Charities and donee organisations – Part One
Please note the following changes:
ED0207a is the first of a 2 parts outlining how IRD will monitor and advise charities of the requirements for income tax exemptions and donee status. There are a lot of points to consider, including:
• Charities must have an IRD number.
• Charities must be registered with Charities Services (at IRD) to qualify as a tax charity.
• Charities that are registered under the Charities Act will, prima facie, qualify for the income tax exemption for non-business income in s CW 41.
• Business income will only be exempt for that part of the income which is carried out for charitable purposes in New Zealand. The charity will need to self assess the proportion of business income.
• From the 2021 financial year charities with income derived from a business carried on by or for the benefit of a trust, society or institution of the kind referred to in section CW 41 (1) will be exempt from income tax on that income, only if the entity carrying on the business is at the time that the income is derived also registered as a charitable entity under the Charities Act.
• Bequests are exempt from income tax.
• A newly registered charity does not need to make a separate application to Inland Revenue for donee status.
• From 1 April 2020 registered charities will not need to apply for RWT exempt status.
• The FBT concession for charities only applies to the extent the fringe benefits provided are part of the charities business activities that are within its charitable, benevolent, philanthropic or cultural purposes.
• Change to GST rules from 15 May 2018 including rules relating to the valuation of assets on disposal and upon de-registration.
• Consequences of being removed from the Charities Services register.
• De-registration rules from 1 April 2019 applying to the valuation of assets and liabilities.
• Rules applying to Maori organisations.
• Commissioner may approve an exemption from income tax for an international/non-resident charity that is unable to be registered with the Charities Services, subject to certain criteria.
• There can be disclosure requirements in terms of FATCA and CRS.
• The Commissioner no longer requires a charities rules to contain a clause preventing it from altering certain clauses without the Commissioner’s prior approval
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Charities and donee organisations – Part two: donee organisations
ED0207b deals with the Commissioner’s view on the law relating to donee organisations.
• From 1 April 2020 all entities established for a “charitable purpose” will be required to register as a charitable entity with Charities Services to be included on the IRD donee organisation list, unless they get approval from the Commissioner to be placed on the list for purposes other than charitable purposes. These are benevolent, philanthropic or for cultural purposes.
• Refer to QB 16/05 to find out what qualifies as a gift. Similarly, for gifts to State and to State integrated schools go to QB 18/10 and QB 18/11.
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QB 16/05: https://www.classic.ird.govt.nz/resources/f/7/f7d57b27-0162-4d4e-9514-1e1d11460f94/qb1605.pdf
QB 18/10: https://www.classic.ird.govt.nz/resources/f/d/fd717e5d-9b11-46cc-827d-15fa246bae73/qb18-10.pdf
QB 18/11: https://www.classic.ird.govt.nz/resources/c/9/c9412564-a0ac-456d-b3c4-a3c80fc940f2/QB18-11.pdf
Source: Tax-e-mail, Small Business Institute Ltd: Issue 2006
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