Paschal Donohoe (Dublin Central, Fine Gael)
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Deputy, as you are aware after clarification sought on your question and your agreement, the question is being answered on the basis of "donations " rather than "grants".

I am advised by Revenue that donations are treated differently depending on the category of the donor (an individual or a company) making the donation and whether the charity fully complies with the conditions laid down by the Charities Regulator and the Revenue Commissioners.

A donor who is an individual (self-assessed or PAYE only worker) that makes a relevant donation to an approved body can choose to authorise the approved body to claim a refund of income tax paid by the individual at a blended ‘grossed-up’ rate of 31% up to the amount of tax actually paid by the donor in a chargeable period. If the individual chooses to allow the charity to claim the tax refund, by completing either an Enduring or an Annual certificate, then the donor is not entitled to a repayment of any part of the tax that has been repaid to the approved body.

When a company makes a relevant donation to an approved body, the company may claim a tax deduction for the donation, as if it were a trading expense or an expense of management for the accounting period in which it is paid.

In order to be considered an “approved body” an entity must have obtained—

1. charitable status from the Charities Regulator,
2. a charitable tax exemption (CHY number) from Revenue,
3. Charitable Donation Scheme (CDS) authorisation from Revenue.

Subject to meeting these conditions, it is possible that a social enterprise could become an “approved body”.

Since 2014, a charity must register with the Charities Regulator to obtain charitable status before applying for tax exemption from Revenue. The Charities Regulator is responsible for determining whether an organisation’s activities meet the ‘charitable purposes’ test. Further information is available at the Charities Regulator website, www.charitiesregulator.ie. An organisation such as a social enterprise can apply to the Charities Regulator for charitable status, but it must fully comply with the regulators criteria for charitable status.

If a social enterprise is successful in registering with the Charities Regulator, it can apply to Revenue for the charitable tax exemption, which is an exemption from income tax and/or corporation tax, as appropriate. I am advised by Revenue that to apply for charitable tax exemption an organisation is required to submit the application form “Charities and Sports Bodies e-application” online through ROS. The charity’s application for tax exemption must include:

1. the entity’s latest financial accounts or details of its financial plans,
2. a statement of its activities and plans, and
3. a copy of the charity's constitution which has been approved by the Charities Regulator.

Revenue will issue a Charitable Tax Exemption (CHY) Number once the entity is registered with Charities Regulator and has submitted the relevant application and supporting documentation. The Charitable Tax Exemption is provided for in section 207 and 208 of the Taxes Consolidation Act 1997 (TCA) for Irish-based bodies and section 208A TCA for Irish source income of overseas bodies. A body qualifies for the exemption if it applies its income to charitable purposes.

Further information on the charitable tax exemption is available at www.revenue.ie/en/companies-and-charities/charities-and-sports-bodies/charitable-tax-exemption/index.aspx.

If a social enterprise which has a CHY number wishes to become an approved body that operates the CDS (in accordance with Section 848A and Schedule 26A TCA), it must apply to Revenue for authorisation to do so. The CDS provides a uniform scheme of tax relief for donations to approved bodies. An authorisation will not issue unless the applicant charity meets certain conditions that are outlined in the Tax and Duty Manual referred to below.

The CDS requires that a donation must fulfil a number of requirements before it is considered a relevant donation. These conditions are outlined in the Tax and Duty Manual referred to below and must be met in order for a donation made by a company to an approved body to be tax deductible.

Further information on the CDS, including links to the list of bodies with the Charitable Tax Exemption, can be found in Revenue’s Tax and Duty Manual 36-00-17 “Charitable Donations Scheme, Tax relief for Donations to Approved Bodies” on Revenue’s website at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-36/36-00-17.pdf.