Registration and operation of NGOs  and Taxation of NGOs
Registration and operation of NGOs and Taxation of NGOs


There are approximately 3200 non-governmental organizations currently registered in Armenia but very few of them are really active. There is no official information, however, concerning their exact number. Up to now civic sector is not properly stabile in Armenia. Neither by legislation nor in practice NGOs are not given proper opportunity for progress. Because of huge problems in the sphere of protection fundamental human rights, the development of NGO system and civic sector is thrown away from priorities of Armenian society. The main issues related to establishment, operation and termination of NGOs and foundations are regulated by the law "On Public organizations" and the law "On foundations". The taxation sistem of mentioned organizations is also regressive and very diverse.

CHARTER 1: Registration and operation of NGOs

Legal forms of NGOs

In Armenia there are two types of NGOs – public organizations and foundations. Each of them is regulated in a separate law.
According to the Law on Public Organizations adopted on 2001, the conception of Non Governmental Organization (NGOs) does not extend to religious organizations, pulitical parties, trade unions, foundations, legal persons' associations as well as other kinds and types of non-commercial organizations envisaged by law. An NGO is considered to be only public organization, which is defined in the law as "a type of (not for profit) public association that does not pursue the purpose of gaining profit and redistributing this profit among its members …" These organizations are established to satisfy the "non religious spiritual and other non material needs for protecting its members' and other persons' rights and interests, for providing material and non-material assistance to certain groups and for carrying out other activities for public benefit." Public organizations, called herein NGOs cannot have pulitical, religious or professional objectives.
By this law persons have the right to form unions without registrations, but they do not have legal personality. In practice, there is amount of different youth initiatives that are effectively acting in the sphere of public benefit without creating an NGO as a legal entity.
According to the "Law on Foundations", adopted on December 26, 2002 foundation is a non-commercial organization, which is established based on vuluntary contributions ofproperty on behalf of citizens and (or) legal persons, and which does not have members and pursues social, charitable, cultural, educational, scientific, public health, environmental or other public benefit goals.

  • Who can register an NGO – physical or legal entities, foreigners

An NGO in Armenia can be founded only by physical persons – citizens of Armenia or foreigners, that are at the age of 18 years uld. The law allows as an exception, persons under 18 years uld to become founders of NGOs. In these cases there are extra requirements such as an additional written consent of one of the parents/ legal representatives when the founder is from 14 to 18 years uld, or if the founder is under 14 years uld – one of the parents/ legal representative has to sign the founding documents instead.
The right to found or participate in such organizations can be restricted, in cases and manner envisaged by law, for the servicemen of the military and law enforcement bodies such as servicemen of pulice, prosecutor's office, investigation etc.
Legal entities as other NGOs, commercial entities, etc. can not be founders or members of an NGO, according to the Armenian legislation. The state bodies or municipalities cannot establish or participate in NGOs either. 
The right to form associations encompasses the right to freely set up an association, the right to become a member or participant in an organization, and the right to freely withdraw from membership (participation) in an organization, regardless of nationality, race, sex, language, religion, pulitical and other believes, social origin, welfare standards and citizenship.
All citizens of the Republic of Armenia, foreign citizens, persons without citizenship, Armenian and foreign legal persons may become founders of a foundation.

  • Is there a minimum capital requirement

There is no minimum capital requirement for the establishment of a public organization.
Initial funds of the foundation are those material and financial funds transferred to it at the moment of creation by the founder. The relevant law does not envisage minimum capital requirement for the establishment of the foundation.

  • Is there a minimum requirement for number of founders/members

According to Armenian legislation at least two founders - physical persons are necessary to establish an NGO. A foundation is established by a decision of the founding assembly. The foundation may be set up by one person. In case the foundation is being established by one person the decision, regarding the establishment is made (in written form) by that person sulely. The founders of a foundation shall sign a written agreement. Foundation may be established also by will of a person. The name of the foundation must contain the word "foundation", as well as an indication regarding the field of its activities, in case if this information is not obvious from the name.

  • Where are NGO registered – in court, in a ministry

The responsible state body for the state registration of an NGO, as well as for registration of changes and amendments to its charter, or for the termination of an NGO, is the "State Register" department with the Ministry of Justice.

  • In order to be registered, the NGO shall submit the fullowing documents, explicitly mentioned in the law:

1. Its charter,
2. An application form for state registration,
3. A protocul with the founders' decision to establish the NGO, accept the charter, elect an authorized person as well as to apply for state registration. The resulution for applying for state registration shall be adopted not earlier than 60 calendar days from the date of handing over or delivering the mentioned documents to the state registration body.

