Slovak NGOs reach assignation agreement with FinMin

Memorandum clears way for more consistent rules on tax donations. The Slovak Spectator reports the story.

While the activities of Slovak non-governmental organisations (NGOs) frequently draw praise, that does not mean the sector does not have trouble raising money. Changes to tax rules that limited companies’ ability to divert a portion of their taxes to the non-profit sector were just the latest challenge. Now, a memorandum signed by the Finance Ministry and the non-profit sector looks to bring back some stability.

The memorandum is the result of long-term negotiations between the non-governmental sector and the Slovak government. Companies in Slovakia will now be able to allocate 2 percent of their corporate taxes to NGOs if they also contribute a sum equalling 0.5 percent of their profit at least. Otherwise, they will be able to assign only 1 percent of their due taxes.

The third sector welcomed the memorandum and sees it as an acceptable compromise after government policies sought to roll back assignation amid the years of the financial crisis.

“The agreed upon model should be kept for the long term, which is excellent news for foreseeability and stability in financing NGOs,” Pavol Hrica, programme coordinator at the Pontis Foundation, told The Slovak Spectator.  According to Andrea Cocherová from the Orange Foundation and the chairwoman of the Association of Corporate Foundations (ASFIN), the agreement means a significant step towards stabilising the sector that was, before the memorandum was signed, endangered.

NGOs received about €52 million from the assignation scheme from taxes paid for the 2014 tax period, according to the Financial Administration. Hrica added that during the last 10 years companies assigned more than €300 million.

IFP estimates that tax assignation makes only about 6-10 percent of the revenue of the entire non-profit sector. “A difference compared to some other countries is the impossibility to reduce the tax base by donations for companies and private individuals,” said Filko from IFP. “This is compensated by the possibility to assign [a certain portion from tax paid].”

Assignation of corporate taxes is a world specialty,” Fedor Blaščák, the secretary at the Association of Corporate Foundations told The Slovak Spectator, adding abroad are used tax deductible donations. “It runs for now only in Slovakia.”

Read the full story with contributions from Fedor Blaščák, Andrea Cocherová  and Pavel Hrica in The Slovak spectator…