Taxation of Non-Profit Associations in Estonia and Worldwide
There are 5581 non-profit associations in Estonia (as at 1.11.99). By fields of life, their number is the biggest in public, social and personal services (3268 associations), and in real estate, lease and business services (1962). In Estonia, the following income of non-profit associations and foundations is tax-exempt:
- joining and membership fee;
- interest received from the placement of joining and membership fees in a resident credit institution;
- subsidies set out in laws or established by the Government of the Republic;
- other income defined in § 9 section 2 of the income tax act.
In accordance with the order no. 39 of 20 January 1999 of the Government of the Republic, 1194 non-profit associations, i.e. 21,4% of registered non-profit associations, were exempted from income tax.
Legal acts regulating taxation of non-profit associations in Estonia follow the principles of the tax provisions for non-profit organisations in the Basic World Tax Code.
The international centre for not-for-profit law (ICNL) has together with the World Bank made a study of the legislation in more than 100 countries and highlighted the following principles that encourage the activities of non-profit associations:
- exempting non-profit associations from income tax;
- tax incentives for donations and donators;
- economic activity of a non-profit association is taxed if the profitable economic activity is not directly related to no-profit goals of the association;
- tax incentives for VAT and customs duties.
Viability of non-profit associations depends first and foremost on legislation and the different possibilities for their financing.