Requirements to Qualify for Charitable Status
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:
- the prevention or relief of poverty or economic hardship;
- the advancement of education;
- the advancement of religion; and
- 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.
Charitable Tax Exemption Granted By Revenue Commissioners
A company (generally the organisation would incorporate a Company Limited by Guarantee Company ‘CLG’) established for a charitable purpose may apply to the Revenue Commissioners for 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.
Revenue’s minimum requirements for a new CLG Company applying for Charitable Status are as follows:
- 3 Directors (must be non-related)
- Secretary (this can be one of the Directors)
- Minimum of 3 members (Directors can be members also)
- Specific clauses to be contained in the Constitution
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 in the object clause, Express Company Formations will go through this with you in detail prior to submitting your application to the Charities Section of the Revenue Commissioners where they will review the proposed constitution 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.