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Charitable Tax Status & Name Exemption For Irish Companies

Charitable Tax Status Ireland
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Charitable Tax Status IrelandThis blog will look at the requirements for qualifying for charitable tax status and name exemption for Irish registered companies.

It will also discuss the statutory obligations placed on charities by the Charities Act 2009, the Companies Registration Office, the Revenue Commissioners and the Charities Regulatory Authority.

The 2009 Act was introduced in order to reform how charities are governed, to ensure that they comply with their legal obligations and to enhance transparency and governance standards in the charity sector.

 

Requirements To Qualify As A Charity 

Any organisation seeking to qualify as a charity must be established for a “charitable purpose”. Section 3 (1) of the 2009 Act specifies what activities are considered to fall under this definition, namely:

  1. the prevention or relief of poverty or economic hardship;
  2. the advancement of education;
  3. the advancement of religion; and
  4. any other purpose that is of benefit to the community.

Section 3 (11) of the Act provides a more detailed list of twelve activities that are considered to fall under the point 4 above.

Related: Good Governance Code for Northern Ireland Charities

Charitable Tax Exemption Granted By Revenue Commissioners

A company established for a charitable purpose may apply to the Revenue Commissioners for a tax exemption on the organisation’s income and property.

In examining the application, Revenue will consider the objects, the actual activity of the company, and case law. If the tax exemption is awarded, the Revenue Commissioners will grant a CHY reference number.

Importance Of Constitution Wording

The wording of the Constitution of any company seeking charitable status must be considered carefully as the organisation must be established exclusively for charitable purposes.

A tax exemption will not be granted where there is a mix of charitable and non-charitable purposes.

In addition, the objects must be stated in precise terms in order to clearly identify this charitable purpose. Objects that are considered to be too vague or broad will not be accepted by the Revenue Commissioners.

Given the importance of the wording, the Charities Section of the Revenue Commissioners will review the proposed constitution if submitted with the application for charitable status, along with other relevant supporting documentation.

If the text of the constitution is in order, the Revenue will then advise to proceed with the incorporation, on the basis that the company will qualify for the tax exemption.

It is recommended that companies who intend to apply for charitable status avail of this review process.

Related: Purpose Trusts – When Are They Valid?

Name Exemptions

Under Section 971 and Section 1180 of the Companies Act 2014 respectively, a Designated Activity Company or a Company Limited by Guarantee which is established for a charitable purpose may claim an exemption from the use of the full company type suffix - in English or Irish - as part of its name.

For new companies, this involves filing a Form G5 when making the incorporation application.

The process is more involved for existing companies and entails:

    • filing form G5 together with a copy of the amended Constitution to reflect the removal of the company type name suffix,
    • a G1 in relation to the amendment of the constitution of the company and
    • a form G1Q in relation to the change of name special resolution.

Related: What’s In A Name? – Irish Company Name Requirements

Obligation To Register With Charities Regulatory Authority.

The Charities Regulatory Authority (“CRA”) was formally established on 16 October 2014 as provided for under Part 2 of the Charities Act 2009 and all charities must register with the CRA.

The CRA maintains a register of charities which is open to public consultation online and every organisation granted a charitable tax exemption from the Revenue Commissioners prior to 16 October 2014 (the date the CRA was established) was automatically added to this register.

All other charities must register with the CRA. It is an offence for any organisation not on the register to claim that it is a registered charity or to operate or fundraise as a registered charity.

Seek Professional Advice

It is recommended that professional advice be sought from a recognised company secretarial services provider, particularly in relation to the wording of the constitution and precise objects of companies intending to apply for charitable status.

 

Disclaimer: This Blog posting contains general information only and should not be read as a comprehensive analysis of the subject matter nor construed as professional services or advice to be relied upon. Before taking any decision or action in relation to the matters described herein, we would recommend that you contact a qualified professional advisor.

 

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