14 February 2014

Source: Moscow Helsinki Group - reprinted from Filantrop, 14 February 2014

The Ministry of Finance intends to increase the flow of private funding to the non-profit sector. This week the Ministry published for discussion a draft bill that would allow individuals to donate to the charitable sector the tax relief they are due on previous donations.

Today if a person donates money to a good cause, he can receive back 13% of this sum in tax relief. The government as it were reimburses part of the expenditure. (How this is done in practice, can be read, for example, here). The Ministry of Finance proposes giving the donor the possibility to donate this sum, for a charitable purpose, as well to the same recipient organization.

The Tax Code in its current form allows, with the help of donations, to reduce the sum paid in income tax. For example, if someone donates 100,000 roubles to a charitable cause, this money is eligible for tax relief, and the donor can receive back from the government 13,000 roubles – i.e. 13% of the sum already paid in income tax, as the newspaper Kommersant writes. In practice, donors rarely ask for this back payment.

The Ministry of Finance proposes to introduce into the Tax Code a new regulation that would enable a donor to a charitable organization to donate this sum to the organization that received the original donation instead of receiving the tax relief directly. To simplify this procedure, the non-profit organization itself may, in the absence of a tax declaration by the donor but with his agreement, apply to receive the back payment itself. In the statement it would be possible to name several donors at the same time.

Comment by Vyacheslav Bakhmin, human rights defender, member of the Moscow Helsinki Group:

The system of donations is developing and this is definitely a positive development. At one time making a donation could only be done through Sberbank, where it was necessary to fill out a special bank transfer form. And donations were rarely made. Nowadays there are many methods of donating, from online accounts to text messages. The number of donations has correspondingly increased. The government should aim to further simplify procedures for making donations in the future. Of course, the share of private donations is significantly lower than in the West. But donations are being made and initiatives by the Ministry of Finance to attract more resources to the charitable sector can only be welcomed.