NEWLY
INDPENDENT STATES
CENTRAL ASIA
Index:
Belarus ; Kyrgyzstan
; Moldova ; Russia ;
Tajikistan ; Ukraine ; Uzbekistan
BELARUS
Ministerial
Decree # 280 dd. February 23, 1999
The
Law on Non-Governmental, Non-Profit Organizations
By Vadim Nee, ICNL Advisor
In
June 1999 a new Law on Non-governmental, Nonprofit Organizations was adopted by the Kyrgyz
Parliament. It has not been signed yet by the President of Kyrgyzstan and the official
final text of the law is not available to the public. However, according to some Kyrgyz
NGOs, if the final draft did not suffer through major revisions, it will improve the legal
environment for NGOs.
The new law has
been prepared during the course of several years as a result of joint efforts of NGOs and
people’s deputies of the Kyrgyz Parliament. However, the final version of the law
went through heated discussions between different NGOs.
The basic purpose
of the law is to strengthen both the principle legal status of a non-profit organization,
and its specific forms (such as public associations, institutions, and foundations). The
principle advantages brought to NGOs by the new law are (i) the declaration of the freedom
of association either with or without establishing a separate legal entity, (ii) the
simplified registration procedure eliminates the requirement to register an NGO based on
the territoriality of its activity, (iii) the list of documents established by the law
limits government’s authority to expand the mentioned list other than through
amending the law, (iv) the permission to carry out any activities not prohibited by the
law and stated by an organization, (v) the possibility to set up different organizational
forms of NGOs, such as public associations, foundations, and institutions, which were
declared, but not regulated in details by the Kyrgyz Civil Code, (vi) the need to regulate
political parties and religious organizations separately from other NGOs, and (vii) other
advantages.
However, NGOs
criticized several provisions of the law, such as the compulsory re-registration of NGOs
due to the adoption of the new law. A few alternatives for replacement of the given
provisions have been submitted to the Parliament’s consideration. Other provisions
criticized by NGOs were the lack of restrictions for the government authorities to
supervise NGOs and provisions on the order of resolution of conflict of interest in NGOs.
Appropriate amendments to the draft were prepared by NGOs and submitted to the Parliament.
Kyrgyz and
international NGOs are looking forward to see the final text of the new law to start
working on its implementation.
Draft Law on Religion
A draft law on religion was approved by the
Jogorku Kenesh at the first reading, on March 4. This draft if passed would replace the
Law of December 1991.
The
main concern about this draft is the ban on unregistered religious groups. These would be
prohibited to preach, own property or carry out any religious activity. Further, it seems
that the registration itself could be hampered by the large discretion given to the State
Organ for Religious Affairs competent for the registration of religious organizations.
In addition, the draft provides that only religious
organizations and academic institution will be allowed to pursue the publication and
distribution of religious literature.
For more
information regarding this draft, please contact the Keston Institute [www.keston.org] at Tel.: + 44
1865/31 10 22; Fax: + 44 1865/31 12 80; e-mail: keston.institute@keston.org
For a complete listing of Documents ICNL has in its documentation center on Kyrgyzstan, Click Here!
On
June 11, the draft law on foundations passed its first reading in the Moldavian
Parliament. The draft law previously received a reading in the Parliament of the old
convocation in 1997. However, according to the Parliament’s Procedures the draft law
will still have to go through another reading. It is expected that this second reading
will take place no later then in the fall of this year.
Russian
Federation: New Federal Law on Foreign Humanitarian or Technical Assistance
By Petr Pajas, ICNL
· The humanitarian or technical assistance may be exempt from some federal or local taxes only upon obtaining a special certificate issued by an agency of the Federal Government. The form of the certificate and procedure required is to be determined by the Russian Federal Government before September 1999. The certificate should identify the financial resources, goods, services and works, which form the specific humanitarian or technical assistance program or project.
· The foreign assistance must be provided free of charge by foreign governments or their national, regional or municipal branches, as well as by international or foreign institutions or not-for-profit organizations. However, commercial legal bodies or natural persons are no longer included in the list.
· All programs or projects of foreign technical assistance must be registered by a procedure which is to be determined by the Russian Federal Government within three months.
· The scope of the items, which are considered to form the foreign assistance has been substantially enlarged: It includes not only financial resources, but also any other kind of assistance, including goods, services and works done in the framework of the assistance on the territory of the Russian Federation. However, all goods which are subject of the excise tax are excluded and may not be counted as a part of the assistance.
· All items certified to be a part of the foreign assistance are now free of income tax. Moreover, the conditions limiting the exemption of those items, which are provided according to the intergovernmental agreements have been omitted. Ms. Semionkina remarks to this point, that NGOs, which have different accounting procedures from commercial companies, may have difficulty with assigning the obtained grants and humanitarian aid to the category of those incomes which the tax law recognizes as income tax exempt.
