The annual ceiling for tax-exempt income that non-governmental organizations (NGOs) can earn from economic activities should be increased from the current EUR 15,000 to between EUR 25,000 and EUR 50,000, provided the funds are used exclusively to advance the organization's mission, Flavius Jakubowicz, president of the Supervisory and Advisory Board of the International Fiscal Association (IFA) Romania, said on Wednesday.

Speaking at the conference 'The Impact of Taxation on Entrepreneurs and NGOs', Jakubowicz argued that the current threshold is outdated and should be adjusted in line with developments over the past two decades.

'Experts involved in the OECD accession process recommended that this EUR 15,000 ceiling should be updated,' he said. 'When the state gives NGOs greater freedom to generate non-taxable income from economic activities, provided that income is used exclusively for the organization's declared purpose, the pressure on alternative funding sources and on state allocations would be lower, while the interest and involvement of NGOs would be greater,' he argued.

Romanian tax legislation currently exempts from taxation income earned by NGOs through economic activities up to the equivalent of EUR 15,000 per year, but only provided that this amount does not exceed 10% of their tax-exempt income. Both conditions must be met simultaneously.

Jakubowicz said the revised threshold should be linked to inflation and economic developments since it was introduced.

'Reasonably, in my view, it should be somewhere between EUR 25,000 and EUR 50,000,' he said. 'The money should continue to remain tax-exempt only if the entity can justify that it is spent exclusively on achieving the NGO's purpose.'

At the same time, he stressed that a higher ceiling should be accompanied by safeguards designed to prevent abuses, including limits on remuneration received by members of NGOs' governing boards.

'I support increasing and indexing the ceiling, but with fairly restrictive conditions on how the money is used,' Jakubowicz said. 'I would also strongly limit board members' allowances to ensure that the additional resources are actually used for the association's objectives.'

Another proposal put forward during the conference concerned broader transparency requirements for organizations benefiting from sponsorships and tax redirections.

Currently, NGOs are required to publish transparency reports only if they receive public funding. Jakubowicz argued that similar obligations should apply to organizations that receive funds through Romania's tax redirection mechanisms or through corporate sponsorships.

'I know this may not be welcomed by everyone in the NGO sector, but I would require transparency reports from all NGOs receiving money from tax redirections or sponsorships financed through profit tax or income tax mechanisms,' he said. NGOs funded exclusively through their own economic activities could be exempted, he added.

The IFA Romania representative also highlighted administrative difficulties NGOs face when updating their records in public registries, saying outdated information can complicate compliance procedures with banks, financial institutions and corporate sponsors.

'The public registry does not provide updated data when changes are made through the courts,' he said. As a result, NGOs are often required to obtain court-issued registry extracts, a process that can take '30 or even 40 days' in some cases.

Jakubowicz also pointed to a significant increase in tax inspections targeting the NGO sector in 2026, particularly those linked to sponsorship deductions claimed by companies.

'I can tell you from practice that 2026 brought an intensification of tax authority controls in the NGO sector,' he said. Authorities are increasingly tracing the entire flow of sponsorship funds in order to verify their final destination and ensure that the deductions remain justified.

The IFA Romania official also criticized situations in which sponsors lose tax deductions because the beneficiary NGO or religious entity is removed from the official registry after the sponsorship contract has been signed.

'For reasons that do not depend on the sponsor but on the beneficiary NGO, the sponsorship deduction can be cancelled,' he said. 'I don't think that is particularly fair or equitable.'

Data presented at the conference showed that Romania had 141,204 registered NGOs as of September this year, of which 130,247 were active.

The sector generated revenues of more than RON 21 billion in 2022, equivalent to 1.51% of GDP, and employed approximately 127,000 people.

The figures also revealed that about 26% of NGOs reported no income in 2022, while only 20% of organizations that filed financial statements posted revenues above RON 200,000.

On the funding side, 88,544 companies used Romania's sponsorship mechanism, while RON 420.86 million was redirected from personal income tax through the 3.5% allocation scheme for 2023 income.

Jakubowicz additionally proposed the reintroduction, in capped form, of tax incentives for sponsorships made by microenterprises, the expansion of the 3.5% tax redirection mechanism through the Single Tax Return, and the development of a unified tax guide for NGOs in cooperation with authorities and accounting and tax professionals.

The fifth edition of the 'Impact of Taxation on Entrepreneurs and NGOs' conference was organized on Wednesday by Club Antreprenor and Piata Presei. AGERPRES (RO - writing by: George Banciulea; EN - writing by: Simona Klodnischi)