The old system restored – Legal amendment pertaining to the value added taxation of donations

Formerly, in the so-called "Old VAT Act", charitable donations did not attract any VAT liability, however, this provision was not carried over to the so-called "New VAT Act", i.e. charitable donations were subject to VAT. The objective of the latest amendment is to eliminate the VAT liability of charitable organisations again.

The amendment removes goods and services extended as charitable donations from the scope of both supply of goods and supply of services, this way ensuring that the donator does not incur a VAT liability in relation to the donation.
It should be noted, however, that the amendment defines and describes the notion of charitable donations in detail, and sets forth that only goods and services provided to public-benefit organizations or priority public-benefit organizations with a view to supporting their public-benefit activities and public duties, or goods and services provided to churches with a view to supporting their activities shall qualify as charitable donations. The conditions include, among others, that the donator shall possess a certificate with the pre-defined content issued by the recipient of the donation.

The urgency of the amendment is not only substantiated by the series of natural disasters currently affecting the country but also by the recognition that the VAT liability in itself could significantly reduce the number and monetary value of donations in general. The amendment was drafted and adopted on the basis of this experience.

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