· The VAT due to be paid for goods imported, services provided or works done as a registered part of the free of charge foreign assistance may be reimbursed in full from the state budget.
· The tax on property of companies may now be reduced by subtracting the balance value of all property, which was obtained as a part of the foreign assistance. This reduction may be used for the first two years from when the property was obtained. The same is valid also for any property directly used for the purpose of the registered foreign assistance.
· Also new is the possibility to subtract from the income tax base of natural persons those incomes, which were obtained as a part of the humanitarian assistance.
· Similarly, the dues paid by employers for employed natural persons to the funds of insurance may not include those wages paid to foreigners, who were employed for the purpose of the assistance and during the period of the assistance project and/or program.
· The tax-payers of the tax on means of transportation and their purchase and of the highway tax are exempt from these taxes in case of using or purchasing the transportation means exclusively for the needs of the foreign assistance purpose.
· The goods imported to the territory of the Russian Federation or exported from it for humanitarian or publicly beneficial purpose by foreign governments and/or international organizations are exempt from customs fees.
* Based on the text of the Act and comments to it by Irina Leonidovna Semionkina, CAF Moscow, June 1999.
For a complete listing of Documents ICNL has in its documentation center on Russia, Click Here!
In
June 1999, the Tadjik Parliament adopted the new Civil Code. However, the final official text of the Code has
not yet been available to the public. The new Code has yet to be signed by the President
of Tadjikistan.
The draft Tadjik
Civil Code was prepared based on the 1992 Model Civil Code and is similar to the civil
codes of Russia and other Central Asian countries (except Turkmenistan). The new Civil
Code allows the existence of different forms of NGOs, such as public associations,
foundations, and institutions. Like provisions in most other Civil Codes in Central Asia,
the Tadjik Civil Code requires follow up legislation in order to establish these forms of
NGOs. However, the adoption of the Civil Code is an extremely important step in the
development of the civil legislation in Tadjikistan, including the NGO legislation.
The Tax Code and Non-Profit Organizations in the Ukraine.
In English or In
Russian (Cyrillic Fonts required)
A
Roundtable on National Register for Not-for-Profit Organizations in Ukraine: By-laws
do not Substitute for the Legislative Flaws
By Alexander Vinnikov,
Pylyp Orlyk Institute for Democracy, Kyiv, Ukraine
Under the Ukrainian Law on Corporate Income Tax of 1997, a number of organizations are eligible for not-for-profit status and relevant tax deductions. Deductible income includes donations, passive income, fees for related services and membership. The General Tax Administration (GTA) is to keep a national register of not-for-profit organizations (such as public benefit organizations, non-business associations, churches, credit unions, pension funds, political parties, state-sponsored schools or museums). The GTA also makes the decision, if any organization meets the legal demands for not-for-profit status and has discretionary powers to include and exclude from the register. It should be stress that NGOs not included to the register are still legal entities, which may not distribute any dividends between membership. However, such NGOs just lose the right to tax deductions on corporate income tax and are required to pay 30% of total grants or gifts received and the relevant fines if they fail to pay this tax.
It makes NGOs most vulnerable given the lack of state funding and arbitrary decisions made by local tax authorities about “related-unrelated” NGOs activities. Some NGOs have to give up public benefit activity or to shift into businesslike operations losing any legal tax deductions. GTA regulations which came into effect in November 1998 declare that the mere mention of unrelated activities in NGO articles represents a sufficient reason to refuse including them into the register or even to exclude them from it, even if the NGO never had any income, e.g., from book sales.
On April 14, 1999, Committee on Finance and Banking of Ukrainian Parliament and Pylyp Orlyk Institute for Democracy held a roundtable on issues concerning the register of not-for-profit organizations. The discussions between Members of Parliament (MP), GTA officials and NGO activists have disclosed the following.
Ukrainian legislation contains no legal definition or concept of not-for-profit activities (syn. public benefit, related or charitable). There are only separate and often incompatible lists of organizations and their revenues eligible for tax deductions. MP Sergy Teryokhin has argued that only laws should define the not-for-profit activities and its criteria. Neither the executive branch nor individuals should decide if anybody else’s activities are of mutual benefit.
MPs are strongly opposed to the idea of using foundations for permanent reinvesting tax-free assets for eventual funding public benefit. However, Ukrainian law on public benefit activities and charities demands that at least 80% of total PBO income should be spent on public benefit projects. The lack of institutions like foundations with an endowment has become a great obstacle to accumulation of internal sources of PBO funding in Ukraine, but legislators have no clear approaches to endowment regulation yet. It might be useful to provide optional models for endowments funding (e.g., part of capital gain, of annual expenditures or estimated assets).
