Dáil Éireann Debate, Thursday - 29 June 2023
189. Deputy Mattie McGrath asked the Minister for Finance if not-for-profit, community organisations that are not registered charities are liable for tax, or if there are any exemptions for same; and if he will make a statement on the matter. [31726/23]
View answerI am informed by Revenue as follows.
The Taxes Consolidation Act (TCA) provides for income tax exemptions for charities and sports bodies subject to certain conditions. Where a body is eligible for one of these exemptions, they may also be eligible for exemptions from other taxes. If a non-profit body does not have the charitable tax exemption it may be liable to tax on income, gains or other receipts, depending on the circumstances.
Since the establishment of the Charities Regulatory Authority (CRA), a body must first apply to the CRA for charitable status and then to Revenue for the charitable tax exemption. Bodies which had received charitable tax exemption before the establishment of the CRA continue to hold that exemption unless it has been withdrawn or the charity has ceased activities.
Organisations which do not fall within the scope of the charitable tax exemption may be subject to income tax, corporation tax, VAT, Capital Gains Tax (CGT), or Stamp Duty on any income or gains arising to them or on transactions that they are a party to.
In relation to CGT, there is no general CGT exemption or relief for a non-profit organisation which does not qualify for the charitable tax exemption. Some bodies may qualify for an exemption from CGT under section 610 TCA 1997, by way of their inclusion in Schedule 15 TCA, but the granting of an exemption under this provision is on a case-by-case basis. Certain other types of bodies may qualify for an exemption, such as a friendly society (registered or unregistered) whose income is exempt from income tax under section 211 TCA and special trusts for permanently incapacitated individuals, provided certain conditions are satisfied. A body with the charitable tax exemption is also exempt from CGT under section 609 TCA. It may also, in some circumstances, be exempt from other taxes including Deposit Interest Retention Tax (DIRT), Capital Acquisitions Tax, stamp duty, Dividend Withholding Tax (DWT), and local property tax.
Under Irish and EU VAT law, most charities are outside the scope of VAT. This means that most charities and non-profit organisations do not charge VAT on their services and cannot recover VAT incurred on goods and services that they purchase. The VAT Compensation Refund Scheme is designed to compensate certain charities for the VAT they incur on their inputs in recognition of the work undertaken by the charities sector. The scheme is designed to compensate charities for a proportion of the VAT they pay on goods or services bought using non-statutory or non-public funds.
Regarding sporting organisations, if a not-for-profit community sporting organisation meets certain criteria it may be eligible for the sporting tax exemption. Section 235 TCA provides for an exemption from income tax or corporation tax, as appropriate, for bodies established for the sole purpose of the promotion of athletic or amateur games or sports (“approved sporting bodies”) for so much of their income that is applied for the purpose of promoting the game or sport in question.
A sporting body which has been granted an exemption from income tax or corporation tax under section 235 TCA is also exempt from CGT by virtue of section 610A TCA provided the proceeds from any disposal made by such bodies are applied for the sole purpose of promoting athletic or amateur games or sports within the period of five years of the receipt of such proceeds. In certain circumstances, the exemption from CGT applies where the proceeds from disposals of sports bodes are applied for charitable purposes. Revenue may also allow an extension of the period of 5 years if they are satisfied that an approved sports body is in the process of applying the proceeds of a disposal for sporting or charitable purposes, as the case may be. A sports body which is exempt from income tax / corporation tax and CGT may also be exempt from other duties and taxes in certain circumstances, including DWT, CGT, and Stamp Duty. However, there is no general exemption from VAT for a sporting body, and the deposit income of a sporting body is also not exempt from DIRT.
Further information on the charitable tax exemption and the sporting tax exemption is available at www.revenue.ie/en/companies-and-charities/charities-and-sports-bodies/charitable-tax-exemption/index.aspx.
