According to the NGO law, an NGO may engage in economic activities for the purpose of supporting its not-for-profit activities, and provided that income realized through economic activities is used solely to accomplish the purposes specified in the NGOs statute. Same, an NGO may own and manage property and assets for the accomplishment of its not-for profit purposes.
The NGOs without Public Benefit Status, in their economic activities and financial transactions, are subject to general tax and fiscal laws that apply to all business activities in general.
The NGO Law allows the Public Benefit Status, which provides for tax exemptions and benefits for qualifying NGOs. The public benefit status may be granted to NGOs that conduct one or more of the following activities: humanitarian assistance and relief, support to the persons with special needs, charity, education, health, culture, environmental conservation or protection, economic reconstruction and development, promotion of human rights, promotion of democratic practices and civil society, or any other activity that serves the public benefit. NGO activities may constitute public benefit activities only if significant benefits are provided free of charge or at least less than fair market value to disadvantaged individuals or groups. Economic development constitutes a public benefit activity only if it is undertaken primarily for the benefit of disadvantaged individuals or groups. However, the tax exemptions and benefits for the NGOs holding the Public Benefit Status are not specified in this law. The article 17 of this law states: “Pursuant to conditions and procedures contained in legislation into force, NGOs with public beneficiary status shall be entitled to tax and fiscal benefits, except those which are essentially charges for municipal public services.”, leaving to other tax and fiscal related legislation to decide on specific exemptions for the Public Benefit Status. However, the current legislation in power does not provide for too many possibilities for the qualified NGOs to really benefit from their Public Benefit Status.
Currently, all NGOs are part of the VAT regime in Kosovo like any other taxable person. The standard VAT rate is 16%. Registration is mandatory above an annual turnover of EUR 50,000, therefore NGOs who do not reach this limit may choose not to become part of the VAT system.
Article 30 and 33 of the VAT Law excludes from the VAT imports or supplies funded from grants made to NGOs “in support of humanitarian and reconstruction programs and projects in Kosovo”. This is the only explicit reference to NGOs as distinct from any other VAT taxpayer. .) However, these exemptions are not specified and clear and NGOs have limited space for benefiting from the provision. In general, the VAT Law fails to recognize the existing legal status of the Public Benefit organizations, as provided by the NGO Law.
The Corporate Income Tax Law, exempts the tax on income of organizations registered under Legislation on the Registration and Operation of non- governmental organizations that have received and maintained public benefit status to the extent that the income is used exclusively for their public benefit purposes. (Article 7, point 1.1.), while NGO commercial or other activity that is not exclusively related to its public purpose shall be charged income tax at the rate of ten percent (10%) on income derived from such unrelated business activity(Article 33).