Registration and Taxation
Voluntary organisations in Malta are given considerable importance due to their extensive contributions towards our society. They are often set up, organised and nurtured by professionals and highly dedicated individuals. Naturally, the state sought to govern this sector through concrete legislative measures and by introducing the role of the Commissioner for Voluntary Organisations.
The initiatives undertaken to strengthen this sector go beyond the implementation of legislative measures. Recently, the state introduced a newly established fund of €900,000 which was primarily set up for the benefit of voluntary organisations upon submitting an application.
The Identification of an Organisation
An organisation may take advantage of this fund and any other benefits upon the identification of its inherent nature. Essentially, an organisation is considered to fall under the category of “voluntary” if the organisation enjoys one or more of the following features:
- If it is brought to life by voluntary and complimentary concessions and if the organisation’s activities are backed and financed, at least partially, by such concessions or by services performed voluntarily;
- If complete authority is exercised by voluntary administrators then an organisation is also deemed to be a voluntary entity;
- Subject to any restraints due to the nature and size of the organisation, any individual can become a member of the organisation or take part in its affairs.
Once the status of the organisation is construed according to the above-mentioned criteria, the contemplation of registration is of utmost importance. In fact one of the very first functions exercised by the office of the Commissioner for Voluntary Organisations was the creation of a register of voluntary organisations which will be managed by the Commissioner in terms of the Voluntary Organisations Act, Chapter 492 of the laws of Malta.
Registering a Voluntary Organisation
An organisation contemplating registration shall provide all the necessary documents, including the following:
- basic details pertaining to the organisation;
- the registration number of the organisation if registered as a legal person;
- the administrators’ details;
- if the organisation is foreign then the local representative’s details must be provided;
- a copy of the constitutive deed;
- a copy of the annual accounts along with the report of the reviewers or of the auditors;
and the annual reports.
Apart from the Voluntary Organisations Act, other primary Maltese laws, such as the Civil Code also deal with the actual registration of voluntary organisations. A voluntary organisation must be categorised in the register according to the Commissioner’s legitimate wishes or in line with its main functions. Indeed, the Commissioner must ensure that all the formalities are in check and must also make sure that the proposed objectives of the organisation are legal and legitimate.
The law also provides for the enrolment of an organisation, however if an organisation is enrolled it may not automatically be deemed to be a registered organisation with its own legal personality. Enrolment is different from registration, in the sense that enrolment would enable the organisation to benefit from a number of privileges. In fact, upon enrolment an organisation would be able to organise public collections without seeking the permission of the Commissioner of Police. Furthermore, an organisation which is not enrolled will not be able to make use of the “VO” status in any of its official documentation.
The natural consequence of a positive submission would result in the issuance of a registration certificate. This certificate shall be deemed to be definite evidence that the requisites provided for by the law have been adhered to.
Taxation of VOs
Another important matter is the taxation of such organisations. In this regard, the Voluntary Organisations Act merely refers to taxation matters in relation to the Ministers’ power to regulate. The Act states that both the Minister responsible for the Voluntary Sector and the Minister of Finance may promulgate regulations relating to the fiscal status of voluntary organisations. It also refers to the possibility of formulating rules for different categories or for different classification of purposes.
Furthermore, the Act provides for the possibility of the issuance of exemptions by the concerned Minister/s. In order to promote the importance of enrolment of voluntary organisations, coordination between the Ministers responsible for the Voluntary Sector and that for Finance is of utmost importance.
The Act goes on to provide for the possibility of Ministers establishing regulations regarding the fiscal rules in connection with the activities of voluntary organisations and donations to such organisations. Moreover, such regulations may also establish the terms, conditions, and forms of any fiscal certificates, receipts or other ancillary documentation which may be essential for the enjoyment of the above fiscal status and regulations.
A recent budget initiative has given a tax break to companies contributing to the Malta Community Chest Fund — a charitable institution aiming to help philanthropic institutions and individuals with different needs. Having said that, this exemption from tax on gifts by companies was not extended to the rest of the voluntary sector.
Meanwhile, the Income Tax Act does not make any particular reference to ‘voluntary organisations’, nor does it explicitly exempt voluntary organisations from the requirement to pay tax. It only refers to particular forms of organisations which are exempt from paying tax when satisfying certain conditions.
However, article 12(1)(e) of the Income Tax Act which refers to exemptions, states that when the organisation is of a “public character” and performs “philantropic work” it might be subject to exemptions.
Definitions of the above are derived from case law of the Court of Appeal and the Board of Special Commissioners. Public character was defined as “whether the (Maltese) public in general would obtain a benefit” and whether or not it was “set up for the public in general or at least a determinate section of the community.”
Moreover, Subsidiary Legislation 123.24 — Exemption on Philanthropic Work Notice provides a list of institutions and organisations which are considered exempt from income tax.
The Income Tax Act makes reference to particular kinds of voluntary organisations and highlights their position vis a vis income tax. These are political parties, clubs, philharmonic societies and sports clubs.
Another kind of voluntary organisation which is exempt from income tax through it being mentioned in Maltese legislation is the Youth Clubs and Youth Centres. Reference to such organisations is made in Subsidiary legislation 123.56.
This Subsidiary Legislation exempts Youth Clubs and/or Youth Centres from tax if they satisfy the criteria mentioned in the same Subsidiary Legislation.
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