NEW TAX BENEFITS FOR NGOs ARE ADOPTED

Dear Colleagues,

At the end of 2002, amendments to the Corporate Income Taxation Law and the Law for Taxation on the Income of Physical Persons were adopted, which provide tax benefits to NGOs and their donors. This is a result of the activity of the joint working group including representatives of the Ministry of Finance, the Bulgarian Center for Not-for-Profit Law, the Open Society Foundation and Members of Parliament, with the assistance of the Resource Center Foundation, the Bulgarian Charities Aid Foundation and the Center for Study of Democracy. This result was made possible also because of the support for the campaign for tax amendments received from a great number of NGOs throughout the country.

According to Art. 48, par. 2 of the Corporate Income Taxation Law after the amendments, a donation accounted as an expenditure, is taxed at the rate of 15% if the donation is in favor of legally registered denominations and public benefit NGOs, registered in the Central Registry at the Ministry of Justice. The provision is applicable if the donation is not deducted from the positive financial result of the donor before tax transformation but is accounted as an expenditure, which is taxed at the source. The previous amount of that tax was 25%.

The last amendments to art.20, par.6 from the Law on Taxation of the Income of Physical Persons provide that from the taxable income of physical persons working under labor contract and similar employment contracts are deducted up to 10% of the income for donations made for the achievement of specific purposes or in favor of a list of organizations among which are public benefit NGOs, registered in the Central Registry and non-commercial legal entities with charitable, social, environmental, healthcare, scientific, educational, cultural and sports purposes.

The Ministry of Finance had a proposal for revocation of the VAT exemption when gratuitous aid is imported by public benefit NGOs, registered in the Central Registry. As a result of our campaign this exemption remained in force.
The Ministry of Finance and the Parliamentary Committee of Budget and Finance did not accept the proposal for revocation of the tax, withheld at the source, for dividends and liquidation proceeds paid in favor of public benefit NGOs, registered in the Central Registry. The rate of this tax remains 15%. The proposal for tax exemption of the mutual benefit NGOs for donations received and granted under the Local Taxes and Fees Law was not accepted as well.
BCNL expresses its gratitude to all the organizations from around the country for the support in the campaign for amendments in the tax framework for NGOs. We would like to emphasize our readiness to carry on working for improving the tax treatment of NGOs for which we will rely on your future support.

Sincerely,
Luben Panov
Director,
Bulgarian Center for Not-for –Profit Law