Latin America

Taxation of Grants in Russia

The International Journal
of Not-for-Profit Law

Volume 7, Issue 2, February 2005

By Yulia Checkmaryova*

Amendments proposed this year by the Russian government to the Tax Code threaten to make matters worse for the civil society sector. In response, Russian NGOs have mobilized to bring about changes in the draft amendments.

Tax Changes of 2002 

In January 2002, a new form of grant taxation took effect in Russia. Now, according to the Tax Code, a grant is property earmarked only for cultural, art, environmental, educational, and scientific projects. NGOs may receive tax-exempt grants from individuals or other NGOs, and from foreign or international NGOs included on a special list approved by the Russian government. Unfortunately, such a definition of grant infringes upon interests of NGOs implementing projects in other fields, e.g. social welfare services, health care, and protection of human rights. Russian NGOs made every effort to improve this unfair situation but in vain.

Government Amendments

In July 2004, the Russian government submitted proposed amendments to the Tax Code to the State Duma. The amendments to subsections 5 and 6 of Article 251, if enacted into law, would directly affect NGOs. On the one hand, the amendments expand the definition of the activities for which grants can be given. These include social welfare services, health care, and protection of human rights. On the other hand, the changes would place additional burdens on both foreign and domestic grantmakers. Specifically, the proposed amendments threaten to (1) prevent foreign citizens from making tax-exempt grants; (2) require Russian donors to be included on a government-approved list of grantmakers in order in order for their grants to be tax-exempt for the recipients; and (3) require foreign donors to satisfy stricter requirements in order for their grants to qualify as tax-exempt.

Public Outcry

Such amendments will not merely eliminate the anticipated effect of the widened scope of activities; they will make grantgiving impossible. That is why the government’s proposal has triggered a public outcry. This problem has been discussed at the National Assembly (an informal grouping of NGO leaders) and at numerous meetings. A series of amendments to the government draft are being prepared now. A number of independent experts are involved in this public campaign. The main idea behind the public drive is to save the current grant taxation system by adding only three more fields. The second reading of the draft was originally scheduled for late October or early November but has been postponed. We can only hope that joint efforts will ultimately produce good results.

Tax Reform Project 

CAF Russia (the branch office of Charities Aid Foundation in Russia) is also taking part in the protection of NGOs’ tax interests; moreover, it is implementing the project “Civil Society Unites for a Strategic Public Policy Campaign: NGO Tax Reform in Russia,” financed by USAID. Its well-known partners are the Centre for the Development of Democracy and Human Rights, the Agency for Social Information, the Institute of Urban Economics, and the U.S.-based International Center for Not-for-Profit Law (ICNL). The project’s goal is to develop legislative changes that will improve the legal framework affecting civil society organizations (CSOs), to increase public support for proposed legislative changes, and to increase the capacity of CSOs to influence public policies. The partners are coordinating the current public drive against the government amendments to the Tax Code.


* Yulia Checkmaryova,, is a lawyer at the Charities Aid Foundation (CAF) – Russia. This article originally appeared in the Winter 2004-2005 issue of the Social Economy and Law (SEAL) Journal, published by the European Foundation Centre. We are grateful to SEAL for permission to reprint it.