Associations, as well as foundations, legacies, and funds, are exempt from income tax on foreign and domestic grants, donations, membership dues, and similar forms of income which are not the result of economic activities. Associations are however, subject to 2.5% tax on gifts (gifts‐in‐kind and also property), but foundations etc. are exempt from these taxes. Distinguishing between donations and gifts is an area of ambiguity, subject to the interpretation of the Tax Administration. According to the Enterprise Profit Tax Law, profit generated by CSO activities is only exempt income tax up to a limit of 300,000 Dinars (approx. 3,000 EUR) exempt from income tax, provided that: profits are used to further the organizations objectives, that salaries do not exceed double their equivalents in the commercial sector and that CSOs economic activities do not constitute unfair competition with the private business sector. Currently, any organization (commercial or non‐profit) with an annual turnover of less than 4 million Dinars (approx. 43,000 EUR) is exempt from registering for VAT. Concessions to CSO activity are otherwise fairly limited. Foreign grants and donations are not subject to VAT. In addition, foreign donors are exempt from paying VAT on humanitarian goods imported into Serbia.
Most importantly, while CSOs are not provided special exemptions, the law does exempt a number of services and supplies which are often provided by CSOs in the field of: medicine, social welfare, culture, education, science, religion, and sports. Businesses may deduct up to 3.5% gross income for charitable donations for the following purposes: medical, educational, scientific, humanitarian, religious, environmental protection and sport purposes. Support to cultural activities, however, can only be deducted up to a maximum of 1.5% income. There are no incentives provided for individuals to support charitable ventures.
Public-benefit status
New NGO Law introduces the notion of “programs of public interest”, listing them in details in Article 38 in details: social security; disabled war veterans’ security; security of persons with disabilities; social child care; security of internally displaced persons from Kosovo-Metohija and refugees; promotion of birth-rate; assistance to senior citizens; health care; protection and promotion of human and minority rights; education; science; culture; information dissemination; environmental protection; sustainable development; animal protection; consumer protection; combating corruption; as well as humanitarian aid programs and other programs whereby the association pursues public needs exclusively and directly.
It is stipulated that funds for these programs will be secured out of the Republic of Serbia budget (Province of Vojvodina and local self government budgets) with transparent procedure envisaged. However, it is still not clear how the “public benefit” criteria are assessed.
Having in mind that the Office of cooperation between the Government and CSOs is underway, it is planned that this Office will deal with the issue of defining the “public interest” and will further elaboration of the transparent criteria for state funds distribution.