There are 69,500 registered not-for-profit organizations in Ukraine (January, 1999), including only 11,480 non-business associations and 2,070 PBOs. The rest of 23,000 NGOs having legal personality are on the shelf or non-eligible for the GTA register because of their business activities. Moreover, the slight majority of registered NGOs do not declare any revenues. In fact, tax deductions for not-for-profit organizations in Ukraine are practical only for 5,000 non-business associations and 1,200 PBOs (near 25% of total NGOs number). This is the measure of social partnership between the Ukrainian government and 50 millions of citizens.
In 1998, the total income declared by PBOs' was 134 millions hrivnas (4 hrivnas=1$US), composed of grants and donations (123 M), passive income (4 M), fees (4 M) and other revenues (4 M). The non-business associations earned 190 M, including grants and donations (149 M), passive income (13 M), fees (12 M) and other revenues (16 M). It is remarkable that registered NGO got 84% of their income as grants and donations and only 5% as fees. State funding is most restricted, too. So the structure of Ukrainian NGOs income differs greatly from the EU and other CEE countries. The share of NGOs in GNP is insignificant (0.2-0.3%). However, these statistics accounts for a minority of NGOs, which do not engage in any business activity nor have any income from hidden sales; this may cause the total share of fees and other revenues to be greatly underestimated.
The fiscal outcome of tax deductions for NGOs is quite paradoxical. GTA estimates the direct losses in state revenues for 1998 to be 214 M hrivnas (50 M $US). Some state officials regularly demand to revise the regulations of not-for-profit activities to prevent tax-evasion and to get additional money for budget expenditures. Putting aside the controversial issue whether the state or NGOs provide more cost-effective social services, these accusations are just ill-grounded. First, these losses are not distributed between NGOs and other registered not-for-profit organizations (government agencies, churches, political parties, etc.). Income tax on NGOs revenues (81 M US$) may not exceed 24 M US$. Second, the great majority of grants and donations comes from the agreements on international technical assistance between Ukraine and Western countries. This income is tax-free under the self-executing agreements and other legislative provisions without special tax deductions for NGOs. So the direct budget losses are within 5 to 6 M US$.
However, a number of other taxes are levied on NGOs in Ukraine. If GTA refuses to include an NGO into the register, the organization would rather give up its activity or get its income in cash (grants or fees). Then, the state budget loses sums of individual income tax and taxes on social insurance: it is only natural to presume that 6,200 NGOs with a single full-time paid employee would pay 4.5 to 5 M US$ as direct taxes per year. The more assets the registered NGO declares, the more VAT, customs and hard currency exchange revenues Ukrainian budget receives. The corporate income tax deductions for NGOs costs nothing, and may be even profitable for the Ukrainian government. Meanwhile, 124,000 enterprises are tax debtors: instead of sanctions, the government complicates the bankruptcy procedures.
The Ukrainian Parliament used to pay occasionally attention to legal framework for NGOs, while discussing drafts concerning sensitive issues (legislation on political parties, humanitarian aid, national elections, lobbying or publicized abuses). MPs are aware of the biases of the executive branch toward NGOs: the latter are constantly suspected of money laundering and political advertising (certainly, there are some well-known cases).
Legislation amendments take time and have shifting priorities, so the legal framework for NGOs in Ukraine should not depend only on Parliament. Special government agencies or even ministries (like in Poland) responsible for co-operation with NGOs could solve some problems of legal regulation in a more operative and competent way. It does not mean, however, that such an agency might decide which activities are of public benefit or worthy of tax deductions; it should be the responsibility of the legislative branch.
Unfortunately, in the drafts of Civil Code and Tax Code that are discussed in committees of the Ukrainian Parliament, little attention is paid to the concepts of non-business corporation or foundation as well as to not-for-profit activities. Ukrainian NGOs and international organizations should make efforts to change the situation, otherwise some day it would be a district tax police authority, not Parliament, that defines the criteria of public benefit.
Pylyp Orlyk Institute for Democracy (Kyiv, Ukraine)
Project Director, Not-for-profit Legislation Development
New Law
On Non-governmental Non-commercial Organizations:
·
The new Law on NGOs creates the ability to
establish new types of non-commercial organizations such as foundations and institutions. The law establishes a basis for simple registration procedure for foundations and
institutions provided that the subsequent legislation or acts related to the new law will
appropriately implement provisions of the new law.
·
Not only Uzbek citizens, but also foreigners
and persons without citizenship are allowed to found NGOs. Legal entities as well as
physical persons can be founders of NGOs.
·
The reporting requirements
are simplified. There is no longer any need to file annual activities’ report to
registration authorities.
·
The list of documents
required for the registration became shorter.
·
The public will have access
to information in the public register of legal entities.
International Center for
Not-for-Profit Law
733 15th St. NW, Suite 420 - Washington, D.C 20005 Phone: (202) 624-0766 Fax: (202)
624-0767
E-Mail: infoicnl@icnl.org
All contents Copyright (c) 1999, International Center for Not-for-Profit
Law. All rights reserved.
Revised: July 22, 2004.