Draft law on donations and sponsorships in public activities

Expression of goodwill for inciting civic society

 

What will the Law on donations and sponsorships in public activities bring to the civil society organizations in Macedonia?
According to all comparative analyses, taxation is the biggest legal obstacle for the development of civil society organizations in the Republic of Macedonia. In comparison with the other countries from the region, Macedonia has the least tax relief. Tax incentives of individual and corporation taxes have not been introduced into the legislation yet.

However, on the initiative of a group of members of the parliament, on 22nd February the Parliament of the Republic of Macedonia passed a proposal for passing a law on donations and sponsorships in public activities. The law should make tax benefits in order to encourage mobilization of private resources for activities of public interest.

There is a need for such law and the objective for its passing is especially justified, and it enables citizens and the business sector to get involved in solving relevant social problems and needs, contributing to the social and economic development of the country on its way to the European Union.

The law organizes giving and receiving donations and sponsorships, the purpose of giving and receiving, donors and recipients, the subject, use, tax relief and registering and control of donations and sponsorships in public activities.

Providers of donations and sponsorships can be domestic and foreign physical and legal entities and a recipient can be only a domestic legal entity, and under special conditions, a foreign legal entity. For the civil society organizations it is important that a domestic legal entity is considered to be a public institution, a local self-government unit, citizens’ associations and foundations of public interest, trade organizations, a managing body or any other subject.

 

Subjects of donations and sponsorships are: financial resources, any kind of goods and services, produced or purchased; testamentary and other transfer rights.

The law also projects tax incentives for the donor and the recipient of the donation and the sponsorship.

Tax incentives refer to the personal income tax, gain tax, value added tax, property taxes.

Key tax relief is the following:

According to the draft law, the physical person who donates financial resources has a right to the personal income tax decrease, determined on the basis of his annual tax return in the amount of 20% of the annual tax debt of the donor, but not more than 24,000 denars.

The taxpayer of the gain tax for the amount of the given donation in the current year is recognized as expenditure in the tax balance in total amount of 5% of the total income and for sponsorships in total amount of 3% of the total income.

The turnover for the realization of the donation according to this law, for the objectives of the value added tax, on the basis of providing funds from the budget of the Republic of Macedonia for paying VAT is treated in the same way as the turnover for realization of foreign donations for financing projects that the Government of the Republic of Macedonia has signed contracts for.

The donor and the recipient of the donation and sponsorship are obliged to make a report on the given and received donation and sponsorship.

The Public Revenue Office (PRO) and the other state and municipality bodies control donating, receiving and using the donation and sponsorship in cases of application of tax incentives in accordance with the law.

If PRO and the other competent bodies during their control come across any irregularities and misuses while using the donation or the sponsorship, they bring criminal charges.

The proposal is undoubtedly an expression of goodwill for inciting civic society. Civil society organizations have shown their interest in participation in creating the law through organized public disputes with an unambiguous message that it is very important for it to contain solutions that reduce the opportunities for vagueness, ambiguity and misuse.