Expanding NGOs to Asia: A Country-by-Country Comparison and Analysis

Factor  

Singapore  

South Korea  

Australia  

Nonprofit entity types  

• Public Company Limited by Guarantee (“PCLG”)  

• Society  

• Charitable Trust  

• Representative Office (“Rep Office”)  

• Incorporated under Korea Civil Code:    

• Foundation   

• Associations   

• Unincorporated:   

• Beyoungri Im-ui Danche (nonprofit legal person); or  

• Other non-incorporated organizations   

• Incorporated    

• Incorporated Associations, e.g., ‘XYZ Inc.’  

• Company Limited by Guarantee (“CLG”)  

• Non-trading Co-operatives  

• Indigenous Corporation  

• Unincorporated   

• Trust   

• Association   

Setup timeline  

• Rep Office: 1-2 weeks  

• Charitable Trust: 1-2 months  

• PCLG | Society: 2-3 months  

• Complexity (in increasing order): Rep Office, Society, PCLG, Charitable Trust   

• Establishment of NPO requires ministerial approval  

• Establishing an NPO involves the central government, local governments and various government ministries, based on a complicated legal framework  

• 2 to 3 months to incorporate  

• Incorporating with Australian Charities and Not-for-profits Commission (“ACNC”) usually takes between 3-4 weeks.   

• Process is straight forward   

Compliance requirements  

• Register with Commissioner of Charities  

• Accountability and disclosure of funds raised, used and purpose  

• Compliance requirement is dependent on the law applicable, which in turn is based on the purpose and nature of the NPO’s activities.   

• Accountability and disclosure of funds raised, used and purpose  

• Register with the ACNC  

• Accountability and disclosure of funds raised, used and purpose  

• Disclosures fall into 2 categories:   

• Financial   

• Operational   

Availability of tax exemptions  

• Need Charity Status for tax exemption for the organization; donors do not get tax deduction  

• Need Institution of Public Charity (“IPC”) status for Donors to get tax deduction for their donations  

• Unincorporated NPO: “Beyoungri Im-ui Danche” derives its “nonprofit legal person” status for tax exemptions, based on the Enforcement Rule of the VAT Act  

• Incorporated NPO: “Beyoungri Bubin” derives its “nonprofit legal person” status for tax exemptions based on nonprofit laws. There are different tax laws for each type / nature of NPO (e.g., schools, medical services etc. These laws set out the criteria to be granted tax exempt NPO status.   

• All ACNC-registered charities can apply for income tax exemption  

• Tax-exempt charities may also receive refunds on dividends franking credits, i.e., dividends from shares owned, at gross.   

• Tax exempt charities may be eligible for GST concessions  

• ACNC-registered charities can apply for and obtain employee fringe benefits tax rebate or full exemption  

• Qualify to be Deductible Gift Recipient (“DGR”), whereby the respective donor’s contributions will be tax deductible for the donor’s personal tax    

International fundraising limitations  

• 80/20 Rule – 80% of funds raised locally must be used for local objectives   

• The Korea “Act on Collection and Use of Donation” comprise specific legislations that guide the fundraising activities of NPOs.   

• The philanthropy culture gravitates towards funds raised to be used for local initiatives  

• Assistance for Nonprofit and Nongovernmental Organizations (ANNO) Act of 2000 provides legal framework for government grants and support or NPOs. To receive financial support from the central and local governments, the NPO must be registered as “Beyoungri Min- Gan Danche” (nonprofit private organizations)   

• The ACNC does not regulate fundraising. However, the Charity still needs to observe the relevant state and territory laws, as well as corporations and consumer laws.  

Cost Ranking / Social Security / Payroll tax*  

• 1 / 17% / 0%  

• 3 / 9.96% / 0%  

• 2 / 9.5% / 0%  

Other advantages  

• Political stability  

• English is an official language  

• Government offers a nurturing environment to become a ‘charitable’ hub in the region   

• Registration is generally straight forward  

• Centralized oversight under the Commissioner of Charities  

• Proliferation of NPOs, local and foreign based, in country; generally a familiar situation and accepted  

• Awareness of NPOs and International Organizations such as UN further increased in the last decade due to local politician and diplomat Ban Ki-moon’s role as the former Secretary-General of the United Nations.   

• The centralization of all charities under the ACNC and tie-back to the Australia Tax Office (“ATO”) makes the process transparent and straight forward   

• There is a fairly strong environment for charities to thrive in Australia. ACNC currently manages over 58,000 charities  

Other disadvantages  

• Bank account set up is tedious as banks follow a stringent KYC process  

• Registration is decentralized and complex  

• No central government legislation on NPOs, resulting in complexity (depending on nature and type of NPO). In 2020, over 20 ministries are involved in the nonprofit incorporation process  

• Many official regulations are in Korean language; adds translation challenge  

• Australia’s is geographically distant from the core South-East Asia region. Thus, coordinating foreign objectives and projects cross-border may be challenging