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 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 taxpayers) Tax deductions Tax credits Percentage designations Other incentives (e.g. gift aid)

Forms of indirect support Tax benefits to volunteers of NGOs Tax benefits to beneficiaries of NGOs 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 criteria (stricter than other NGOs) Higher level of indirect support “in exchange” Sometimes additional benefits (e.g., direct support)

HUNGARYPBOsNon- PBOs Profit tax exemptionYes Profit tax ex. on related economic activities Yes Profit tax ex. on unrelated economic activities Up to 15%Up to 10% % designationYes Tax deduction for donorsYesNo Tax benefit for volunteersYesNo

POLANDPBOsNon- PBOs Profit tax exemptionYes Profit tax ex. on related economic activities YesNo Profit tax ex. on unrelated economic activities No % designationYesNo Tax deduction for donorsYes Tax benefit for volunteersYesNo

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

Some dilemmas Do tax incentives really help with development of philanthropy? 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 competition, creates opportunity for abuse YES: it helps fulfill NGO’s mission YES: it helps sustainability of NGOs (greatest % of NGO income worldwide from economic activities)

Tax Tools: 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

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