Honorarium

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An honorarium is an ex gratia payment (i.e., a payment made without the giver recognizing himself as having any liability or legal obligation made to a person for his or her services in a volunteer capacity or for services for which fees are not traditionally required. This is used by groups such as schools or Sports clubs to pay coaches for their costs.[1][2][3] Another example includes the payment to guest speakers at a conference meeting to cover their travel, accommodation, or preparation time. Christian Church funerals and/or memorial services, are often paid by honorarium, as the minister, musicians, organist, soloist and others of out care do not have a set fee for services to grieving families. [4] [5] [6] Like wise, weddings are often paid through honorarium also.[7][8]

Taxation of honoraria[edit]

Australia[edit]

An example of this is the payments made by Australian schools to their sporting coaches.[9] They are ostensibly receiving a reimbursement for their costs in their voluntary roles as coaches. The concept of an honorarium has a tax implication. In Australia recipients of these funds make a tax declaration (known as the hobbyist form)[10] to the tax office and therefore do not have to include this money in their annual tax return.

Canada[edit]

In Canada, honoraria are considered salary and thus, taxable income under the Income Tax Act.[11] In the case where a gift is substituted for honorarium (gift in lieu of money), it is still classified as a taxable benefit by Canada Revenue Agency.[11]

In cases where an honorarium is paid to an individual who is not a resident of Canada, the honorarium is still subjected to income tax withholding (usually 15%) unless prior approval was obtained from Revenue Canada.[12]

Hong Kong[edit]

Honoraria are subjected to taxation under HK Laws. Chap 112 Inland Revenue Ordinance and also subjected to the Mandatory Provident Fund, a compulsory saving scheme for retirement.[13][14]

Indonesia[edit]

Under Indonesian National Laws, honorarium recipients are subjected to withholding tax under Income Tax Article 21.[15][16]

New Zealand[edit]

When honorarium is paid to an employee, such as mayors, chairpersons and local clubs and societies, it is not subject to withholding tax but is subject to income tax.[17] However, if the payment was not made to the above-mentioned category of people, it is subject to withholding tax rate between 33c to 48c.[18]

United Kingdom[edit]

Honoraria to employees are subject to Income Tax and National Insurance contributions under PAYE.[19][20] However payments are made based on services required and not bound by any contractual arrangements.

United States[edit]

An honorarium paid to a U.S. resident for services performed within or outside the U.S. is subject to federal (and in some cases state) income tax.[21]

See also[edit]

References[edit]

  1. ^ Washington State Executive Ethics Board, ethics.wa.gov, An example of the rules for payment of an honorarium in the United States.
  2. ^ cbc.ca, Sports, Coaches courted with payment in minor hockey, Gone are the days when all coaches were unpaid volunteers, By Kristina Rutherford, CBC Sports, Dec 05, 2008
  3. ^ McMaster University, mcmaster.ca, A Canadian example of the use of an honorarium.
  4. ^ Caring.com, What is the standard donation for a minister who performs a memorial service?, July 13, 2016
  5. ^ funeralwise.com Good Etiquette Guide for the Surviving Family – Planning the Funeral
  6. ^ heart2soul.com, Funeral Honorarium/Funeral Tipping, By Karen Zinn
  7. ^ weddingwire.com, Honorariums for Minister
  8. ^ weddings.costhelper.com, How Much Does an Officiant Cost?
  9. ^ Australian Swimming Coaches & Teachers Association, An example of an Australian school paying a coaching honorarium.
  10. ^ Australian Taxation Office, Australian tax law regarding the payment of honoraria
  11. ^ a b Queen's University, queensu.ca How to Pay an Honorarium
  12. ^ McMaster University's Faculty of Health Sciences, THE HOOKER DISTINGUISHED VISITING PROFESSOR TRUST FUND
  13. ^ Hong Kong Special Administrative Region, Report No. 43 of the Director of Audit
  14. ^ University of Hong Kong , Mandatory Provident Fund
  15. ^ Embassy of Indonesia in Ottawa, ARTICLE 21 INCOME TAX
  16. ^ Pajak Indonesia, Konsultan Pajak, Taxation of Expatriate Employee
  17. ^ New Zealand Inland Revenue website, When to tax honoraria
  18. ^ New Zealand Inland Revenue website, Activities subject to withholding tax
  19. ^ HM Revenue and Customs. "Honoraria and similar payments". PAYE for employers. Retrieved 26 May 2012. 
  20. ^ HM Revenue and Customs. "NIM02205 – Class 1 NICs: Earnings of employees and office holders: Honoraria and similar payments". National Insurance Manual. Retrieved 26 May 2012. 
  21. ^ UCAR, Honorarium Payment Guidelines