There are special methodological instructions in Moldova that differentiate between the accounting standards of noncommercial organizations (NCOs) from those of economic entities. Contacted by IPN, auditor Tatiana Prisacar, who forms part of the working groups for formulating the national accounting standards and the methodological indicators regarding the particularities of NCO accounting, said that this is a step forward as, under the Accounting Law, the financial accounts serve as a basis for writing fiscal declarations. Before the methodological indicators were designed and approved, there was no such accounting basis. For this reason, some of the NCOs faced problems related to the taxation of incomes they earned from the provided services.
Some of the organizations still experience such problems. Tatiana Prisacar said this refers to NCOs that make incomes from activities that do not result directly from their statutory goals and are not clearly defined as non-taxable in the Tax Code. The methodological indicators were worked out based on the Civil Code norms and the legislation that regulates the foundation and work of NCOs. They regulate the method of including the types of financing and incomes of noncommercial organizations in the financial accounts.
The auditor said that if a NCO performs only statutory activities, including economic, which result from the statutory goals, there will be no problems concerning taxation. But all the Tax Code conditions must be respected, including the registration as noncommercial organization exempted from paying the income tax and utilization of the incomes only for carrying out measures directly related to the statutory objectives.
In Moldova, the regulation of accounting is separated from the fiscal one. Changes are to be made to the Tax Code and the Civil Code to extend and define the types of incomes that can be generated within the activities of the NCOs and to specify the organizations can be exempted from paying the tax.
Exemptions based on results
Tatiana Prisacar said the structure and content of the special methodological instructions for NCOs were worked out based on the good practices of other countries. The document “Methodological indications concerning the particularities of accounting in noncommercial organizations” was approved by an order of 2010 of the Ministry of Finance. It makes a difference between the accounting standards for noncommercial organizations that perform economic activities from those for economic entities. A series of changes made to the Tax Code say not only the public utility organizations are exempted from paying taxes.
“This condition was excluded from the Tax Code, but I know that many NCOs expressed their indignation at this fact. A noncommercial organization whose public utility is not confirmed cannot benefit from the same concessions, including tax concessions, as the organizations that confirmed their status. I agree with this approach,” said the specialist.
She said that she took part in many discussions with representatives of the Ministry of Finance and the Main State Tax Inspectorate, about the reformulation of Article 52 of the Tax Code, as it contained many of the former requirements that could be misinterpreted. There were also excluded provisions that from the very beginning could not be respected and that ran counter to other legal acts.
Article 53 of the Tax Code concerning the auxiliary business of noncommercial organizations was completely removed because it contains unclear, nontransparent, interpretable provisions that ran counter to the strategy for supporting the NCO activities by the state.
Practices to be studied and implemented
Tatiana Prisacar said the NCOs can carry out economic activities only if these activities are in line with the statutory goals of the organization. If the statutory objective of a noncommercial organization is to support and promote the freedom of expression of the journalists, it can organize training seminars for money with representatives of this sector or can carry out studies in this area. In this case, the economic activity results from the organization’s tasks and is relevant to the statutory goals. The incomes earned from such activities are treated in the same way as the financial resources allocated by different donors and are not taxed. But these incomes must be strictly directed to achieving the statutory goals, including not to be used for personal purposes by founders, employees or members of the organization. This criterion is taken as basis and will be examined thoroughly.
“Using the international practices, the exemptions from VAT can be based on the public utility of the NCOs’ activities in society and the advantages they bring so as to determine the concessions that the organizations can enjoy,” stated Tatiana Prisacar.
If the economic activity is not relevant to the goal of the organization, when for example the NCO purchases and sells certain food products, the incomes earned from this commercial activity are separated in accounting from other statutory incomes and are taxed. There are many opportunities in this respect that deserve to be discussed and used.
In some of the counties, they do not impose restrictions on the type of activity, including economic, from which revenues are earned. Restrictions are put only on the full and predestined use of these incomes for statutory purposes. In other countries, restrictions are imposed on the share of the commercial economic activity, which has nothing to do with the statutory objectives, in the total volume of activities of the NCOs. If the commercial incomes or incomes earned from activities that are not related to the statutory goals of the NCOs exceed the limit for a certain period, the organization is obliged to register as commercial organization. The international practices must be studied and discussed with civil society representatives, experts and professionals. The ambitions and personal interests should be excluded, said Tatiana Prisacar.
Desired result concerning VAT can be achieved by cooperation
Tatiana Prisacar stated that in Moldova there are many questions as regards the payment of VAT by NCOs. These aspects should be discussed with experts and there should be established cooperation with the Ministry of Finance and the State Tax Inspectorate. Discussions should be also held within the relevant parliamentary commissions so as to reach the result wanted by the civil society representatives, which should also be equitable, rational and justified. The exemption from VAT of the NCOs must be based not on populism, but on the results of collective work.
The auditor said there are good international practices on tax concessions that can be implemented. “I took part in many studies, explained the current situation, gave examples of VAT use in other countries and formulated proposals for implementation in Moldova. But, unfortunately, these studies gather dust. No continuation for examining and putting them into practice is ensured,” said Tatiana Prisacar.
She also said that until the Tax Code contains provisions concerning the VAT, the NCOs that are unable to implement technical project or projects financed from European funds will have to comply with these provisions. Definite proposals are needed for amending the provisions of the Tax Code concerning VAT payment by NCOs and the authorities and representatives of the competent bodies should be convinced that this is the right way to follow.
Alina Marin, IPN
