AMENDMENTS IN THE TAX LAWS
On January 1st, 2006 amendments to the tax laws, some of which concerning the non-profit legal entities, entered into force.
1. The legal frame of tax incentives for the corporate donors of non-profit legal entities, set forth in the Law on Corporate Income Taxation has been altered. With the changes of the last year, the legal entities-donors were obliged in all cases to account the donations as expenses. The latter are levied with the tax withheld at the source, which is a final tax. The new moment for year 2006 is the tax rate – 10%, while for year 2005 the rate was 17%.
The expenses for donations in favor of exclusively listed persons and objectives up to a certain amount from the positive financial result are legally recognized as expenses and are directly deducted from the positive financial result of the legal entity – donor. The deduction of the positive financial result with the expenses for donations to non-profit legal entities in public benefit is up to 10% from the financial result and up to 15% from the financial result for donations for arts made in accordance with the Law on donation on arts.
The law also sets forth the restriction that the total amount of the expenses for donations for the listed entities and objectives may not exceed 65% from the positive financial result before tax transformation.
2. Under the Law for Taxation of the Income of Physical Persons, the taxable basis for physical persons is decreased with the incentives for donations amounting up to 10% for the benefit of expressly listed persons and objectives, among which are the non-profit legal entities, entered in the Central registry of non-profit legal entities for public benefit. The new moments in the legal frame are related to the opportunity for physical persons-donors, despite the source of their income – labor agreement or self employed, to deduct up to 15% from their taxable basis with the donations for cultural support. The donations should be made in the form of gratuitous aid under the Law on donation on arts.
The law also sets forth the restriction that the total amount of the incentives for donation for the benefit of the listed entities and objects may not surpass 65% from the taxаble basis of the donor; the persons making the donation, apart from not having tax obligations by December 31 of the year, should not have mandatory social security obligations as well.
3. The new thing in the legal frame of tax incentives for donations under the Law on Value Added Tax (LVAT) is that non-taxable deliveries under LVAT are (among the previously listed) donations of goods except for the excise goods, made for the benefit of gratuitous aid recipients and organizations supporting the culture according to Law on donation on arts in the cases when the donation is made under the requirements of the law.
4. The Law on Local Taxes and Fees stipulates a new rule under which gratuitous aid made in accordance with the Law on donation on arts is exempt from tax on donations.