Upon submission of application for inscription on the list of non-profit associations, foundations and religious associations benefiting from income tax incentive, we draw your attention to the following.
1. On submission of an application
An application for inscription on the list of non-profit associations, foundations and religious associations benefiting from income tax incentives (hereinafter application) shall be submitted to the Estonian Tax and Customs Board.
Applications can be submitted to the Estonian Tax and Customs Board:
- to the e-mail address email@example.com (digitally signed by the signatory (of the member or members of the board))
- to a service bureau
- By post to the address: Lõõtsa 8a, Tallinn 15176
2. On filling in an application
Applicant’s data are indicated in Part I.
Activities (incl. activities to be planned) of the association of the current year are described in Part II.
Point 1 explains what operation for charitable purposes in the public interest means:
- to whom the charity is aimed at or to whom services or other benefits are offered, primarily free of charge or in another non-revenue seeking or publicly accessible manner;
- what makes the activity of an association as being charitable and operating in the public interest;
- necessity (why is it reasonable to engage in it just for charitable purposes);
- desirable result;
- what kind of activities are necessary to achieve this result;
- what kind of plans have been made and what has been planned for the current year.
Point 2 describes forward-looking visions or gives a short survey of the development strategy (incl. activities planned for the following years).
Point 3 answers the questions about your own members (non-profit association fills in). Social welfare supporting associations indicate the total number of members only. Data are given as at the date of submitting an application.
The following shall be indicated about the current year:
the total number of members and the list of members or reference to the list of members on the web page of the association is attached to the form of the application (the list need not be separately signed);
the amount of payments expressed by a whole number of euros – benefits, allowances, supports, grants given to the members, gifts, donations or other similar payments made;
the total number of founders and the list of founders is attached to the form of the application (the list need not be separately signed).
The application shall be signed and the correctness of information confirmed by the signatory of the association.
3. Decision of the Estonian Tax and Customs Board on inscription on the list or refusal to inscribe on the list
3.1. Inscription on the list
An association shall be inscribed on the list (subsection 11 (2) of the Income Tax Act) if:
the association operates in the public interest, i.e. objectives of the activities are primarily related to the public interest of the society, and it does not operate in the interest of a narrow circle of persons (e.g. members, founders, etc.) or in private interests. The association operates for the society as a whole or assists those who are not self-sufficient.
the association operates for charitable purposes, offering goods, services or other benefits primarily free of charge or in another non-revenue seeking or publicly accessible manner. The publicly accessible manner does not mean that everyone should have access to goods, services or other benefits provided by the association but the majority, including those people in the area of the operating association whose income is below average.
- the association does not distribute its assets or income, grant monetarily appraisable benefits to its founders, members, members of the management or controlling body (§ 9 of the Income Tax Act), persons who have made a donation to the association during the last twelve months or to the members of the management or controlling body of such person or to persons associated with such persons (clause 8 (1) 1) of the same Act).
The objective of the refusal is first and foremost to prevent the situation where the person who made a donation would get monetarily appraisable return compensation, or, substantially, not a donation is in question, the essential feature whereof is lack of a return compensation.
upon dissolution of the association, the remaining assets shall be transferred, according to the articles of the association, to an association entered in the list or to a legal person in public law or to an association established in another EEA Contracting State, if it is supported by sufficient evidence that it meets the requirements of § 11 of the Income Tax Act. The abovementioned requirement does not apply to religious associations which comply with § 27 of the Churches and Congregations Act.
the administrative expenses of the association correspond to the character of its activity and the objectives set out in its articles of association.
If the requirements provided in subsection 11 (2) of the Income Tax Act are met and the shortcomings mentioned in subsection 11 (4) of the Income Tax Act are lacking, the association shall be inscribed on the list of non-profit associations, foundations and religious associations benefiting from income tax incentives by the decision of the Estonian Tax and Customs Board on the first day of the calendar month following the decision.
The list shall be made public on the web page of the Estonian Tax and Customs Board.
3.2. Refusal to inscribe on the list
An association shall not be entered in the list if (subsection 11 (4) of the Income Tax Act):
it does not operate in accordance with its articles of association;
it has not operated for at least six months and submitted an annual report for this period to the commercial register (except congregations, monasteries or institutions of churches operating on the basis of an international agreement);
whose documents submitted for inscription on the list do not conform to the requirements established by legislation;
it does not use the revenue received from economic activity primarily for charitable purposes in the public interest. The association may be engaged in economic activity (business) but the revenue received from the economic activity must be used primarily for charitable purposes in the public interest. If the revenue derived from economic activity is directed to economic activity once again or used some other way that does not serve the main objective of the association, granting tax incentive shall not be justified.
it is engaged in advertising the goods or services of a founder or donor (except if the association provides, based on a contract, advertising services at the market price), or promotion of the professional activity or business of a person in the target group;
it has tax arrears for which no payment schedule has been arranged;
it has repeatedly failed to submit, by the term or pursuant to the procedure prescribed by legislation, a report or tax return, or it has repeatedly delayed payment of tax;
it is being terminated or bankruptcy proceedings have been brought against it;
it is mainly engaged in support of the representatives of some profession or in business support or if it is a trade union or political association. If the principal activity of the association is operating in the public interest, the promotion of some profession as ancillary activity does not automatically exclude a chance for entry in the list. It is essential that the said activity is not the main objective for the activity of the association.
If it becomes evident that the association does not meet the requirements provided in subsection 11 (2) of the Income Tax Act or if the shortcomings mentioned in subsection 11 (4) of the Income Tax Act become known, then the Estonian Tax and Customs Board shall inform the association of a resolution to enter in the list or to deny entry in the list within 30 days of the submission of the application.
The reason for refusal to inscribe on the list is indicated and the legal basis given in the decision.
If the association does not agree with the decision of the Estonian Tax and Customs Board, it has the right to file a challenge against it within 30 days after the receipt of the decision. The Estonian Tax and Customs Board shall resolve the challenge within 30 days after the receipt of it.