Roundtable on the Impact of the VAT Law on NGOs in Bosnia and Herzegovina

ECNL

11 April 2006

On March 29, 2006, in Banja Luka, International Center for Not-for-Profit Law (ICNL) and Lex International hosted a roundtable event on the impact of the BiH VAT Law on NGOs. The VAT Law, which came into force in BiH on January 1, 2006, introduced major changes in the consumption tax system.

The primary purpose of the roundtable was (1) to educate participants on why the VAT system generally does not favor NGOs, what the potential benefits are for NGOs that choose to register for VAT, and what is the current line of thinking in the EU regarding potential compensation schemes for losses NGOs incur as a result of VAT; and, (2) to provide answers to some of the critical issues relating to the substance and implementation of the BiH VAT Law.

The roundtable drew representatives of NGOs, bookkeepers and tax experts. In addition to ICNL, local experts and one of the leading experts from Croatia addressed various aspects of the VAT system. The presentations generated lively discussion, which illustrated difficulties NGOs are already facing in complying with the VAT Law. For example, according to one NGO representative, tax authorities deny NGOs VAT registration even if they meet the prescribed statutory income threshold; they also refuse to issue a reasoned decision, which would allow the aggrieved party to contest it.

The VAT Law specifically provides that any legal entity (NGO included) which has generated income from economic activities exceeding 50,000 KM must register for VAT. The Law also provides fines for the failure to register. Another participant, a USAID implementer, inquired about the VAT status of USAID in-kind donation (oil) which was sold on the market to generate proceeds that were used for humanitarian activities. Participants also sought to learn more about the procedures that would facilitate VAT registration for an NGO that has generated income from economic activities below the prescribed statutory threshold but seeks nonetheless to be registered in the VAT system.

As they state it at ICNL, the event was a great success due to the fact that the experts in Bosnia and Herzegovina still have a number of dilemmas regarding the impact of VAT Law on NGOs. ICNL, in collaboration with the Civil Society Promotion Center, will host a roundtable on the same topic in Sarajevo. The tentative date for that event is April 19, 2006.