Individuals/Families

Tax Relief on Donations

Tax Relief on Donations
The Community Foundation is an independent registered charity, as such most contributions are eligible for a tax deduction. It can, on occasion, be more advantageous for tax purposes to use The Community Foundation, especially for people considering establishing their own private foundations.The Revenue Commissioners have summarised the Scheme of Tax Relief for Donations to eligible charities and other approved bodies, under section 848A, Taxes Consolidation Act 1997.

For advice in relation to tax planning, we recommend you consult a professional tax advisor to ensure you can maximise your generosity for your preferred cause through the Community Foundation for Ireland. However, below is a summary of the typical tax benefits you can gain depending on your chosen way of giving.

Tax Efficient Giving
The Community Foundation for Ireland is a not for profit organisation with charitable status and is an approved body for the purposes of section 848A, Taxes Consolidation Act, which relates to tax relief for donations to approved bodies.

Donating Cash for an Endowment
There are tax benefits for setting up a Fund with cash. An endowment typically requires a larger initial lump-sum. You can create, for example, a €25,000 family endowment fund over one or two years. If you are PAYE and paying tax at the 41% rate, you will make a donation of €14,750 and The Foundation will ask you to complete a CHY2 form. The Foundation should then be able to claim €10,250 from Revenue which will be added to the endowment fund the following year.

If you are self-assessed and paying tax at the 41% rate you will make a donation of €25,000 and you can claim back 41% of this in your annual return, i.e. €10,250. Therefore the net ‘cost’ / ‘investment’ in either case is also €14,750.

For donors paying tax at a lower rate, the lower rate will apply for tax relief purposes. The above examples are based on people who are paying enough tax in a financial year to generate the reliefs suggested.
Please note that many people who think of themselves as PAYE, may in Revenue’s eyes, for the purpose of this scheme, be deemed to be self-assessed. If you have e.g. rental or dividend income, it is very likely you will be considered self-assessed and you will need to make your donation accordingly. If in doubt consult your tax advisor or Revenue.
 

Donating Cash for a Flow through Fund and Other Funds:

Donations to Flow Through Family Funds, County Funds and Thematic Funds can be smaller. For tax relief to apply the minimum donation is €250.

The following table summarises the current tax situation:

Limitations in Giving from Income
Please also note that from the 1st January 2007 under the 2006 Finance Bill, individuals with income in excess of €250,000 who have specified tax reliefs available to them have been restricted in the amount of tax relief they can claim each year. The specified reliefs that a person will be able to apply against their taxable income will be restricted to 50% of their gross income in any one tax year. Any excess reliefs will however be available for “carry-forward” to the following and subsequent years, subject to the 50% income cap.
The tax relief scheme on donations as originally conceived placed no upper limit on the amount that a donor could give to charity tax effectively in any year. The reason for this was to use taxation policy to actively promote the development of philanthropy in Ireland. The 2006 provision effectively introduced a cap on the scheme for high income individuals. The Community Foundation for Ireland is campaigning to have this provision amended and we are hopeful of success.

The 2010 Finance Bill introduced further changes, which if enacted, will reduce further the potential tax relief for larger scale donors. This section of the website will be updated when the Bill is enacted. See also the news section. This issue may be addressed following announcement by the government in February 2012.

Capital Gains Tax (CGT)
Many advisors in Ireland are unaware of the tax benefits which could apply for their clients following a ‘windfall event’ which could aid setting up, for example, a family fund. The CGT rate has increased from a low of 20% to 30% in more recent times in Ireland, making it all the more attractive. No upper limit / cap applies.

Donations of non-cash assets to charity can benefit from relief from capital gains tax under Section 611 of the Taxes Consolidation Act 1997. Normally, the donation of non-cash assets to charity would amount to a disposal of those assets by the donor at their market value and capital gains tax (CGT) would apply to any gain arising. However, when a donation of non-cash assets is made to a charity by way of a gift (for no consideration), or for a consideration not greater than the cost, section 611 provides that the market value rule does not apply and the disposal is deemed to be made on a “no gain, no loss” basis. Accordingly, no capital gains tax should arise.
 

End of Year Contributions
A donor may decide to make a significant donation to The Community Foundation at the end of a tax year and then over the course of the following year work out with The Community Foundation how best to make grants from this. This can be a useful mechanism as part of a general tax planning exercise.

Donating Shares
In 2005 income tax relief was introduced for the donation of publicly-quoted shares to eligible charities. This means that gifts of shares to The Community Foundation for Ireland of €250 or above in a tax year are now eligible for tax relief. Those giving gifts of publicly quoted shares have to choose between an Income Tax relief OR Capital Gains Tax relief as outlined below.
If you choose income tax relief, The Foundation will give you a receipt for the market value of the shares on the day the donation was made. You can use this to reduce your taxable income (if you are self-assessed for tax). If you are ‘taxed at source’ (i.e. a PAYE worker), The Foundation will claim the tax back. These procedures are the same as for cash donations.
If you do not wish to claim income tax relief, you can claim capital gains tax relief instead. If you choose to claim CGT relief, the sale of your shares will be treated as a ‘no profit, no loss’ sale, i.e. it is treated as if you sold shares for exactly the same price as you paid for them. It is important to remember that there is no ‘double tax relief’ – you cannot claim both income tax and capital gains tax relief. The Charities section of the Revenue Commissioners has indicated that it will be up to the local tax offices to deal with CGT claims.

Donating Property
There is no specific relief for donations of property or land. Instead of donating property or land, it is often more tax efficient to sell the asset and make a tax efficient donation from the proceeds. Please consult The Community Foundation for Ireland and your advisor to discuss further.

Donating Overseas
The Community Foundation for Ireland has since 2006, been the Irish representative of Transnational Giving Europe which facilitates tax effective giving across much of Europe. You will benefit from this service by being able to gain ‘on the ground’ knowledge of a local charity or organisation from our overseas partner.
The Foundation can also facilitate your direct international tax effective giving. If you want to donate to e.g. a French charity, by doing so through the Community Foundation for Ireland, you could significantly increase the size of your gift as a result of the tax benefits which are applied as outlined above for cash donations. By way of example, if you would like to donate €100,000 to the French organisation, by doing so through The Foundation, you can potentially make a tax reclaim for €41,000 and your net cost is €59,000. A small fee will also apply.