TAX INCENTIVES FOR INDIVIDUAL DONORS

Individuals that can use tax incentives for donations, the amount of the tax incentives and the conditions for their use are defined in the Law for taxation of the income of physical persons. The law envisages tax incentives for donation which is up to 10 pct of the taxable annual income and the incentive is used after submission of the annual tax declaration under art.41 par.1 from the Law for taxation of the income of physical persons. The incentives are used by those who receive incomes from labour legal relationships, by persons with free professions and executing other activities and services under non-labour legal relationships, by persons executing management and control and by those receiving incomes from a rent. In order tax incentives to be used the donation must be done in a benefit of recipient, defined under the Law for taxation of the income of physical persons. Apart from that donors should not have unpaid declared tax receipts or receipts, determined by a tax inspectoral act at the moment of making the donation.

How the taxable income is decreased:

For those who receive incomes from labour - legal relationships tax incentives for a donation are deducted from the taxable income after the deductions indicated below:

• installments for pension, health and other insurances that the worker or the employee are obliged to do on his expense;
• installments for voluntarily pension and health insurance and voluntarily insurance for unemployment;
• installments paid by persons on their own under contracts for “Life and rent” and “Life” insurances if they are connected with an investment fund.

For those who receive incomes from non-labour legal relationships, who exercise free professions and who work under contracts for management and control the tax base is decreased with:

• with expenses for the activity from 10% for management and control, 35% for rendering of services with personal labour and exercising of free profession, with up to 70% for cattle-breeding;
• with installments for pensions, health and other insurances that the persons under the law are obliged to do on their own;
• with installments for voluntarily pension and health insurance and voluntarily insurance for unemployment;
• with installments under contracts for “Life and rent” and “Life” insurances if they are connected with an investment fund and their total value is up to 10% of the taxable income after deducting the expenses from the activity.
  

TAX INCENTIVES FOR LEGAL ENTITIES

Legal entities obligated under the Law for taxation of the corporate income tax levying can account donations as expenses. If the donations are at a value of up to 10% of the positive financial result, taxes are not levied on them and the financial result is reduced with them directly. If the donations are bigger, the exceeding part is added to the financial result and a 10% withholding tax, that is estimated as expenses on activity, is levied on it.

In order a tax incentive to be used the donation must be made in benefit of recipients, defined under art. 35, par. 2 under the Law for taxation of the corporate income tax levying.

For forming the donation the following documents are needed:

• Donation contract or a donation certificate with the same sense. Requisites of the donation contract are defined in the Law for obligations and contracts.
• Evidence that the contract is implemented and the donation is given and received, as for example documents for banking transfer, transfer protocol.