Technical Assistance for improving the enabling environment for Civil Society Organisations in the Republic of North Macedonia
  Enabling Environment
Enabling Environment

Civil society organisations are playing an increasingly active role in the social, economic and political life in the Republic of North Macedonia. This role is essential in democratic societies to uphold the rule of law, fundamental rights and democratic accountability.

In order to be able to play that role CSOs must operate within a legal and regulatory framework that allows their establishment, space and scope to operate in the public sphere.

Civil society organisations are playing an increasingly active role in the social, economic and political life in the Republic of North Macedonia. This role is essential in democratic societies to uphold the rule of law, fundamental rights and democratic accountability.

In order to be able to play that role CSOs must operate within a legal and regulatory framework that allows their establishment, space and scope to operate in the public sphere.

A favorable legal environment for CSOs goes beyond the governments’ obligation not to interfere arbitrarily in civil society activities and requires a proactive and supportive legislation. Additionally, it is closely related to the need of legal certainty where vague definition and provisions may be (mis)used by governments to target CSOs. It encompasses a wide range of laws regulating: establishment, registration, funding, taxation and participation in policy and decision-making processes.

In the Republic of North Macedonia, the national legislation on CSOs includes a comprehensive and quite heterogeneous group of laws, by-laws, rules of procedure, decisions as well as acts of soft law such as codes. The normative framework on CSOs is in general in line with international standards however there are certain issues and challenges that have an adverse impact on the civil society environment.

    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Establishment, registration, status and funding

    Law on Associations and Foundations As central piece of legislation the Law on Associations and Foundations (LAF) regulates the manner, the requirements and the procedure for establishment, registration and termination of CSOs, the forms of CSOs, the available assets, the supervision, the status changes and the status of organisations of public interest. Adopted in 2010...Read More
    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Establishment, registration, status and funding

    Law on Associations and Foundations As central piece of legislation the Law on Associations and Foundations (LAF) regulates the manner, the requirements and the procedure for establishment, registration and termination of CSOs, the forms of CSOs, the available assets, the supervision, the status changes and the status of organisations of public interest. Adopted in 2010 with two minor amendments in 2011 and 2016, the LAF provides the legislative framework for CSOs operations in the country for over 10 years. Several reports and assessments, point to the need for an in-depth assessment and revision of the LAF. The key issues are listed below.
    • The principle of non-party activity is not in compliance with the key role of CSOs in democratic societies to enhance and participate in public debate on all issues of public interest.
    • The provisions on public interest organisations set in the law are not meeting their legislative objective and are not operational in practice.
    • Lack of sufficient clarity and precision in defining the criteria under which the CSO may conduct an economic activity.
    • The legal source for state funding (Art. 49 par. 2) leaves significant discretion to the Government and the municipalities on setting the criteria and procedure for allocation of funds.
    • The law does not foresee any obligations to the state organs for ensuring favorable support environment for CSOs.
    Law on one stop shop This law and the corresponding by-law regulate the manner, procedure and forms for registration of establishment and/or statutory change to the register of other legal entities. On the other hand, the National Classification of Activities provides the lists of activities, profit and non-profit, that needs to be assigned to each organisation. Key issues that should be subject to a further review regarding this law and the classification are:
    • The forms and procedures are identical for trade, as well as for other legal entities which causes problems in the practice;
    • The procedure for enlisting establishment and registration does not allow decision-making using electronic means;
    • The status of founders of trade entities and founders of CSOs regarding the registration process is almost identical which is not in compliance with the laws regulating companies and CSOs and may cause problems in practice;
    • The CSOs in overwhelming numbers use the generic code for activities from the National Classification (94.99 – Actions of other organisations based upon membership not stated else) which have its effects on the possibility to conduct economic activities.
    Law on games of chance and entertainment games Though regulating an unrelated subject area, this law is relevant for the CSOs since it secures that the funds collected from the organisation of games of chance and entertainment games shall be used for financing of: national disability organisations, their associations, association for prevention of domestic violence and the Red Cross. The amount to be allocated accounts for 50% from all received funds but between 60 and 120 million MKD. The allocation is done by the Government on the basis of program proposed from the MLSP. This legislative solution had raised concerns whether is the most appropriate for allocating the funds. Key concerns identified are:
    • The limited number and type of organisations that may benefit from the funds;
    • The practice has shown that the allocated amounts is always near the legal minimum which is not more than 6% from the total income;
    • Lack of competitive and merits-based process for allocation of the funds.
    Law on Disability Organisations The Law on Disability Organisations regulates the status, specific services that the disability organisations provide and their funding. The law contains some statutory provisions on the Disability Organisations as a specific sub-form of CSOs and it prescribes the criteria for obtaining such status. The law also sets the framework for the National Disability Organisations and for their funding. There are some articulated concerns regarding the function and the status of these organisations and whether the current model suits best to the interest of the persons with disabilities. A more in-depth analysis of the law is necessary to be planned in the next Strategy for cooperation and development of civil society. 
    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Fiscal status and regulatory compliance

