On the Social Tax Deduction for Physical Persons with Regard to their Expenses on Charitable Activities

The social tax deduction for expenses on charitable activities should be granted in accordance with the norm stipulated in sub-item 1, item 1 of Article 219 of the RF Tax Code. The current version of the Tax Code establishes that the tax deduction should be granted in the amount of actual expenses (but not in excess of 25 % of the taxpayer’s total income received over a given tax period) made in the form of money transfers for charitable purposes to the scientific, culture, healthcare and social security organizations that are partly or fully financed fr om the funds of the relevant budgets; to physical culture and sports organizations and educational and pre-school establishments for the purposes of promoting physical culture among citizens and the upkeep of sports teams, and also in the form of donations transferred to religious organizations for the purpose of enabling them to perform their charter-stipulated activities.

Those taxpayers – physical persons that will begin to make their donations from 1 January 2012 onwards should be granted the right for the social tax deduction in the event of their having transferred funds to:
a) charitable organizations;
b) socially-oriented non-profit organization, for the purpose of enabling them to perform their activities envisaged by the Russian Federation’s legislation on non-profit organizations;
c) non-profit organizations engaged in activities in the fields of science, culture, physical culture and sports, human rights and freedoms protection, assistance to citizen protection under emergency situations, protection of the environment, and animal protection;
d) religious organizations, for the purpose of enabling them to perform their charter-stipulated activities;
e) non-profit organizations, for the purpose of forming and/or augmenting their target capital.

The social tax deduction is to be granted, as before, in the amount of actually made expenses, but not in excess of 25 % of the total amount of taxable income received over a given tax period.

Thus, the amendments introduced to the RF Tax Code by RF Federal Law No 235-FZ do not increase the upper lim it of the social tax deduction but expand the list of reasons for granting it. In particular, the Law:
a) has abolished the requirement that non-profit organizations-recipients of funds should be partly or fully financed from the budget;
b) has expanded the list of the activities of non-profit organizations – recipients of donations;
c) has expanded the list of reasons for granting the tax deduction by including therein the transfer of funds for the purpose of forming and augmenting the target capital of non-profit organizations.

T. A. Malinina – Head of the Tax Policy Department