The legislative and tax system has couple of benefits for civil society organizations. The most important one from Article 13a of the Rulebook on tax exemption procedure regulates tax exemption of projects funded by the European Union. Exemption from VAT is realized on total contract amount, including European Union resources, as well as co-funding resources. Non-governmental organizations are also exempt from tax on real-estate which is in their ownership, if it is used for achieving the goals of organizations. On the same ground they are exempt from tax on real-estate turnover. However, CSO representatives stress that more tax benefits are necessary, bearing in mind the fact that CSOs are non-profit organizations and paying all taxes as companies or corporations do affects the volume of services they can provide. It is significant to emphasize that 58.3% of organizations that participated in the online questionnaire were not familiar with the existence of tax benefits for NGOs.
6.25% of surveyed CSOs reported they had to pay fees to the State in order to receive funds, apart from regular bank fees for transactions. On the other hand, 10.41% of organizations said they had to pay bank fees, while none of CSOs reported they had to pay indirect taxes.
When it comes to taxes for economic activities of CSOs, the tax base is reduced for 4.000 EUREUR if the income is used in a way that contributes to achieving the goals of the organization. Organizations that are founded only for conducting non-profit activities do not pay income tax and are not obliged to report it, according to the Law on Corporate Income Tax. Taxes, surtaxes and contributions to employee earnings are calculated as is the case with any other employer. Tax base is 70% of gross earning at the rate of 9%. Only 2.08% of CSOs reported they used tax benefits for economic activities. However, 6.25% of CSOs stated they use tax benefits such as exemption of VAT.
The Income Statement and Balance sheet, that every organization must submit at the first quarter of the year for the previous year, contain overview of all income and expenses. There is no specific category that is named Passive investments, but there is a category Other income. None of the CSOs reported they utilize passive investments.
As of December 2019, there are 207 domestic endowments in Montenegro, which are registered as foundations. Out of all CSOs that participated in online questionnaire, only 2.08% reported complicated procedures for registration, while 6.25% report complicated administrative requests for operating endowments. In addition, 2.08% of CSOs reported high financial costs for maintaining endowments.
0 – 20 Fully disabling environment20 – 40 Disabling environment
40 – 60 Partially enabling environment60 – 80 Enabling environment
80 – 100 Fully enabling environment