At the same time as contemplating the legal requirements to operate at the local level, the legal requirements for operating at the international level have to be taken into consideration. Most of the CIS countries will likely have laws that provide for international organizations. Creating one NFPO that operates in several countries would make for a more cohesive operation than having separate legal entities. Nevertheless, this may not be possible in all countries and some type of partnership relationship may prove more viable in some countries. For instance, in Russia there are disadvantages from a tax perspective of establishing an international organization.
If an international organization status is adopted or if a representative branch of a foreign NFPO is established, the statutory documents should state the date and place of registration of the founding organization and the full name of the registering authority. This will facilitate the determination of the legal status of the organization. The charter of a locally registered organization should be in accordance with the charter of the founding organization.
It would not be advisable to establish a NFPO with a membership base. A NREC can establish various administrative processes and procedures to ensure participation and input from different sectors of society. This could involve participation in advisory panels and regular consultations.
In the past, founders of large NFPOs often sought to establish such organizations pursuant to an executive decree or special act of the legislature. The possibilities for such a creation process in the CIS appear to be slim or none. The window has closed in Russia and will likely close soon in Ukraine. Nevertheless, in the event the proposed new laws are not adopted, a special creation process should be considered.
There are disadvantages to such a creation process. The decision to establish an organization by executive decree has to be made at the highest level. At this point, the creation process becomes very political and starts to attract considerable attention. There could be a huge demand for the NFPO to provide more services that it intends to provide for a wider group of constituents than targeted initially. Moreover, other NFPOs could resent the special privileges that the organization receives. The development of comprehensive not-for-profit laws, which will apply to all NFPOs, represents a positive trend.
How the CIS governments treat tax matters remains unclear. For instance, some laws appear to require that a NFPO state in its charter the commercial activities it will conduct. The issue arises as to whether these commercial activities have to relate to the NFPO's objectives as stated in its charter. Also, is a NFPO prohibited from engaging in commercial activities unrelated to its charter objectives or is it just prohibited from receiving a tax exemption on this income? In addition, various donors may have tax treaties with countries in the CIS or bilateral assistance agreements which could have applicable tax provisions. Resolving tax issues regarding commercial activities proves important. In order to foster long-term financial sustainability, a NREC could consider engaging in commercial activities. Such activities need not conflict with the not-for-profit character of the organization.
Given the uncertainty in tax matters, the founders of a NREC should work closely with the appropriate authorities when registering the organization. There could be opportunities for the authorities to provide a favorable interpretation of the laws. Such interpretations could be a factor in deciding where to locate an organization.