Will the recipients of grants from foreign NGOs with branches registered in Russia have to pay tax?
The grants received by Russian NGOs from foreign and international organisations for carrying out specific programmes in areas defined by the Tax Code of the Russian Federation are not liable for tax if the donor organisations are included in a special list held by the Russian government. A similar condition applies to individuals. At the present time there are 12 organisations on the government list, according to Darya Miloslavskaya of the International Centre for Non-commercial Law in Russia, while between 2002 and 2008 there have been over 100 organisations on such lists. No new organisation had been added to the list over the past year despite a decree passed in 2009 allowing the respective federal authority to propose their inclusion.Russian NGOs have to pay a 20% tax on grants from most foreign donors. Because of this some donor organisations have temporarily suspended the provision of grants in Russia, others have reduced their support and the remaining grant-makers have redefined themselves as benefactors (but this form of support of Russian NGOs is inconvenient for foreign donors as it reduces the possibility of controlling the way the resources are spent).A discussion of the current situation for NGOs and how to find a way out of it took place at the Independent Press Centre on 27 May, organised by the International Centre for Non-commercial Law in Russia and the non-commercial partnership “Lawyers for Civil Society”. According to a speaker from the latter organisation, legislation in Russia starting in 2006 required the branches of international and foreign organisations (currently 59 of them) to present annual reports to the Ministry of Justice on their targeted use of the resources received, including that given as grants to other NGOs and citizens, and such a check would be sufficient to avoid the tax imposed on the recipients of grants if the head organisations informed the Ministry of Justice in advance about their desire to provide grants on Russian territory. According to experts, administration of the provision of grants could be carried out by the representative offices of the foreign NGOs (currently 198 of them) as well as their branches. But in contrast to the situation with the branches, the head organisation would transfer the resources to the recipients not via the account of the representative office but directly (in other words these monetary transfers would not appear in the accounts of the representative offices). Hence additional reports to the authorities could be required in order to avoid the tax in this case. The meeting’s organisers will be presenting these proposals to the authorities, but even if the amendments are approved in principle it is thought unlikely that the exact wording can be agreed this year, creating difficulties for NGOs not on the government list. Talks between representatives of the non-commercial sector and the government about further inclusions are likely to continue for some time, but the actual process of including organisations on the list is not open or transparent.