Digital transformation has completely changed the way businesses work, yet the current legal and fiscal framework has not accommodated for this. At best, we could say that it is a “work in progress”.
Along with businesses, digital transformation has changed whole societies, including philanthropic giving. Are Serbian laws adequate? Are they supporting the growth of digital philanthropy, especially donation-based crowdfunding?
With support from USAID and the European Center for Not-for-Profit Law, Trag Foundation and Catalyst Balkans ran a series of research this past year on crowdfunding practices and developed a set of policy recommendations to address existing gaps in giving at home and from the diaspora. Serbia has one domestic donation-based crowdfunding platform, Donacije.rs, launched with support from USAID. Since Donacije.rs’s inception in 2018, citizens and companies have used this platform to donate over 590,000 EUR for public good. Available data show that for just one year, 265,000 EUR was raised for projects from Serbia through global crowdfunding platforms. These amounts may not seem significant compared to the billions of dollars of the global crowdfunding market. However, what is significant is that donation-based crowdfunding in Serbia ensures access to funding to smaller, rural communities and provides support to causes that are generally less visible in “traditional” philanthropy. This way of fundraising also has clear and long-term impacts (renovation of classrooms and cultural venues, purchase of equipment, support to young talent), and enables quick reaction during crises (support to hospitals in COVID hot spots last year).
However, there are many uncertainties and obstacles for backers, campaign owners, and platforms. If there is a will, the state can make two simple but important changes right now.
The first change concerns giving to projects from Serbia through foreign platforms. Many people, organizations, and companies (including companies that operate in Serbia but are part of multinational groups) want to use global platforms when giving for local projects.
“If there is a will, the state can make two simple but important changes right now”
When a domestic entity successfully raises money this way, they encounter unnecessary delays when trying to transfer funds from the platform to their account in Serbia. This is because banks do not have a purpose code in the Codebook of collection, payment, and transfer regarding cross-border payments. The National Bank of Serbia can quickly fix this issue by adding a new code for donation-based crowdfunding.
The second change would require clarifying the Corporate Income Tax Law, Article 15, which regulates tax relief for giving for public good. If a company donates through a third-party (intermediary) platform, can it receive tax reliefs, as is the case with a direct donation? The answer to this question is not clear since the law only refers to the purpose of direct giving to recipients registered for that exact purpose, and crowdfunding did not exist in Serbia when this law was written. The Ministry of Finance can easily fix this if they provide an official opinion clarifying that tax reliefs apply to giving through donation-based crowdfunding platforms, rendering them eligible for tax reliefs.
These two things can be done right now, and they would immediately influence how companies give and how nonprofits and institutions like schools and health care centers raise money. Trag Foundation and Catalyst Balkans will address both the National Bank and the Ministry of Finance with these proposals.
Apart from these two changes, there are other laws that need to be updated regarding payment institutions, foreign exchange transactions, personal income tax, and property tax.
Step by step, Serbia can join the world in embracing new ways of doing good through mainstreaming donation-based crowdfunding, thus demonstrating leadership in the region which requires no investments while yielding benefits for all.
