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Aleksandar Buzarovski
What is tax base of income tax and what is the difference within non-for-profit organizations and trade companies?
Article 8
(of the Profit Tax Law)
The basis for computation of profit tax is the profit determined in the tax balance. Profit represents the difference between the total incomes and expenditures of the taxpayer, in amounts determined by accounting regulations and accounting standards, excluding the incomes and expenditures that are differently determined by this Law.
Comment
The basic difference within non-for-profit organizations and trade companies results from the way of recognizing incomes and expenditures according to an accounting principle of modified occurrence of business changes, that is transactions, defined in Article 13 of the Law on Accountancy for Non-for-profit Organizations.
When we consider the specifics, article 13 of the Law on Accountancy for Non-for-profit Organizations should be taken into consideration and it states the following:
1 Recognition of incomes and expenditures of non-for-profit organizations is carried out according to an accounting principle of modified occurrence of business changes, that is transactions.
2 An accounting principle of modified occurrence of business changes, that is transactions from paragraph (1) of this article means incomes to be recognized in the accounting period in which they occurred according to the criteria of measurability and availability. Incomes are measurable when they can be expressed in values. Incomes are available when realized in the accounting period or within 30 days after the expiry of the accounting period, in case they refer to the accounting period and serve for covering obligations from that accounting period.
3 An accounting principle of modified occurrence of business changes, that is transactions from paragraph (1) of this article means expenditures to be recognized in the accounting period or within 30 days after the expiry of the accounting period, in case the obligation for payment is made in that accounting period.
4 Items of stock of materials are recognized in expenditures by purchase value. Purchase value comprises purchase price, increased for import duties, value added tax, expenditures for transport and all other expenditures that can be directly added to the purchase value, that it is purchase expenditures, reduced for discounts and rebates.
Article 18 of the Rulebook on accountancy for non-for-profit organizations should also be taken into consideration and it says:
Recognition of incomes and expenditures of non-for-profit organizations is carried out in a way determined in accordance with Article 13 of the Law.
Non-for-profit organizations’ incomes are considered available in terms of Article 13 paragraph 2 of the Law when they are realized (paid) in the accounting period they refer to, that is by 31 December in the current business year or realized (paid) within 30 days after the expiry of the accounting period they refer to, that is by 31 January next year, in case incomes refer to accounting period and serve for covering obligations from that accounting period.
Non-for-profit organizations’ expenditures in terms of article 13 paragraph 3 of the Law are recognized in the accounting period they are made, that is by 31 December in the current business year, if paid in the accounting period they refer to, that is by 31 December in the current business year or paid within 30 days after the expiry of the accounting period, that is by 31 January next year, in case the obligation for payment to be made in that accounting period.
Expenditures for spending short-term assets, such as: food, medical materials and drugs, are recognized at the moment and in the amount of occurrence of real spending.
This principle actually means the following:
Incomes are recognized in the accounting period in which they occur according to the criteria of:
a) measurability (to be able to be expressed in values); etc
b) availability (to be realized, that is, paid not later than 31 January next year and to refer to the previous year and serve for covering obligations from that year).
Expenditures to be paid not later than 31.01. following year.
Extract from Review of tax provisions for civil society organizations with comment
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