Registration and Operation of NGOs, Taxation of NGOs,  Public Funding for NGOs and NGO Participation in Decision-making
Registration and Operation of NGOs, Taxation of NGOs, Public Funding for NGOs and NGO Participation in Decision-making

By Bulgarian Center for Not-for-Profit Law

Sofia, 2009


CHARTER 1: Registration and operation of NGOs

  • Legal forms of NGOs

According to the Bulgarian Law on Non-profit Legal Entities, there are two legal forms of NGOs: associations and foundations.  
There is a specific type of non-profit organizations, called chitalishta, which are regulated by a special law. They are community centers which main activities are in the field of culture, education and dissemination of information for the community.

  • Who can register an NGO

Founders of NGOs can be legal entity/ies (other NGOs, trade companies, municipalities, etc.) or physical person/s. Founders can be either nationals of Bulgaria or of another country. Physical persons - founders of NGOs must be at least at the age of 18.

  • Is there a minimum capital requirement

There is no minimum capital requirement for establishing an NGO.

  • Is there a minimum requirement for founders/members

There is a minimum requirement for number of founders of an association and it is different according to the benefit status that it has. If the association is established as an organization in mutual benefit, the founders must be at least 3 entities (physical and/ or legal entities). If the association is established in public benefit, then the founders must be at least 3 legal entities or at least 7 physical persons. For establishing a foundation there is no such requirement which means that it can be done by one person or more.

  • Where are NGO registered

NGOs are registered in the regional court according to the seat of the organization. When the registration in the court is complete, the non-profit organization acquires its legal personality. After the court registration, NGOs have to be entered in the BULSTAT register in order to receive an identification number for tax purposes. The last obligatory registration for all NGOs is in the State Agency for National Security.
There is a special registration for public benefit NGOs in the Central Register for Non-profit Legal Entities with the Ministry of Justice. After this registration, the public benefit NGOs can have the benefits that the law provides to them (tax benefits and others).  

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

The court refuses registration of an NGO if the purposes, activities or other provisions of the statutes do not comply with the legal requirements (for example – the activities for achieving the purposes should not be legal i. e. they can not violate the territorial integrity of the state or human rights, etc.). The court can requests additional information if there is a missing document or there is a need to make a technical amendment in the text of the statutory documents, etc. In such cases the court gives instructions to the founders and after the instructions are followed, the registration procedure can be finalized.
According to the law, an NGO can be terminated on the following grounds:

  • with a decision of the supreme body of the NGO;
  • if the NGO has been established for a limited term, pointed out in its statutory documents – with the end of this term;
  • under a decision of the court only if: the NGO wasn't established according to the law; the NGO performs an illegal activity or the NGO is insolvent.

In the cases under point 3 the court provides a 6-month period to correct the situation before terminating the organization.

  • Structure of the NGOs

The law determines the mandatory structure of NGOs according to their type and status as following:

  • associations, must have as a supreme body - a General assembly, consisting of all members and as a managing body – a Management Board, consisting of at least 3 members, elected by the General Assembly.
  • mutual benefit foundations must have at least one managing body that can be either a director/ manager or a management board;
  • public benefit foundations must have one collective supreme body that can be called Board of trustees, Board of founders, etc. and one managing body that can be a director/ manager or a management board. 
  • Is there a public benefit status in your country?

Yes, there is a public benefit status, according to the Bulgarian legislation on NGOs.  These organizations work in fields that are considered to be important for the society and the results from their activity benefit not only the members, founders or a specific group of persons, related to the organization in some way, but all other interested parties. The law on Non-Profit Legal Entities explicitly determines some fields as public benefit, for example – education, development of civil society, protection of human rights, culture, etc. Because of the importance of public benefit organizations, the state provides them different benefits (for example – favorable tax regime, state subsidies).  At the same time, there is an additional registration and reporting requirements (at the Central Register for Non-Profit Legal Entities in Public Benefit with the Ministry of Justice), as well as  special provisions for avoiding conflict of interest for these organizations in order to assure their transparency and accountability

  • Reporting requirements and oversight authorities

According to the legislation, there are several common reporting requirements: for tax purposes, for statistical purposes and for money laundering purposes. Public benefit NGOs have an additional reporting requirement – to submit an annual report about their activities to the Central Register for Non-Profit Legal Entities in Public Benefit with the Ministry of Justice.
The oversight authorities are the Regional Prosecutors' Office; the National Revenue Agency; the National Statistic Agency; the State Agency for National Security; the Central Register for Non-Profit Legal Entities in Public Benefit with the Ministry of Justice.