    Law on accounting for non-profit organisations This law and its by-laws set up a separate accounting system for the non-profit organisations differing from the accounting for companies in order to respond to the specific needs of the CSOs. It regulates the manner and requirements for the accounting of non-profit organisations, the types of business books...Read More
    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Fiscal status and regulatory compliance

    Law on accounting for non-profit organisations This law and its by-laws set up a separate accounting system for the non-profit organisations differing from the accounting for companies in order to respond to the specific needs of the CSOs. It regulates the manner and requirements for the accounting of non-profit organisations, the types of business books and data processing, the rules for incomes and expenditure, the obligations for financial reporting as well as the sanctions for failure to comply. A recent assessment identifies the following gaps related to this law:
    • Lack of international standard on accounting for non-profits leaves it to the state to regulate this area, often inconsistently which has negative impact on CSOs, increased costs and problems with financial institutions (banks);
    • Problems with reporting income from economic activities;
    • Inadequate chart of accounts for non-profits.
    Law on donations and sponsorships This law regulates the criteria and procedure for stimulation of donations and sponsorships in public interest affairs through tax exemptions. Though the law is in force for almost 15 years and was amended several times, key challenges in ensuring its effectiveness remain unaddressed. The current law does not provide the necessary stimulus for increasing donations and sponsorships in the areas of public interests. The following issues need to be addressed by legislative amendments:
    • Inconsistent terminology used especially regarding the terms public service and public interest;
    • Unreasonably long and complex administrative procedure for obtaining relief;
    • The public interest is determined for the specific donation, not for the receiver;
    • Lack of harmonisation between the public interest in the context of this law and the Law on Associations and Foundations;
    • The law omits to make distinction between profit and non-profit receivers of donations and sponsorships;
    • Restrictive approach towards cross-border philanthropy;
    • There is lack of proportionality between the relief received and the regulatory burden.
    Law on corporate tax In 2018 a significant amendment to the Law on corporate tax for the CSOs was adopted. It aimed to surpass the long-lasting ambiguous status of the non-profit entities regarding calculation and payment of tax that is in essence related to profit. It stated clearly that the CSOs are not subject to this tax for their income generated by: membership fees, trusts, endowments, donations, grants, gifts etc. However, if CSOs generate income from economic activity they are obliged to pay corporate tax in the amount of 1% from the total income from economic activity if the income is greater than 1.000.000 denars. This is a significant improvement that enables conducting economic activities however additional amendments in LAF concerning the preconditions for conducting economic activities and in the law and by-laws on accounting for non-profits on documenting and reporting generated income are still necessary Law on personal income tax This law regulates determination of taxable income and the obligation for payment of personal income tax. The recent amendments of this law to great extent clarify and improve the legislative framework relevant for CSOs on what is considered taxable income. Transactions related to transport, accommodation, food for events organised by CSO with proper documentation are exempt from taxation.  The new law from 2018 and subsequent amendments in general responded to the need and requests of the civil society organisations for exemption of certain transactions characteristic for the CSOs activities (travel costs for training, accommodation and refreshment for workshops) from the obligation to calculate and pay personal income tax. Law on value added tax Obligation of CSOs as vendors or buyers of goods and services subject to VAT as well as VAT exemption procedure. Key issue is the prolongation of the VAT exemption procedure impacting negatively on the implementation of projects by CSOs when such exemption is required by the donor. The law does not foresee any tax relief for public interest organisations. Key issue remains the prolongation of the VAT exemption procedure impacting negatively on the implementation of projects by CSOs when such exemption is required by the donor.
    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Employment and volunteering

    Law on employment relations This is the central law regulating the rights and duties of CSOs as employers towards the employee as well as towards the state institutions. The generic approach in defining the rights and obligations of the employer is appropriate for the business sector however, it does not consider the specifics of the...Read More
    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Employment and volunteering

