KYRGYZSTAN TODAY Policy briefs on - Department of Geography
KYRGYZSTAN TODAY Policy briefs on - Department of Geography
KYRGYZSTAN TODAY Policy briefs on - Department of Geography
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Nookatbek Idrisov,<br />
Director <strong>of</strong> the Internati<strong>on</strong>al Center<br />
for Not-for-Pr<strong>of</strong>it Law in Kyrgyzstan<br />
Taxati<strong>on</strong> <strong>of</strong> N<strong>on</strong>-for-Pr<strong>of</strong>it Organizati<strong>on</strong>s in the Kyrgyz<br />
Republic: Recommendati<strong>on</strong>s for a New Draft Tax Code<br />
Introducti<strong>on</strong><br />
The following is required for not-for-pr<strong>of</strong>it organizati<strong>on</strong>s (NPOs) to exist in any<br />
state: (1) legislati<strong>on</strong> that would allow establishing NPOs with no difficulty, (2) lack <strong>of</strong><br />
significant obstacles <strong>on</strong> the part <strong>of</strong> public <strong>of</strong>fices for NPOs to implement their activities,<br />
and (3) possibility <strong>of</strong> financing NPOs legally.<br />
Are there any legal ways to finance the activities <strong>of</strong> not-for-pr<strong>of</strong>its in Kyrgyzstan?<br />
To answer this questi<strong>on</strong>, it is important to first analyze the terms under which NPOs<br />
receive their funds from various sources.<br />
What we have seen worldwide dem<strong>on</strong>strates that today the revenue <strong>of</strong> NPOs can<br />
be divided into three types, such as:<br />
1) Internal income (membership fees, income arriving as a result entrepreneurial<br />
activities, and income that comes from securities and invested capital);<br />
2) Assistance received from the state;<br />
3) D<strong>on</strong>ati<strong>on</strong>s by physical and legal entities and grants.<br />
The efficiency <strong>of</strong> funding am<strong>on</strong>g not-for-pr<strong>of</strong>its is c<strong>on</strong>tingent <strong>on</strong> tax regime for each<br />
<strong>of</strong> the above-menti<strong>on</strong>ed items in a particular state.<br />
Sources <strong>of</strong> NPO income exempt from taxes<br />
At the present time, in accordance with the Tax Code <strong>of</strong> the Kyrgyz Republic<br />
(hereinafter referred to as the Tax Code), any income arriving from membership and<br />
entrance fees, gratuitous and charity d<strong>on</strong>ati<strong>on</strong>s, grants, and humanitarian aid is exempt<br />
from pr<strong>of</strong>it tax. In most <strong>of</strong> European countries, these are traditi<strong>on</strong>al sources <strong>of</strong> income<br />
am<strong>on</strong>g NPOs.<br />
However, in some cases definiti<strong>on</strong>s <strong>of</strong> these sources <strong>of</strong> income in the Tax Code<br />
d<strong>on</strong>’t let NPOs enjoy tax exempti<strong>on</strong>. For instance, Article 9 (68) <strong>of</strong> the Tax Code defines<br />
membership fees as “assets provided by entities that are part <strong>of</strong> a n<strong>on</strong>-for-pr<strong>of</strong>it<br />
organizati<strong>on</strong> based <strong>on</strong> membership, whose amount and transfer procedure are outlined<br />
in articles <strong>of</strong> associati<strong>on</strong> bel<strong>on</strong>ging to this organizati<strong>on</strong>, provided that the member <strong>of</strong><br />
this organizati<strong>on</strong> does not enjoy reciprocal services for free or below cost.” As a result<br />
<strong>of</strong> this definiti<strong>on</strong>, tax authorities oblige, for example, associati<strong>on</strong>s <strong>of</strong> water users or<br />
garage cooperatives, which are n<strong>on</strong>-for-pr<strong>of</strong>it organizati<strong>on</strong>s, to pay 4 percent <strong>of</strong> tax for<br />
providing paid services to the public using membership fees. Thus, tax authorities view<br />
all membership fees <strong>of</strong> such NPOs as income for the services they provide. Needless<br />
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