Legal Environment for Endowments in Hungary - PowerPoint PPT Presentation

About This Presentation
Title:

Legal Environment for Endowments in Hungary

Description:

Legal Environment for Endowments in Hungary Nilda Bullain ICNL Polish NGO Seminar, Warsaw, June 6-7, 2002 Economic Environment Macroeconomic growth Nonprofit sector ... – PowerPoint PPT presentation

Number of Views:76
Avg rating:3.0/5.0
Slides: 14
Provided by: Nil133
Category:

less

Transcript and Presenter's Notes

Title: Legal Environment for Endowments in Hungary


1
Legal Environment for Endowments in Hungary
  • Nilda Bullain
  • ICNL
  • Polish NGO Seminar,
  • Warsaw, June 6-7, 2002

2
Economic Environment
  • Macroeconomic growth
  • Nonprofit sector growth
  • Increase in disposable income
  • Increase in consumption
  • Trust in private investments halted
  • Financial literacy emerging

3
Nonprofit Sector Economy
4
Nonprofit Sector Economy
  • Total Sector Revenue (2000)
  • US 1,830 million
  • Revenue from Financial Transactions
  • US 41 million (2.2)
  • Revenue from Interest
  • US 40 million (2,3)

5
Nonprofit Sector Economy
  • Highest percentages of income from financial
    transactions and interest
  • Education (12), economic development (10,1),
    research (8.4)
  • Private Foundations (5.5 from financial
    transactions, 3,4 from interest)

6
Nonprofit Sector Economy
  • NGOs expend 96 of their revenues
  • Foundations expend 92 of their revenues
  • Amount unexpended in 2000 US 40,000,000
  • Value of fixed assets in foundations (2000)
  • US 215 million
  • Value of fixed assets in public benefit
    companies US 288 million

7
Political Environment
  • Government intention has been to exercise control
    over state funds
  • Public Law Foundations not suitable for
    investment (dependent on state budget, annual
    renewal) yet they represent a growing
    proportion among foundations
  • Endowing / tax exemption of investment income was
    not a priority
  • Lack of communication among NGOs, government and
    financial community

8
Legal Environment
  • Establishment
  • Closed foundation (default form)
  • Initial capital as investment
  • Open foundation
  • Initial capital as start-up fund for operations
  • In practice, mostly open foundations with low
    amounts of initial capital

9
Legal Environment
  • Governance Liability
  • Founder has little influence over the operations
    of the foundation
  • Liability regulations do not address this issue
  • Principles of investing
  • Entrepreneurial activity only without endangering
    foundation purposes (PBOs)
  • If investing, it should have investment policies
  • Voluntary Mutual Insurance Funds (1993) model

10
Legal Environment
  • Taxation
  • Entrepreneurial activity taxed (not all economic
    activity is entrepreneurial)
  • For foundations, grant support, gifts or own
    income serving statutory purposes not taxed
  • Entrepreneurial income for PBOs tax exempt under
    10 of whole income or 10 million HUF above that
    taxed proportionally

11
Legal Environment
  • Taxation
  • Interest received from the credit institution or
    issuer of securities, or yield of state bonds,
    partially not taxed (in proportion to revenue
    from statutory activity in the whole revenue)
  • Question of dispute securities
  • Law on Accounting uses the term for credit type
    facilities only not for shares
  • Corporate Tax Law uses the term for both, but
    uses interest in this paragraph

12
Legal Environment
  • if a PBO does not have commercial activity at
    all, its income from investments in credit type
    securities will not be counted as entrepreneurial
    income
  • while income from investments in shares, limited
    partnerships and perpetual funds will be tax
    exempt only as long as it is under 10 of its
    total revenue or less than 10,000,000 HUF.

13
Conclusion
  • Endowments in Hungary do not exist, but timing
    might be right to address the barriers
  • So far this has not been a political priority but
    new government is open to suggestions
  • Increasingly favorable economic environment
  • Nonprofit sector growth indicates opportunities
  • Need to improve financial management skills in
    NGOs
  • Need to establish communication with the
    financial/banking community
Write a Comment
User Comments (0)
About PowerShow.com