The Status of a Charitable Organisation
A charitable organisation is an organisation to which the status of charitable organisation has been granted under tax legislation. The status is granted to an organisation created for the pursuit of charitable activity, registered under the statutory procedure, and having at least 1 year of experience of charitable activity. The granting, annulment and withdrawal of the status are carried out by the Head of the Revenue Service, on the proposal of the corresponding tax organ and in agreement with the Minister of Finance of Georgia. The application is made in writing and indicates the name of the organisation, its organisational-legal form, its principal aims, the principal directions of the last year's activity and the addresses of the governing organ and branches. The application must be accompanied by a copy of the charter, a certificate of state or tax registration, a report on the last year's activity and the last year's financial documents confirmed by an independent auditor — the balance sheet and the profit-and-loss statement. The Head decides within 1 month; if no decision is taken within that period the status is considered granted; it enters into force immediately upon grant and is issued indefinitely. In completing the application, all requirements must be satisfied together — both the mandatory fields and the accompanying documentation, since the absence of the auditor's conclusion or of the report stops the procedure from the outset.
What Constitutes Charitable Activity
Charitable activity is the voluntary and gratuitous provision of assistance — directly or through a third person — to persons who need it: persons in need of social protection or medical assistance, the needy, including persons with disabilities, the elderly, orphan children, large families and persons affected by war, armed conflict, accident, natural disaster or epidemic. Charitable is also the activity of organisations for the benefit of society in such spheres as the protection of human rights, protection of the environment, development of democracy and civil society, culture, education, science, health care, social protection, physical education and amateur sport, and art. The enumeration also covers institutions for children and the elderly, medical institutions, charitable organisations and other similar formations.
The Tax Demarcation
Charitable activity is not attributed to economic activity — this demarcation is the functional meaning of the status. Economic activity is any activity carried out to receive income or compensation; charitable and religious activity, employment and the activity of organs connected with their statutory functions are not attributed to it. At the same time, auxiliary economic activity serving the principal aims of the organisation does not change its charitable character. The notion of organisation is itself broad: it covers nonprofit legal persons, their foreign branches, budgetary organisations, public-law legal persons and international organisations; and where an organisation carries on economic activity, the corresponding part of its property and activity is treated as the property and activity of an enterprise.
The Certificate, Loss of Status and Control
An organisation that has received the status is issued a confirming certificate indicating the name and organisational-legal form, the status, the address of the governing organ, and the date and number of the grant of the status. The status is indefinite, but this is no perpetual guarantee: the law provides for annulment and withdrawal by the same competence — decision of the Head of the Revenue Service. The object of practical control is conformity of activity: assistance must remain within the charitable list, and auxiliary economic activity must serve the principal aims; the documentary fixation of these recognised forms grounds the preservation of the status.
The status also imposes continuing obligations. By 1 April of each year the organisation must submit to the tax organ the program report on the last year’s activity, a financial report on income indicating its sources and the purpose of the expenses incurred, and the balance sheet and profit-and-loss statement confirmed by an independent auditor; these reports must be published and accessible to every interested person. It is impermissible to distribute the profit and assets of the organisation among its members, founders, members of the board and of the board of trustees, and upon liquidation the property passes to a charitable organisation with similar aims. The status is withdrawn on two grounds — violation of the code’s requirements or loss of registration — and the organisation must then return the part of the benefit received through tax reliefs connected with the violation; before a withdrawal proposal the tax organ grants an additional one-month cure period, and restoration may be sought no earlier than 1 year after the cause is eliminated. The Revenue Service keeps the unified registry of charitable organisations, accessible to all interested persons.
Frequently Asked Questions
Below we answer the questions most frequently asked on this subject.
How much experience is needed for the status?
At least 1 year of charitable activity, together with registration.
Which documents accompany the application?
A copy of the charter, a certificate of state or tax registration, a report on the last year's activity and financial documents confirmed by an independent auditor.
Within what time is the application decided?
Within 1 month; if no decision is taken the status is considered granted, and it is issued indefinitely.
Does income-generating activity undermine the status?
No, where it is auxiliary economic activity serving the principal aims; charitable activity itself is not economic.
What reports must the organisation submit?
By 1 April of each year — the program report, the financial report on income and expenses, and the auditor-confirmed balance sheet and profit-and-loss statement, published for all interested persons.
How We Help on Legal.ge
Obtaining the status of a charitable organisation rests on documentary readiness. On Legal.ge you can consult a lawyer who will prepare the application, check the accompanying documents and help you preserve the status. Submit a request on the site and receive qualified assistance.