  • Possibility for direct economic activity

NGOs can carry out direct economic activity. There are several requirements that have to be followed: the scope of economic activity must be pointed out in the NGO statutes; the economic activity must be related to the non-profit activity; it has to be additional to the non-profit activity; the income from economic activity must be used only for achieving the non-profit purposes of the NGO and the profit cannot be distributed to the founders or members of the NGO. When performing economic activity, the NGO must follow the specific requirements in the legal acts regulating the relevant economic activity.

  • Possibility to register a commercial company

According to the Bulgarian legislation NGOs, both in mutual and in public benefit can establish and/or participate as share holders in commercial companies.

  • Possibilities to engage in political/public policy activity

Bulgarian law prohibits the involvement of NGOs in any political activity participating in the elections or financing political parties.
NGOs can organize advocacy campaigns for different public causes, as well as they can participate in the formulation of public policies, proposing changes in the laws or providing expert opinions and statements.



CHARTER 2: Taxation of NGOs

  • Is NGO income taxed?

The income from non-profit activity of an NGO is tax exempt while the income from additional economic activity is taxed at the same rate as businesses.  

  • Is there a tax on the NGO's economic activity income?

The additional economic activity of an NGO is annually taxed with 10% corporate tax on the positive financial results (profit).

  • Is there a tax on donations?

The income from donations is considered to be part of the income from non-profit activity, so it is exempt from income tax for both – public benefit and mutual benefit NGOs. However, only NGOs in public benefit are exempt from paying local tax on donations, while NGOs in mutual benefit are not (it is a special tax paid to the municipality where the NGO has its seat).

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

There are exemptions only for donors of NGOs in public benefit. Individuals can deduct from their annual income up to 5% from the donations made to public benefit NGOs, while corporate donors can deduct up to 10 % of their profit for donations made to such NGOs.   

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

There is an income tax of 5 % on dividends, received by NGOs.
The income of NGOs formed by bank account interests is exempt from taxes, if the money is for financing the non-profit activities of the NGO. The income accumulated from sales of shares or securities on the regulated Bulgarian securities' market is exempt as well.   

  • Are there taxes on the property owned by NGOs?

NGOs have to pay annual local tax for the real estate they own.

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

Public benefit NGOs are exempt from taxes on the property inherited by them, while mutual benefit NGOs are not.

  • Is there tax on grants?

Grants are exempt from taxes, because they are considered to be part of income from non-profit activity.

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

There are no limitations on foreign funding for NGOs.

  • Are there any exemptions from VAT for NGOs?

Yes, there are some exemptions from VAT for NGOs that are already registered under VAT law for example when they organize fundraising activities, related to their non-profit purposes. This means that the NGO must not calculate VAT for the goods and services provided by it if they are related to an organized fundraising event (for example – organizing a charitable auction for fundraising money for repairing the local school).

CHARTER 3: Public funding for NGOs

  • Is there a special government program providing grants to NGOs?

There is a mechanism for providing state funding to public benefit NGOs on a competitive base. The general amount is determined each year in the law on the state budget (for 2009 the amount was 530 769 euro). The responsible authorities are the Ministry of Justice and the Ministry of Finance. NGOs submit project proposals and they are evaluated by a commission, formed by representatives from several ministries (Ministry of Justice, Ministry of Finance, Ministry of Healthcare, Ministry of Labour and Social Policy, Ministry of Economic and Energy, Ministry of Education and Science, Ministry of Culture), one from the Council of Ministries and one from the State Agency for Youth and Sport.   

  • Are there organizations that receive direct state subsidies because they are important or represent the interests of certain groups (e.g. the Red Cross or Union of Blind)?

