Author: Aleksandar Buzarovski Tax incentives of donation and sponsorship   1 Tax incentive beneficiaries   Article 12 Donor and recipient of donation and sponsorship are entitled to tax incentives projected with this law.   Comment A tax incentive beneficiary can be the donor and sponsor provided they are related to public activities and public interest. A public activity is an activity in the area of protection of human and citizens’ rights, education, science, development of information technology society and transfer of electronic data, culture, sport, health, social protection, protection of disabled children, blood donation, children’s  protection, environmental protection and other activities established by law as public ones. A public interest is supporting or promoting activities in the area of protection of human rights, promotion of culture, ethics, education, science, information technology society and transfer of electronic data, sport, protection of civil society development, promoting blood donation, promoting of international cooperation and other activities established by law. The public interest and public activities are confirmed by the Ministry of Justice. A recipient can realize tax incentives by a tax refund of VAT or by not paying income tax using the special-purpose fund institute.   2 Tax incentives within personal income tax   Article 13 (1) A physical person who donates funds to a legal person, according to the provisions of this law, has the right to personal income tax reduction established upon the basis of his annual tax submission (form PDD-GDP) in the amount of 20% of the annual tax due of the donor, but not more than 24,000 denars. (2) Personal income tax is not paid for income on the basis of received donations in accordance with the provisions of this law.   Comment There are two types of tax incentives in the personal income tax, as follows: - tax incentives to the donor; and - tax incentives to the recipient. Taking into consideration that a taxpayer of personal income tax is a physical person, it means that only if a physical person acts as a donor, he can use an incentive, in the maximum amount of 24,000.00 denars. For example: - The person John Doe gives the donation or sponsorship in the amount of 100,000.00 denars to an association whose activity is sports development; - by decision, the Public Revenue Office assesses personal income tax to 50,000.00 denars; - the tax that John Doe is supposed to pay is 40,000.00 denars (50,000.00 – 10,000.00).   3 Tax incentives within profit tax Article 14 (1) The amount of the provided donation in the current year, according to the provisions of this law is acknowledged to the taxpayer of the profit tax as expenditure in the tax balance with a total amount of 5% of the total profit. (2) The amount of the provided sponsorship in the current year, according to the provisions of this law, is acknowledged to the taxpayer of the profit tax as expenditure in the tax balance with a total amount of 3% of the total profit.   Comment Tax incentives within profit tax are the same for the donor and the recipient, i.e. they are 5% of the total income for donations, i.e. 3% of the total income for sponsorships. This incentive is the same only if the association gives the received donations and sponsorships to other associations. If the received donations and sponsorships are used for an activity set by the statute, i.e. it does not give them as a donation and sponsorship, the provisions for special-purpose funds from the Profit Tax Law apply.   4 Tax incentives within value added tax   Article 15 (1) The turnover for the donation’s realization according to this law is considered a turnover in accordance with article 3, paragraph 3, items 1 and 2 and article 6, paragraph 3, items 1 and 2 of the Law on Value Added Tax. Provision of means from the Budget of the Republic of Macedonia is carried out in the same way as the turnover made for realization of foreign donations for financing projects for which the Government of the Republic of Macedonia has concluded contracts. (2) Value added tax is not calculated on compensation for tickets for cultural, sports or other public events, without excluding the right to deduction of the previous tax, if the total income is aimed and used for financing an activity of public interest within activities in article 3, item 4 of this Law. (3) Value added tax is not calculated on compensation for communication service, in accordance with the Law for electronic communications, when the beneficiary donates funds for financing an activity of public interest within activities of this law, without excluding the right for deduction of the previous tax. (4) For implementation of this article the Minister of Finance passes a statute in the period of 60 days from the day of passing this law.   Comment A special rulebook has been passed on the use of VAT exemptions (Official Gazette of the Republic of Macedonia, No. 90/2007). The procedure for exemption from duty and other costs, excise tax and VAT during the import of assets and goods, as well as the procedure for providing funds from the Budget of the Republic of Macedonia for paying excise tax and VAT for turnover within the country during the realization of projects financed by foreign donors, mentioned in the part of the Law on VAT, also applies here.   5 Tax incentives within property taxes   Article 16 (1) Donation of objects and material assets is exempt from inheritance and gift tax when the donor transfers the right of possession and use to the recipient. (2) Donation of objects and material assets is exempt from the property tax in the following five years, after the year in which the donation was provided.   Article 17 (1) To a foreign legal and physical person, upon his request, the Public Revenue Office (hereafter: PRO) issues a document which certifies that the person has donated or sponsored within an activity of public interest in the Republic of Macedonia. (2) The document of paragraph 1 of this article is issued so that the donor/sponsor can receive a tax incentive for the profit tax in his country.   6 Exemptions from tax incentives   Article 18 Tax incentives cannot be realized when the donation and sponsorship are used for: 1) recipient’s activities aimed towards support of political parties and party campaigns; and 2) giving enterprises from other enterprises   Extract from the publication “Tax Provisions Review for Civil Society Organizations with Comment”