Overview of indirect government support to NGOs Nilda

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Overview of indirect government support to NGOs Nilda Bullain European Center for Not-for-Profit Law

Overview of indirect government support to NGOs Nilda Bullain European Center for Not-for-Profit Law (ECNL)

Forms of indirect support ¢ Tax benefits for organizations l l l l Profit

Forms of indirect support ¢ Tax benefits for organizations l l l l Profit tax exemption on “regular” income Profit tax exemptions on economic activities Property tax Customs tax VAT Fees and dues Local taxes • Etc.

Forms of indirect support ¢ Tax benefits for donors of NGOs (individual and corporate

Forms of indirect support ¢ Tax benefits for donors of NGOs (individual and corporate taxpayers) Tax deductions l Tax credits l Percentage designations l Other incentives (e. g. gift aid) l

Forms of indirect support ¢ Tax benefits to volunteers of NGOs ¢ Tax benefits

Forms of indirect support ¢ Tax benefits to volunteers of NGOs ¢ Tax benefits to beneficiaries of NGOs l Personal income tax exemptions related to training, scholarships, aid, assistance etc. received from NGO

Public Benefit Status Special status for granting certain tax exemptions ¢ Transparency and accountability

Public Benefit Status Special status for granting certain tax exemptions ¢ Transparency and accountability criteria (stricter than other NGOs) ¢ Higher level of indirect support “in exchange” ¢ Sometimes additional benefits (e. g. , direct support) ¢

HUNGARY PBOs Non. PBOs Profit tax exemption Yes Profit tax ex. on related economic

HUNGARY PBOs Non. PBOs Profit tax exemption Yes Profit tax ex. on related economic activities Yes Profit tax ex. on unrelated economic activities Up to 15% Up to 10% % designation Yes Tax deduction for donors Yes No Tax benefit for volunteers Yes No

POLAND PBOs Non. PBOs Profit tax exemption Yes Profit tax ex. on related economic

POLAND PBOs Non. PBOs Profit tax exemption Yes Profit tax ex. on related economic activities Yes No Profit tax ex. on unrelated economic activities No No % designation Yes No Tax deduction for donors Yes Tax benefit for volunteers Yes No

Some dilemmas ¢ Should government provide direct financing to PBOs only? YES: more accountable

Some dilemmas ¢ Should government provide direct financing to PBOs only? YES: more accountable organizations l YES: public money spent on public purposes l NO: depends on the goal of financing l Direct spending can be controlled through contractual relationship – PBO is primarily a tax status l

Some dilemmas ¢ Do tax incentives really help with development of philanthropy? l l

Some dilemmas ¢ Do tax incentives really help with development of philanthropy? l l l NO: research shows worldwide that tax relief is not main motivation for giving YES: tax incentives can influence how much people give and in what way ? : percentage laws – no proven effect as yet

Some dilemmas ¢ Should related economic activities be tax exempt? NO: it fosters unfair

Some dilemmas ¢ Should related economic activities be tax exempt? NO: it fosters unfair competition, creates opportunity for abuse l YES: it helps fulfill NGO’s mission l YES: it helps sustainability of NGOs (greatest % of NGO income worldwide from economic activities) l

Tax Tools: www. icnl. org ¢ Survey of Tax Laws Affecting NGOs in Central

Tax Tools: www. icnl. org ¢ Survey of Tax Laws Affecting NGOs in Central and Eastern Europe ¢ Survey of Tax Laws Affecting NGOs in The Newly Independent States ¢ The Tax Treatment of Nongovernmental Organizations - A Survey of Best Practices from Around the World

Thank you! For more information: www. ecnl. org

Thank you! For more information: www. ecnl. org