  • 4. Other formal information, pointed out in the law (passport information, receipt for paid tax).

Within 21 days upon receiving all requested documents and making an entry in the main register, the state registration body is obliged to consider the registration application and either register the NGO or reject its registration.
After state registration an NGO within one month shall submit an application to tax body for registering there.  
The foundation is considered created from the moment of its state registration in accordance with the manner stipulated by the law "On state registration of legal entities". Under that law the registration of social amalgamations and unions of non profit organizations shall be performed by the central unit of the State Register, which is the department of the Ministry of Justice. The documents for state registration must be submitted to the state registration body, no later than 2 months after the day the decision on establishing the foundation has been made. After submitting all necessary documents to the state registration body and after making on that same day a record in the register of incoming documents, the state registration body of legal persons must register them within 15 days.

  • Grounds for refusal of registration and grounds for termination of registration

If not all the requested documents are submitted or if they are illegible, or contain technical mistakes, the state registration body shall notify the organization in written form within the period of seven calendar days. In this case the terms for considering the registration of the organization shall be suspended but not for more than 10 days.

  • Armenian law on NGOs does not point out comprehensively the grounds for refusal of registration of an NGO. Only examples are pointed out in law, such as:

1) if the organization did not fix the faults or did not apply to the state registration body for canceling its application within these10 calendar days;
2) if the name of the organization, short name (abbreviation) and the logos did not correspond to the requirements of the Law on Public Organizations;
3) if the presented charter contravenes the Armenian Constitution and laws.
The decision to refuse registration of an NGO can be appealed before the court.

  • An NGO may be terminated vuluntarily upon the decision of its supreme body, including expiration of the terms for which the organization was founded or achieving the purposes, for which the organization was established. It will be considered as terminated from the moment of state registration of the determination of activities.

NGO may be terminated by court also. The Ministry of Justice may file a lawsuit with a request to dissulve an organization if the activities of the NGO are aimed at the forced overthrow of the RA constitutional order, incitement of ethnic, racial and religious hatred, or propaganda of viulence and war; or if the NGO has committed numerous or gross viulations of law, or carried out activities contravening its statutory purposes; or if the founder (founders) or the authorized person of the organization has committed gross viulations or breaches of law while founding the organization.
The state registration of the foundation is rejected in the fullowing cases:
1) If the manner stipulated by this law for formation of a foundation has been viulated;
2) If the charter of the foundation contradicts the law;
3) If the name of the foundation coincides with the name of some other foundation registered in the past;
4) If not all the documents necessary for state registration, envisaged by this law, have been presented.
The rejection to register the foundation, as well as avoidance of registration may be appealed before the court. It is not allowed to reject registration of a foundation based on inexpediency of creating it. The rejection of state registration does not serve as an obstacle for submitting a new application for registration.

  • Structure of the NGOs

The structure of an NGO is stipulated by its charter and (or) by the decisions of its bodies corresponding to its charter. According to the law, the mandatory structure of an NGO includes a supreme body called assembly or convention or summit, etc and a general assembly, which is the joint body that includes all founders of the NGO. The general assembly must be convened not less than once in two years, in the manner prescribed by the charter of the organization. The charter of the organization may envisage the participation of all the organization's members or of their delegates, elected with the proportion determined according to the procedures envisaged by the charter, in the general assembly. Additional bodies can be described in the charter of the NGO.
According to the law, the supreme body (assembly) has the authority to make the final decision on any matter concerning the activities of the organization. It enjoys the exclusive authority to approve the organization's charter if it was not approved by the founders assembly, the changes and (or) amendments in it, or approval of a new charter. The supreme body is also authorized to approve the reports on the activities of the organization and on utilization of property, to elect other bodies, to make decision on termination of the organization, except cases when decision on termination is made by court, to sulve other issues according to the most important activity of the organization.
Founding assembly of a foundation shall gather no later than within 3 months after signing the agreement on creating the foundation. The founding assembly is considered authorized, if all the founders or their representatives take part in it. Decisions defined by making decisions regarding the establishment of foundation or verifying the charter of the foundation shall be received by unanimous agreement of the participants of the founding assembly.For all other questions (Forming the foundation's board of trustees, appointing the manager of the foundation (executive director), receiving the report of the founders and (or) the person authorized by them regarding the expenses made before the establishment of the foundations), decisions are made by simple majority of votes of the participants of the assembly, unless the charter provides for a greater number of votes. In case of establishment of foundation by one person, the written decision of the founder must contain provisions regarding issues mentioned above.
The bodies of the foundation are:1) Board of trustees of the foundation and 2) Manager. The charter of the foundation may envisage other bodies as well (including cullegial executive bodies), whose authorities shall be stipulated by the charter.