    Law on employment relations This is the central law regulating the rights and duties of CSOs as employers towards the employee as well as towards the state institutions. The generic approach in defining the rights and obligations of the employer is appropriate for the business sector however, it does not consider the specifics of the CSOs as employees. This could be addressed through a collective agreement however in absence of such document the Law remains the key document regulating employment. The ongoing process (in early stage) of drafting the new Law on Employment Relations is an opportunity for improvement of the regulatory framework. Consideration should be given to amend the criteria for signing collective agreements to better suit to the specifics of the CSO sector. Law on occupational safety and health This law sets the standards and obligations to all employers (including CSOs) regarding the occupational safety and health requirements. The requirements are mandatory and failure to comply with them may lead to fines. It is however noticeable that the standards are set to suit the business sector. For CSOs meeting the requirements such as security plans, documents and equipment can be costly and reflect negatively on the decision on employment vs the use of contractual services. Law on volunteering The purpose of this law was to encourage volunteering and to provide a clear and predictable framework that will ensure respect for the rights of the volunteer. It defines volunteering, delimits it from other types of unpaid work (internship) and regulates the conditions, manner, rights and duties and documentation of volunteer work. Law on unemployment insurance This law is affecting CSOs due to one provision (Art. 77) which regulates the criteria under which the right to monetary compensation in case of unemployment shall be terminated if among other things the beneficiary is the founder of a “company, enterprise or other legal entity” (including CSOs). Other relevant laws There are other laws related to the normative, institutional & financial framework that are to a lesser extent relevant for the enabling environment in which CSOs operate. These are:
    • the Law on Trade Companies which has subsidiary application to the rules concerning the name of CSOs as well as to the process of liquidation of a CSO,
    • the Law on civil procedure which regulates the procedure for termination of CSOs and resolving disputes between different CSOs,
    • the Law on consumer protection which regulates specific sub-forms of CSOs who are working on consumer protection issues and provides legal ground for funding,
    • and the Law on foreigners which regulates the procedure for obtaining a residence permit for foreign volunteers of foreign staff.

    Law on public gatherings
    This law regulates the manner of realisation of the constitutionally guaranteed right to protest. Since the CSOs often resort to public protests as a tool for raising voice and concerns over certain policies as well as in other advocacy purposes, favorable legislation is quintessential for the CSOs to enjoy, without undue interference, the freedom of assembly. The law defines the meaning of the term public gathering and delimits it from other gatherings not related to expression of opinion or protest.

    Based on previous assessments key issues related to this law that are affecting CSOs are the following:

    • The duties of the organiser of the gathering are not defined with sufficient precision and clarity regarding: organisation of security service (Art. 4.1 LPG), threatening personal safety (Art. 4.3 LPG) and the correspondent misdemeanor sanctions for failure to comply;
    • Foreigners are required to seek permit for organising public gathering (Art.8 LPG);
    • The prescribed fines are relatively high and may discourage the use of this democratic tool.

    Law on free access to information
    Access to information is a key precondition for greater involvement of CSOs in policy making processes. The new law on free access to information was adopted in 2019 and it foresees several novelties that are expected to improve the access to information. It is based upon the principles of maximal openness, proactive obligation for publication of data, limited number of restrictions and procedures for facilitation of the access to information. In order to improve the enforcement, the new law transformed the regulatory institution Commission to an Agency with authority to sanction and fine responsible authorities that failed to comply with the law.

    Law on referendum and other means of direct democracy
    This law sets the procedure for initiating, administering and announcing referendum (national or local), civic initiative and town meeting. Though not very commonly used by CSOs they remain a significant tool for impacting policies and decisions and are fundamental for the democracy. There were several cases in the past period where local referendums were initiated by CSOs.

    The experience from the local referendums had shown several problems that are faced by CSOs when attempting to initiate a referendum for certain issue of public importance:

    • The required threshold of minimum 20% signatures supporting the initiative for the referendum from the voting age population of the concerned municipality (Art. 36 par. 1) is unjustifiably high and is discouraging the CSOs from promoting the local referendums as a tool for democratic participation.
    • The support of 20% signatures needing to be collected in 15 days puts an unnecessary burden on the CSO and acts as disincentive for the use of these important democratic tools.

    Law on lobbying
    Тhe new Law on lobbying has been adopted in June 2021. The new law contains provision stating that a civil initiative initiated by law, as well as communication between CSOs and foundations registered under the LAF and representatives, i.e. bodies of executive and legislative government and local self-government bodies, are not treated as lobbying.

