2.1.1. Tax Benefits
The progressive tax reform introduced at the end of 2018, included adoption of amendments in two laws relevant for CSOs, the Law on Profit Tax and the Law on Personal Income Tax. However, during 2019, one part of the legal solutions of the progressive tax reform was “suspended for the next three years” by the new Minister of Finance. Fortunately, there were no changes in regard to the provisions concerning CSOs. Namely, CSOs are not subjects to the Law on Profit Tax and the new Law on Personal Income Tax exempts them in respect of the compensation paid tovolunteers, all accommodation, food and transportation costs for attendees of events organized by the CSOs, as well as travel expenses for attending educational activities and events by educational institutions and organizations abroad.
In addition, the Law on Value Added Tax (VAT) was amended and became more favorable for CSOs. Namely, with the amendment all taxpayers (including CSOs), whose total turnover exceeded 2 million MKD (approx. 32,000 EUR) in the past calendar year or whose total turnover is anticipated to exceed the amount at the beginning of the performance of the business activity or to exceed the amount during the year, shall be obliged to register for VAT. The previous treshhold was significantly lower, 1 million MKD (approx. 16,000 EUR) and presented a burden to CSOs that aimed to engage in economic activity.
Finally, the grants and donations from foreign donors are VAT exempted, with the precondition of going throughthe procedure of registering the project in the Central Donor Assistance Base led by the Secretariat of European Affairs. The VAT exemptions are the most used tax exemptions.
Chart 6. What type of tax benefits are used in the work of your organization? (%)
According to the survey, nearly half (48.47%) CSOs use VAT exemptions, 5.52% use personal income tax exemptions, and 3.07% exemptions on the income from economic activity. Over a third (34.36%) don’t use exemptions, and 14.11% responded they did not know that exemptions are available for their organization. The long and burdensome project registration procedure in the Secretariat for European Affairs inflicts additional costs and difficulties for CSOs.
The legislation provides benefits to all CSOs for their economic activities. Pursuant to the Law on Profit Tax they do not pay profit tax. The Law also specifies which income is not taxed. The income becomes taxable once the the total threshold of one million MKD (approx. 16.000 EUR) is exceeded with 1% tax calculated against the exceeding amount only. In addition to the economic activities, non-taxable revenues are those generated by membership fees, charitable contributions, donations, grants, gifts (in money, goods, property rights), wills, legates, revenues from dividends from trade companies established with the funds of the association, and revenues from the Budget. According to the survey, five CSOs use tax benefits for economic activity. Out of the 84 CSOs which selected using tax benefits, 26 said they did not know benefits exist, while the rest consider the administrative obligations оn using tax benefits for economic activities to be on the average 6th degree of difficulty (on a scale from 1 to 10, where 1 is the least difficult).