Tax Deductions for Art Gifts - Russia

Article 582 of the Civil Code describes a donation as a gift of an item or a right for generally useful purposes. Donations can be given to individuals; health, welfare, educational, and similar institutions; charitable, scientific, public, and religious organizations; and foundations, museums, and other cultural institutions.

Effective January 1, 2006, organizations seeking to advance social welfare, medical care, and human rights protection are also eligible (Tax Code, Article 251).  An otherwise eligible grant may not qualify for exemption if the donor is a foreign or international grant maker. Such a grant is tax-exempt only if the grant maker appears on an official government list - but the requirements for getting onto the list are not clear. The Decree of the Russian Cabinet of Ministers dated January 21, 2006 (N 24), approved the revised version of the "Regulation on the List of Foreign and International Organizations Whose Grants are Not Included into Taxable Income of Russian Organizations - Recipients of Grants" (hereinafter "Revised Regulation"). In addition to expanding the list of areas for tax exempt grants to reflect amendments to the Russian Tax Code dated June 2005, the Regulation added new organizations to the list of foreign and international organizations and associations approved by the Government of Russian Federation, for the first time since 2003.  Individuals may deduct from taxable income any monetary donations to scientific, cultural, health care, educational, sports-related, and social security organizations up to 25% of their total income (Article 219, Tax Code).

Legal entities cannot claim a tax deduction or credit at a federal level for contributions made to NCOs, including charities. However, with the exception of sports organizations, the recipient organization must be state-subsidized or state-owned for the donation to qualify as deductible. Thus, donations to not-for-profit private schools, museums, or health care providers do not qualify for a tax deduction. In addition, Article 219 has been interpreted to require that the deductible donations be made directly to the beneficiary organization. Consequently, donations to umbrella organizations or other intermediaries that redistribute the funds to NCOs that actually undertake the specified activity are not tax deductible. Deductions for individuals may be claimed only for monetary donations; in-kind donations are not eligible for tax deductions (Article 219, Tax Code). Donors may not carry forward or accumulate unclaimed tax deductions or other unused tax benefits. 

Regional and local authorities may grant additional deductions and preferences within the limits of their taxing authority and share of federal tax revenues.  The region (oblast) of Moscow, for example, allows additional deductions for Moscow residents for donations to approved Moscow charities (Moscow region law No. 39/97- OZ, "On preferential taxation in Moscow region," July 9, 1997 as amended).

You can obtain more information on Cultural Gifts Tax Benefits in Russia by visiting http://www.garweb.ru/PROJECT/LAW/doc/10064072/10064072-050.htm