Israel (like other countries) provides support to NGOs in the form of tax benefits granted subject to the fulfillment of defined criteria and conditions. The purpose of these benefits is to support the social and public activities of NGOs and to enable them, among other things, to expand their positive impact on Israeli society.
Among the tax benefits, two are particularly significant:
- Tax exemption to NGOs on their income.
- Tax credit to donors (at a particular rate) in respect of their donations to approved NGOs. This benefit is an incentive for donors and is not a direct benefit to an NGO, but its outcome is a benefit to those institutions.
Income Tax Ordinance
The Israeli Income Tax Ordinance regulates these benefits. The basic condition for receiving the benefits is an institution’s compliance with the components of the definition of “public institution” in the Income Tax Ordinance. According to the definition, a public institution is “a body of at least seven persons, most of whom are unrelated to each other.
which exists and functions for a public purpose and whose assets and income are used solely to achieve that public purpose, and which files an annual report of its assets, income and expenses …”
The definition of “public institution” also contains another definition. “Public purpose” is defined as “a purpose concerning religion, culture, education, encouragement of settlement, science, health, welfare or sports, and any other purpose approved by the Minister of Finance as a public purpose.”
The definition of “public purpose” includes details of public purposes explicitly defined in the section, and gives the Minister of Finance the authority to outline additional public purposes.
New Public Purposes
Over recent decades, the Minister of Finance has indeed exercised his authority to expand the definition, and has added three new public purposes:
- Protecting environmental quality for the benefit of everyone.
- Activities to promote and cultivate the volunteer sector in Israel.
- Proper management in public institutions.
These public purposes do not appear in the definition listed in the Income Tax Ordinance, but rather appear in the Government Gazette.
[View source.]
