12 Mar Uzbekistan’s Tax Code 2020: no benefits for charities
Yesterday, we were glad to know about the registration of the first human rights NGO in Uzbekistan since 2003 and the return of Mercy Corps to the country. And today I am reading about anger and frustration of charitable organisations on Facebook. Natalia Kondratova wrote in the Facebook group Tax Consultants of Uzbekistan: ‘The most unhappy and poor were made into taxpayers. Their benefits were lifted in the new Tax Code 2020.’
- For individuals receiving assistance from charitable organisations. Now, individuals who receive assistance in the form of medication, payment for treatment, as well as assistance to those in need in the form of food products, have become payers of the Personal Income Tax at a rate of 12%. Earlier assistance received from charitable foundations was not taxed. NGOs are now required to pay 12% of the total amount of assistance to citizens. This means that dozens of people will not be provide with vital assistance, since the money will go to taxes.
Until April 1, one can use the benefits under the old Tax Code, and starting from April 1 one will have to pay personal income tax for each beneficiary.
- For legal entities – organisations and enterprises that provide charitable assistance to non-profit organisations, do not have the right to reduce their taxable profit by the amount of charitable assistance. Previously, enterprises transferring assistance to NGOs had the right to reduce taxable profit by 2% of taxable profit.
‘Taxation of our fund will deprive 30 children of chemotherapy’
Self-initiated NGOs in Uzbekistan like Ezgu Amal (“Good Deeds” in Uzbek), a public fund helping homeless, elderly and people with cancer, are already feeling the negative impact of this change in the tax legislation. Hook Report has recently published an article interviewing Aziza Umarova, a member of the Board of Trustees of Ezgu Amal, who believes that those who drafted the new Tax Code did not take into account the complexity of the work of charitable NGOs.
‘Given that many state-owned enterprises do not pay taxes, and there are a lot of them, 55% of our economy is state-owned enterprises. I think that we need to offer our Tax Committee to deduct money that goes to charity from the tax base,’ – Aziza Umarova told Hook Report.
Therefore, Aziza Umarova proposed to submit a proposal to the Cabinet of Ministers, the Ministry of Justice and the Tax Committee of the Republic of Uzbekistan to revise this section in the new version of the Tax Code.
According to the estimates of Natalia Kondratova, founder of the audit company Marikon Audit, last year the fund would have to pay 360 million soums.
‘In the first quarter of 2020, we could still use the benefit of last year, but in April it ends. One chemotherapy costs around 12 million soums. And we calculated that if we switched to [the new] taxation last year, we would not be able to help about 30 children. That is, we will lose about 10 percent of children,’ explains Natalia Kondratova.
It is also clear that the new Tax Code will adversely affect the charitable initiatives of private enterprises and the overall amount of charity support may decrease. Private companies will simply lose their motivation to donate to charitable funds like Ezgu Amal. It is a shame because even in the new law On patronage of arts, people who help theatres, museums and other cultural institutions receive a certain incentive from the state adds Natalia in frustration.
According to Natalia, Ezgu Amal has not yet cooperated with other NGOs regarding this issue, but they already know the answer from the Tax Committee. By law, changes to the existing code can only be done once a year, or if the president initiates these changes. Other NGOs have already applied to the State Tax Committee, but the issue of revising the taxation for charitable NGOs and foundations can be raised no earlier than December this year. And discussion of the issue does not mean a positive decision. This means that taxation for charities and NGOs in Uzbekistan may remain.
Read the article in Russian at Hook Report.