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Charitable entity in New Zealand 

There are three principles constituting a charity: the relief of poverty, the advancement of education and the advancement of religions and activities for the benefit of the community. Thus, a charitable entity is set up with the purpose of providing relief of poverty, advancement of education and religions and for the benefit the community. Moreover, they need to register with Charities services to become charitable entity. The Charities Act 2005 is the legislation in New Zealand to govern the operations and activity of a charitable entity.

 

As a charitable entity, there are some tax advantages.

  • Charitable entity does not have to pay tax on their income. CW 41 of Income Tax Act 2007 allows the income from charitable entity to be exempt income.
  • Although the GST registration threshold of $60,000 still applies, they do not normally run a taxable activity with annual turnover exceed the threshold. The reason for this is because donations, koha, bequests, residential rent, interest and dividends are exempt from GST.
  • Donors are entitled for tax credit on their donations in charitable entity. The rate of 33.33% of the total donations will apply to claim for a tax rebate. For company, donation is deductible expenses against their income.
  • Fringe benefit tax is not payable on benefits provided to employees while they are engaged in charitable activities.

Disclaimer: The following answer necessarily sets out general principles only. The facts of particular cases always need to be considered carefully, and it may be necessary to obtain advice from a tax expert.

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