What is the NGO tax treatment like in Macedonia? 

Without authorized fiscal treatment 
 

Ana Petrovska has asked the question: What is the NGO tax treatment like in Macedonia? Prof. Dr. Vesna Pendovska from the Faculty of Law in Skopje gave us the following answer:
"After their appropriate registration in the authorized legal register, the NGOs receive characteristics of a legal entity. According to this, they automatically become a subject of all fiscal instruments, which are relevant for the legal entities and the exceptions are regulated by the existing tax laws. The NGOs are obliged to pay income tax on a level of entities, personal income tax and social contributions for their personnel (except for the volunteers), property tax, gift tax and inheritance tax, value added tax for buying goods and services, duty and other import taxes, as it is issued by the taxes and duties laws and the secondary regulation.

The Civic associations and foundations law analysis states that de lege lata regulation seems insufficient as far as a very important issue is concerned - it does not provide appropriate and detailed provisions for the special kinds of NGOs, that is, the organizations of public goods. This kind of NGOs, in comparison with the regular NGOs, in most of the countries have authorized fiscal treatment thus providing a long-term fiscal sustainability and growth of the organization of public goods. The law concerning this issue is not clear. Thus, the publicly authorized organizations of public goods fiscal treatment will be established on the basis of "case by case", managed by various ministries.

There are two big legislative sources of establishing the NGO tax treatment in Macedonia: 1. Income tax law; and 2. Personal income tax law.

he NGOs are obliged, according to the provisions of the Income tax law as any other legal entity. Apart from the explicitly legal tax release for the enterprises, which employ invalids, the Law provides a special legal exempt from the NGOs income taxation from membership fees. Namely, tax released can be each income which is strictly purposed for carrying out the legal entity's activities - taxpayer (from budget, funds etc.) This kind of tax is not included in the NGOs tax base for the income tax's objectives. In our opinion, in spite of the fact that the Income tax law explicitly does not mention the membership fees, it is obvious that they are in the category of marked income and therefore should be treated as tax released.

This law also regulates the authorized tax treatment of the financial assets donated for objectives of public interest by the business entities from the organizations, which carry out such activities or services. The original text of this law which forecasted a possibility for donating 10% of the shown income before taxation, with the amendments from 2001 it has been decreased into 3% of the enterprise's gross-income. The Income tax law does not recognize, nor regulate the special status of the non-profitable organizations of public goods "tax release".

The Personal income tax law regulates the physical persons', that is individuals' tax obligation. Its main principle is the global income taxation of any source in the period of one year (the taxation period responds to one calendar year) which origins from Macedonia or abroad (world income principle), realized in cash, in kind or some other way. The non-residents are obliged only to an income generated within the territory of Macedonia. Progressive tax rates are applied to the personal income tax. Since February 2001 there have been some meaningful changes related to the level of tax rates, as well as the method of establishing the scales/rates of the progressive tax tariff. Instead of three rates of 23%, 27% and 35%, there are only two rates: 15% of the monthly income not bigger than 30,000 denars and higher rate of 18% for income over 30,000 denars plus 4,500 denars. On annual basis, the personal income tax is implemented after the same two rates - basic rate of 15% of annual income is subject to taxation not more than 360,000 denars and for income higher than the legally set limit, 54,000 denars and 18% of the part higher than 360,000 denars."  

Prof. Dr. Vesna Pendovska
Faculty of Law, Skopje

 

You can find more information in the article "Macedonian non-governmental organizations tax treatment" part I and II, by Prof. Dr. Vesna Pendovska, in the Ministry of Finance's bulletins 12/2001 and 1/2002 www.finance.gov.mk .