There are organizations that receive direct state subsidies. These organizations are explicitly named each year in the law on the state budget as well as the sum of the subsidy that each of them receives. Usually these organizations are around 20 and usually they are organizations that are nationally representative of people with disabilities (for example - the Union of Blind; the Bulgarian Association for People with Intellectual Disabilities etc.) or provide important services (for example – the Bulgarian Red Cross). In 2009 the organizations that received direct state subsidies were 23 and the total amount of the subsidies was 4 755 128 euro. However there are no clear legal criteria as to how an organization is included in the list.

  • Are there examples of local authorities providing funds to NGOs for certain activities?

There is no general legal regulation on funds established by local authorities for financing certain activities of NGOs. This is an issue that is regulated by each municipality in a different way. However there are some examples as Dobrich municipality which in 2007 provided financial support to NGO projects.

  • Are there cases when the state/local authorities hire an NGO to provide certain services or perform a certain task e.g. prepare a legislative analysis or provide food to old people.

There are cases when the authorities prefer to hire NGOs for certain tasks usually for providing an analyses, expert assistance, monitoring, etc. The cases and the requirements for hiring an NGO are regulated by the provisions on public procurement procedures. According to the law, it is possible directly to hire an NGO only if the price for the services is below 7 500 euro. If it is higher – the relevant state authority has to follow other procedures like organizing a public tender for example.  
In addition, there is a special legal procedure for contracting NGOs that provide social services (social contracting). It is regulated by the Law on Social Support. The services providers are selected on competitive base after submitting project proposals for providing social services.

  • Can NGOs take part in public procurement procedures and get contracts?

Yes, NGOs can participate in procurement procedures on an equal base with other legal entities.

  • Are state funds provided in a decentralized way (e.g. each ministry gives grants in its own area or there is one institution giving grants in different areas)

There is no centralized way for providing funds to NGOs. Different institutions are responsible for distributing funds to NGOs according to their area of activity (for example – the Ministry of Labour and Social Policy is responsible for the EU programs in the social field; the State Agency for Youth and Sport is responsible for the implementation of youth programs, etc.)

CHARTER 4: NGO participation in decision-making

  • Is there a state strategy for NGO-government relations?

There is no state strategy for NGO-government relations.

  • Is there a ministry or agency responsible for relations with NGOs?

There is neither a ministry nor other state institution responsible for relations with NGOs.

  • Is there a Parliamentary commission responsible for NGO issues?

There is no Parliamentary commission that is responsible only for NGO issues, but such are included in the area of activity of the commission called "Parliamentary commission for culture, civil society and media".

  • Can NGO easily take part in debates in parliamentary committees?

According to previous legal regulations, in order to be present in a parliamentary committee, a representative of an NGO has to be officially invited by a member of the committee. In the beginning of 2009 there was a change in this procedure and the present regulation makes it easier to take part in the discussions. Now the NGO representative must only notify in advance the chairperson of the relevant committee for his/her presence and there is no need to have an invitation. 

  • Is there a legal requirement for ministries/parliament to publish draft laws on their websites and ask for comments from the public?

According to the amended Law on Normative acts , all state authorities - responsible for the preparation of draft legal acts, are obliged to publish them on their websites, as well as to determine a term for the interested parties (NGOs, citizens, etc.) to submit their statements and proposals.

  • Are there joint bodies between the administration and NGOs for consultations on different issues?

There are some joint bodies between NGOs and the administration and their main purpose is collaboration and consultations on different issues. They are established as part of the administrative structure of the central or of the local authorities and they can be permanent or ad hoc bodies. Such bodies are for example the Economic and Social Council; the National Council for Collaboration on Ethnical and Demographical Issues; National Council for Integration of People with Disabilities, etc.

  • Is there a legal act or other state document requiring the administration to consult with NGOs?

The Law on Normative Acts requires the state authorities to give a period to NGOs and citizens to submit proposals on prepared draft legal acts and in this way the consultation procedure is regulated, as well as allows NGOs and citizens to make proposals for other legislative changes.

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