form Submission by the end of January of the following year. Do note that businesses can claim CVS tax deduction in its tax computation based on the amount endorsed by the IPC in the Form B when submitting its income tax return.  

This article was first published on 3 March 2021 and has been updated with the latest information.

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