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Croatia: Amendments to Law on Nonprofit Organizations Proposed

(Feb. 4, 2014) The Government of Croatia proposed a draft Law on Financial Operations and Accounting for Non-Profit Organizations on January 30, 2014. Among other provisions, the new Law would require non-profit organizations (NPOs) with annual revenue above HRK230,000 (about US$40,560) to register as new companies or other business entities. Rental and leasing activities are not included in the revenue calculations, however. As a result of the proposed amendment, such non-profit entities would be subject to corporate income tax. (Ivana Kireta, Croatia: New Rules for Non-Profit Organizations, TAX NEWS SERVICE (Jan. 31, 2014), International Bureau of Fiscal Documentation online subscription database; Prijedlog Zakona o Financijskom Poslovanju i Racunovodstvu Neprofitnih Organizacija [Draft Law on Financial Transactions and Accounting for Nonprofit Organizations] [hereinafter Draft Law] (Jan. 2014), Government of the Republic of Croatia website.)

The draft law also requires NPOs to prepare and execute financial plans and to submit annual financial reports, depending on their income and assets. NPOS with annual revenues over HRK10 million (about US$1.76 million) must submit tax audit reports. (Kireta, supra; Draft Law, arts. 5, 6, & 32.)

Some nongovernment organizations (NGOs) criticized the proposed law for not being transparent or detailed enough, while welcoming some of its provisions. According to Dragan Zelic, the Executive Director of GONG, a civil society group aimed at fostering participation in the electoral process, the proposed legislation “is not in line with the strategy to encourage social enterprise because it will make the operation of non-profit organisations that employ a significant number of people … difficult in the future,” even though he found it a positive development that the government was attempting to bring order to NPO operations. (NGOs: Bill on Nonprofit Organisations Financial Operations Needs Improving, DAJLE.COM (Jan. 30, 2014); What Is GONG?, GONG website (last visited Feb. 3, 2014).)

Supporting Finance Minister Slavko Linic’s statement that sports organizations and churches would also have to pay tax under the draft law, however, Zelic opined “that any institution that spent public money should publicly account for its financial operations.” (NGOs: Bill on Nonprofit Organisations Financial Operations Needs Improving, supra.) MirjanaKuÄÂÂ?er, head of the feminist organization Domine, welcomed the legislation, but argued that “[t]he government is using small league players to stop big league players in their tracks and is putting everyone in the same basket. It seems that small NGOs, which are helpful, will pay the price.” (Id.; About Us, Domine website (last visited Feb. 3, 2014).)

If approved by the Croatian Parliament, the Law will enter into force eight days after its publication. (Kireta, supra; see also in general Douglas Rutzen, David Moore, & Michael Durham, The Legal Framework for Not-for-Profit Organizations in Central and Eastern Europe, The International Center for Not-for-Profit Law website (last visited Feb. 3, 2014).)