The Non-profit Legal Entities Act allows the conducting of profit activities of the associations and foundations if so stated in the Articles of Association. The Law on Contracts and Obligations provides the legal framework for another type of membership-based organization – the civic association that is settled by a contract between two or more physical persons who unify for the accomplishment of mutual economic purpose. Employers` organizations and trade unions are also membership-based associations but the law does not treat them as NGOs. However, the Non-profit Legal Entities Act governs their registration regime.
The non-profit entities enjoy tax exemption from taxes about their nonprofit activities. The sources of income include individual and corporate donations, members’ fees and project funds, fundraising campaigns and grants. In addition, the non-profit entities’ bank accounts and interest rates (on the no-profit activities accounts) are subject to the same regulations as individuals, which results in no taxes on the bank accounts. Individual and corporate donors enjoy a lax tax regime. The individual donors can have up to 5% discount of their annual taxes. If it is a corporate donation, it is up to 10 % discount of the profit accounts.
The profit accounts however do not enjoy any preferences and regulations as to business entities apply, i.e. the 10 % corporate tax. The profit and non-profit activities have separate accounts balance. The position of experts is that further elaboration of the distinction between profit and non-profit activities is necessary to avoid any confusion on the matter.
The non-profit entities are obliged to submit an activity report to the National Statistical Institute and a tax account declaration to the National Revenue Agency up to March 31st.
Registration in public benefit is allowed under the Non-profit Legal Entities Act. The public benefit organisations are required to submit annually financial information to the Public registry in the Ministry of Justice with the aim of transparency and accountability of the organisations in public benefit. However, there are problems with implementation of the measures relating to the Central Registry of Public Benefit Organizations resulting in actual inadequacy of the registry. The information is not regularly updated, nor it is user-friendly to navigate and gather data on the financial resources or types and numbers of the organisations in the public benefit organisations.
The NGOs are accountable to the Minister of Justice through annual and current monitoring of the activities. However, this mechanism is not working in practice, which is conducive to less transparency of the NGOs. More specifically, the Bulgarian Center for Non-profit Law (one of the leading advocacy NGOs in Bulgaria especially concerning legislation) states in a recent position that the current non-profit legislation does not provide clear-cut and transparent procurement mechanisms for funding to the NGOs from the municipalities and the government.
Another preference for the public profit NGOs is under the Local Taxes and Fees law stipulates that non-profit public benefit entities are exempt from local taxes on the donations and of paying inheritance taxes. Fundraising campaigns do not entail VAT, however, there are issues with VAT on the text (sms) campaigns as there is a legislative collision as considering the text (sms) a service.
In general, the NGO law in Bulgaria provides sufficient freedom for NGOs. The legislative environment is perceived as relatively enabling and favorable to the development of the non-profit sector in Bulgaria.
Although the legislation in Bulgaria is perceived as satisfactory in the field, still some issues require further amendments and enforcement of the regulation. The Public registry of the Non-profit Public benefit organisations demands clear concept of how to manage the available information and how to guarantee accountability of the NGOs. Further regulation in state funding to the NGOs is necessary in order to avoid any ambiguity and doubts of dependence. Public consultations need codification of rules and procedures to turn into practice.
There are still legislative impediments regarding the accountability and relevance of the public information about the NGOs. There is no clear and uniform codification of the various forms of civic participation in drafting, decision- and policy-making. The current Legal Acts Law that regulates the consultation process in drafting from 1973 has been amended several times in order to incorporate the demands of better drafting and good governance. However, there are still undergoing changes regarding the regulation of public consultations. There is a new draft and set of rules on consultations to be discussed in this term of office.
Another legislative act that enabled the environment is the Access to Public Information Act, adopted in 2000, last amended SG No.104/05.12.2008 that regulated the right to access public information of all physic and legal persons in Bulgaria and defines the scope of responsibilities of all the state institutions and public bodies.