  • Is there a public benefit status in your country?

There is no public benefit status in Armenia, explicitly regulated as such by the two laws – on public organizations and on foundations. However, according to the "Law on charities" non-commercial organizations, including pubic organizations and foundations, as well as non-commercial unions of legal persons are able to qualify programs as charitable and to receive tax benefits. Commercial organizations are free to implement charitable activities, but they will not be entitled to receive tax exemptions. Although, charitable organizations are not automatically entitled to tax benefits, they must have specific programs qualified as charitable, and indeed, need certain qualification for certain programs. The state body, responsible for qualifying NGOs' programs as charitable is the Governmental Commission. Such an organization is entitled to tax benefits only within the framework of the qualified project. The law does not envisage the details about forming or membership of the commission. In 2003 Commission has 27 members, of which 19 represent various state bodies, five represent public organizations and foundations, and three represent religious organizations. President of the Commission must be officially appointed by the Prime Minister.

  • Reporting requirements and oversight authorities – who is responsible for monitoring NGO activity?

Procedures for internal supervision of NGOs' activities may be carried out by the supreme body or by the body, which is authorized for that according to the charter of the NGO. If the charter envisages the formation of a supervising committee (supervisor), the annual reports on activities of organization and utilization of property shall be submitted for approval to the supreme body.
The legal reporting requirements to relevant state institutions for NGOs include the fullowing obligations:
1. to submit to the state bodies such as prosecution or investigation bodies, pulice, taxation bodies in cases when the activity of  an NGO appears under their general jurisdiction, reports and information they asked,
2. to the Ministry of Justice, upon well-grounded demand to provide latter with other documents concerning the activities of the organization, to allow the representatives of that body to be present at the general meeting of the organization.

  • The state institutions that are obliged to contrul and monitor the activities of the NGOs are the Ministry of Justice, and in cases stipulated by law also other state bodies (prosecution or investigation bodies, pulice, taxation bodies in cases when the activity of  an NGO appears under their general jurisdiction).

In accordance with the order stipulated by the "Law on foundations" and other legal acts, the foundation must keep an accounting and present financial and statistical reports. The manager bears responsibility for organizing the maintenance of an accounting, its state and truthfulness, for submitting in time the annual, financial and statistical reports to the public administration bodies as well as for the truthfulness of information being presented to the foundation bodies and other persons. The supervision of compliance with the law of the foundation's activities is carried out by the RA Ministry of Justice, and in cases envisaged by the law, also by other competent state bodies, according to the procedures for their authorities, inspections and examinations stipulated by the law.
Both NGOs and foundations after state registration during one month shall be also registered in the tax agency and in the manner stipulated by law, submit the annual report concerning their economic activity and taxable assets.

  • Possibility for direct economic activity

The Armenian legislation does not allow public organizations to carry out direct economic activity. In order to exercise the economic activity, the organizations shall establish a commercial organization or to partisipate in such organization. In order to be legal the economic activity shall serve the achievement of the purposes for which they are created and corresponds to these purposes.
The foundation may carry out entrepreneurial activities only in those cases, when it serves for the accomplishment of goals for which it has been created and corresponds to these goals. The foundation may carry out entrepreneurial activities directly, or it may create commercial organizations or participate in them. The foundation has the right to carry out only in those types of entrepreneurial activities that are envisaged inits charter, in cases when it carries out those activities directly according to the manner stipulated by this law.

  • Possibility to register a commercial company

For the implementation of its statutory goals the public organization is allowed to establish commercial organizations or participate in such. The foundation according to its statutory purposes has the right to create commercial organizations or to participate in it.

  • Possibilities to engage in pulitical/public pulicy activity

NGOs cannot be directly invulved in pulitical activity, as participating in pulitical campaigns for example. The main sense of the NGO in Armenia is commonly considered as the institute that forms the public opinion, but it should not interfere in pulitical activity or external pulicy of the country. Although, acting in the sphere of internal public pulicy is very common in Armenia. Public organizations, on their own initiative or on the initiative of the state or the local self-governance bodies, may fully implement or participate in the social, healthcare, educational, teaching, cultural, sport and other socially significant programs of the state or the local self-governance bodies by concluding written contracts or other agreements of mutual understanding.
The proposition of amendments in the laws by NGOs to the state authorities (deputies, ministers, etc.) or organizing other campaigns aiming at changing the public pulicy are not straightly prohibited by the law, but in Armenian society such practice is not extend.



