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Domestic Grants, Donations, and Membership Dues: A Tax-Savvy Guide for NPOs
For non-profit organizations (NPOs) operating in Serbia, understanding the tax implications of domestic grants, donations, and membership dues is crucial to maintain their financial stability. The Legal Entity Profit Tax Law provides exemptions from income tax for NPOs that meet specific conditions.
Exemptions for NPOs
Under the law, an NPO’s profit is exempt from income tax if it generates less than RSD 400,000 (approximately $4,123) from economic activities, and meets certain criteria. These include:
- Not distributing earnings to founders, employees, or management board members;
- Salaries capped at double the average salary in the commercial sector;
- All earned profit used to further the organization’s objectives.
Charitable Contributions
Corporations can also deduct charitable contributions up to 5% of their expenditures for specific purposes, such as:
- Healthcare
- Education
- Environmental protection
However, companies face difficulties when attempting to claim deductions, as funds must be donated to entities registered under relevant laws and intended for specific purposes.
Value-Added Taxes (VAT)
Foreign grants and donations are exempt from VAT, while humanitarian goods imported to Serbia by foreign donors are also VAT-exempt.
Expert Insights
- “It is essential for NPOs to understand the tax implications of their activities and ensure that they comply with the relevant laws.” - Bojana Selakovic, Civic Initiatives
By staying informed about the latest tax developments, NPOs can optimize their financial operations and focus on their mission to benefit society.
Sources
- Legal Entity Profit Tax Law
- Value-Added Taxes Law
- Serbian Constitution of 2006
- Law on Associations
- Law on Foundations
Note: This article is intended for general informational purposes only and should not be considered as tax or legal advice. For specific guidance, consult with a qualified professional.