Non-profits and charities enjoy some tax exemptions

Tax exempt status for charities/non-profits

Non-profits are legal entities created to provide a particular service for the benefit of the public. If an organisation is to be classified as a non-profit and enjoy some tax exemptions, it must operate and provide its services without the primary goal of making a profit.

Persons interested in starting a non-profit, can do so by registering the entity through the Companies Office of Jamaica (COJ). The first step is to secure an appropriate name and this can be done on the COJ’s website or by visiting the agency’s New Kingston offices in St. Andrew.

Once the name is secure, the next step is to fill out the relevant application forms to start the registration process. Non-profits are required to prepare a Form 1B, which are articles of incorporation for a company limited by guarantee without share capital. Persons should choose ‘charity’ to register for non-profit status. The form is available on the COJ’s website or in office.

The Form 1B is to be prepared along with the super form (BRF1), which provides the name and nature of the entity; the particulars, including address and date of commencement; and directors.

Before filling out the Form 1B, persons should have a clear understanding of the objectives of the non-profit. Once the forms are completed, persons will submit them along with the relevant documents and the appropriate fee.

In four working days you will receive your certificate of incorporation and will also have requested certified copies of your articles of incorporation from the COJ. The next step is to proceed to the Department of Cooperatives and Friendly Societies (DCFS) to submit the articles of incorporation and other documents that are required. The DCFS is the entity tasked with managing the application, approval and renewal of charities.

Persons must provide proof that their officers are fit and proper and also present other financial information. In submitting the documents to the DCFS, the entity, jointly with Tax Administration Jamaica (TAJ), will decide as to whether the company should be granted charitable status.

If the company is granted charitable status, then the next step is to proceed to the Ministry of Industry, Investment and Commerce to get a Minister’s licence so that the company can operate without the word ‘limited’ and be exempt from declaration of assets. The final step is to take the Minister’s licence back to the COJ, along with a special resolution to have the word limited removed from the name of the organisation.

When that process is complete, the company will then publish the notice of the change of name. That company will then be operating as a charity and will be entitled to all the rights and benefits; all the obligations of a charity.

There are some common mistakes that persons should avoid to make the process of registering a non-profit seamless. One of the most common errors of non-profits is failure to appropriately list the objects and powers of the organisation.

Persons use a generic schedule setting out the objects and powers. For example, the non-profit is to give aid in a community, but the persons will use a generic schedule that sets out that they are doing religious activities. Another common error is for persons to include a clause that directors will receive remuneration.

It is often found that there is inconsistency in terms of data that is presented. Sometimes, in the articles presented, it will indicate that there must be a certain minimum number of officers, yet the persons named fall below that minimum.

Persons should also be aware of the difference between a charitable organisation and a non-profit entity. While all charities are non-profits, not all non-profits are charities.  After a person establishes a non-profit organisation and they may do this through several means – because it may be incorporated or unincorporated – that individual then needs to proceed to the DCFS so that they can be designated as a charity under the Charities Act.

It is recommended that persons seek professional help when going through the registration process in order to ensure that everything is done correctly. Persons do not seek professional guidance when they are forming these entities, but because there is a need to prove to DCFS and TAJ that the non-profit existing for a purely charitable purpose, it is best that these entities get some guidance from a professional.

The entities will have to do an amendment of their articles. Also, another point to consider before registering a non-profit is having the right administrative processes in place to file annual returns with the COJ. The entities need to know that even though they are non-profit they still have annual obligations under the Companies Act and the Charities Act.

For example, under the Companies Act, you need to file an annual return and you need to file income and expenditure on an annual basis. There are also requirements under the Charities Act because if you receive funds for a certain purpose, there must be some transparency in terms of how you are using the funds.

Newly registered charities are required to submit audited financial statements within a year of operating as a registered charity, while existing charities are expected to submit theirs, along with registration form and other documents, and their financial records for the previous year.

For more information on registering a non-profit, persons can call the COJ at (876) 908-4419 or visit the agency’s website at orcjamaica.com.

The Companies Office of Jamaica which originally formed part of the Registrar General's Department was established as a separate Department in 1975 under the then Ministry of Marketing and Commerce, now the Ministry of Industry, Investment and Commerce with responsibility for the day-to-day administration of Companies and Business Names.

It has as its Mission Statement: To facilitate ease of doing business in Jamaica by providing easy to use, efficient registration systems which will promote business regulation and deliver accurate information to all stakeholders.