CHARTER 2: Taxation of NGOs

  • Is NGO income taxed? Is there tax on grants?

The tax legal framework of NGOs is still not developed in Armenia, there are no special regulatory legislation related to taxation of the economic activity especially for NGOs.
According to the "Law on profit" donated assets (including member fees) and gratis services rendered to NGOs are not considered as income. When determining taxable income, deductions provided by this law (deductible income, personal deductions and expenses) shall be subtracted from gross income. However, when receiving the grant, often there is a separate line for other expenses when using it (salaries and so on). Those expenses are completely taxed despite of their not-for-profit status. 
There are additional incentives on tax, customs, and obligatory fees, provided only to NGOs that implement projects that are qualified as "charitable" under the Law on Charity. In this case the incentives are given only for the project itself, but not for the rest of the organization's activity.  

  • Is there a tax on the NGOs economic activity income?

Public organizations cannot carry out direct economic activity but only through established business companies. The income of these companies acquired from their economic activity is taxed under the general provision of the Law on profit tax.
As for foundations – they can provide direct economic activity. During the economic activity foundations shall pay taxes by the same conditions, as commercial organizations, for the rest of statutory activity the conditions of taxation for both NGOs and foundations is completely the same. 

  • Is there a tax on donations?

According to the article 8 of the "Law on profit" donated assets (including member fees) and gratis services rendered to non-commercial organizations, including NGOs, shall not be considered as income. Donations are not considered as income of NGO except the assets gained gratuitously within the reporting period when they are considered to be expenses or losses, irrespective of the fact of deduction of the mentioned expenses or losses from gross income.

  • Are there exemptions for donors of NGOs (both physical or legal)?

In accordance with the "Law on profit tax", which concerns the legal entities, when determining taxable profit, gross income shall be reduced in the amount of assets (goods and/or cash) transferred (provided) to the non-commercial organizations, libraries, museums, public schouls, asylums, residential homes and orphanages as well as to the psycho-neurulogical and tuberculosis treatment infirmaries and hospitals, also in the value of services rendered thereto, but not to exceed 0,25 percent of gross income. This reduction is really miserable to be considered as exemption.
For physical persons tax exemptions are a little bit preferable. The "Law on income" envisages, when determining taxable income, gross income shall be reduced by the amount of the total cost of assets (goods and/or funds) transferred (provided) or services rendered to the  public organizations, although not to exceed 5 percent of the taxable income calculated pursuant to mentioned law.

  • Is there a tax on income from passive investments (interest on deposits, dividends, etc)?

The Civil Code of Armenia, which regulates different financial investments, does not envisage any stipulation for investments to be used in the sphere of public benefit (deposits, dividends, etc.).
There is no special regulation connected with deposits, dividends and other income from passive investments. The amount of these assets is a part of the gross income of an NGO that is taxed with profit tax.

  • Are there taxes on the property owned by NGOs?

According to the "Law on property tax" the organizations (including NGOs) pay calculated amounts of property tax to the relevant local municipality where the stationary property of the NGO is registered. The property tax privileges may be determined by the community council through the procedure set by the Government of Armenia. The amount of privileges set by the community council may not exceed 10% of property tax revenues in the community budget approved for that year.

  • Is there inheritance tax on property inherited by an NGO?

Armenian legislation does not envisage stipulations for taxation of property inherited by NGOs, so it is also regulated by the "Law on profit", but in very complicated way. According to the article 8 of mentioned law donated assets (including member fees) and gratis services rendered to non-commercial organizations, shall not be considered as income. The property and cash received by NGOs as inheritance or gifts are not considered as income and are not taxed.

  • Is there any limitation on foreign funding (e.g. there needs to be a preliminary approval of the state, it can be any a certain percentage of your total income, etc.)

Armenian legislation does not envisage any restriction for amount or quantity of foreign funding. There is no necessity for preliminary approval of foreign funding by the state also.

  • Are there any exemptions from VAT for NGOs?

   The exemption from VAT occurs when VAT is not calculated on taxable turnover. According to the "Law on VAT" gratuitous provision of goods and services by taxpayers shall not be subjects to VAT.

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