Latin America’s legal and fiscal environment for Philanthropy and Private Social Investment: a preliminary view of Colombia

By the turn of the century a new type of philanthropy emerged in Latin America, one that is more organized and encompassing a diversity of actors, which has increased the promotion and channeling of resources and donations. There is a tradition of philanthropy from the private and corporate sector in the region, and in the last decade it has been increasing.

One of the main challenges for the sector in Latin America is strengthening the role of donors — these being foundations, individuals and private social investors. In an effort to contribute to do so, WINGS is working on developing country profiles with basic information on the legal and fiscal environment for philanthropy and private social investment in the region. The focus is on the giving end.

suarez_208WINGS has started to collect data from four member countries: Colombia, Brazil, Mexico and Argentina. We asked Carolina Suarez from the Association of Corporate Foundations in Colombia (AFE) to give a brief overview of the legal status of the sector there, and the country’s current legal environment.

Carolina Suarez: Non-profit organizations (NPOs) are legally recognized in the Colombian Constitution and the Civil Code, which establishes a regulatory framework. This framework covers associations and foundations. In Colombia there are no legal types of foundations. They are understood as legal entities created by the will of a person or group of persons.

In fiscal terms, the Special Tax Regime in Colombia provides the benefit of the tax deduction for donations to NPOs. In some cases, the deduction exceeds the 100% benefit when donations are made in favor of institutions engaged in science and technology or sports. Currently, a new tax reform is under discussion. AFE presented some recommendations in order to strengthen the sector and to ensure that those, who get tax benefits, effectively respond to their social purpose. The main recommendations are:

  • Any regulation of the NPOs should take into account the spirit of the Constitution of Colombia that seeks to safeguard the activities and resources allocated for activities of social interest and public utility.
  • It is necessary a simplification of the tax system applicable to NPOs and to have any criteria to ensure the reasonableness of payroll costs, consulting and representation expenses. The general interest and public benefit of NPOs should be consistent with their structure and nature.
  • NPO can engage in commercial activities, as long as they are used as mechanism to ensure the sustainability of the entity.
  • The control over NPOs should be strengthened. Those NPOs that not meet their objectives or do not meet certain legal requirements to obtain the tax benefits should be subject to full taxation.
  • It is necessary to define specific financial and accounting laws to NPOs to strengthen transparency and legitimacy.
  • All NPOs should have a Code of Good Governance that evidences the commitment of the founders and senior management to pursuit general interest.
  • It is necessary to have authorities expert in the inspection and oversight of NPOs.
  • Finally, we also recommend the possibility to establish a regulation for establishing limited life Foundations.

More WINGS interviews here.

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