    Rules of procedure of the Government
    The Rules of Procedure of the Government prescribe an obligation to the Ministries to publish the draft laws on their web page and on ENER for consultation (Art. 68-a). The deadline of 20 days following the publication for interested parties (including CSOs) to provide opinion, comments and recommendations is significantly shorter compared to other countries from the region (for example a 30 days consultation period in Croatia). The Ministry in the report of regulatory impact assessment lists the received comments and if they are not accepted provides a proper justification for this. There is no obligation for publication of draft laws that need to be adopted in urgent procedure.

    Code of good practices for participation of civil society in policy making process
    The Code is not a law per se but a list of nonobligatory recommendations issued by the Government to the public administration on inclusion and participation of the civil society in the policy making process. It defines the area of cooperation, types and phases of cooperation (information, consultation, dialogue, partnership), and the instruments (ex. ENER web page, public events etc.). The Code sets the Unit for Cooperation with CSOs within the General Secretariat of the Government as key focal point between the CSOs and the public administration.

    RIA Guidelines
    The Guidelines and the Methodology are bylaws of the Government’s Rules on Procedure which are guiding the process of regulatory impact assessment. Similar to the Code of good practices for participation of civil society in policy making processes they are issued in the form of soft law. They regulate the process of assessment of the regulatory impact of proposed legislation. One of the key elements of the RIA is the process of consultation with stakeholders (including CSOs) where several guidelines are provided for the consultation process. However, the wording of the provisions and which form of consultation shall be used is left to the discretion of the Ministries and other bodies. In practice it is not uncommon to notice inconstant and divergent approaches on the implementation of the RIA process among different Ministries but occasionally even within the same Ministry for different legislative initiatives.

    Law on youth participation and youth policies
    This law was adopted in January 2021 and it aims to regulate the forms of youth organisations and participation of youth in decision making processes relevant to them. It defines the criteria for what can be considered a youth organisation as well as the role and function of national youth umbrella organisations and the national youth assembly. The Law also foresees the establishment of a national advisory body on youth policies as well as legal confirmation of the local youth counsels. The bylaws for its implementation are yet to be adopted and the law is still not fully operational.

    Other laws relevant for participation
    The involvement of CSOs in the policy making process in certain areas is subject of regulation of specific laws. Though the CSO development is not in the focus of these laws, the legislative solutions provided in them may have significant impact on the potential of a CSO to be an active participant in the policy and decision-making processes.

    • The Law on the Environment states that the associations (not the foundations) working on issues related to protection of the environment are a “concerned public” in the context of environmental legislation. This designation gives them a right to challenge the decisions of the Ministry for acceptance of the environmental plans and to even seek an injunction order. They also may challenge the A and B integrated permits who are compulsory for any entity that may pollute the environment. However, the practical experiences show that there is need to amplify the voice of CSOs in the area of environment.
    • The Law on Ombudsman involves the CSOs in the Mechanism for Civic Control, a body within the Ombudsman institution that works on monitoring of the public prosecution work on prevention and protection from acts of torture and inhuman and degrading treatment committed by the police or prison authorities.
    • The Law on Anti-discrimination gives authority to CSOs to initiate a court procedure (actio popularis) for protection from discrimination affecting more people. Related to this is also the recently drafted new Civil Procedure Code where a new special civil procedure for protection of collective rights and interests is envisioned. This procedure shall strengthen the status of CSOs in court procedures and their power to bring cases.
    • The Law on Agriculture and Rural Development foresees the establishment of local action groups as key stakeholders in the local development of the rural areas. The majority of existing LAG’s are registered as associations and they are regulated by the Rulebook on the criteria for enlisting into the registry of the local action groups.

    Besides the aforementioned laws there are additional laws related to the inclusion of CSOs in policy and decision-making processes which are to a lesser extent relevant for an enabling environment for CSOs to operate in. These are:

    • The Law on execution of sanctions which regulates the access of CSOs to prison facilities for the purpose of monitoring and protection of the rights of persons deprived of liberty.
    • The Law for protection of the nature which regulates the participation of CSOs in the work of the National council for protection of the nature.
    • The Law on spatial and urban planning which, though it does not explicitly stipulate the role of CSOs, it provides the framework for public participation and impact in the process of urban planning.

    Law on concessions and public private partnerships
    This law regulates among other the contracts for establishment of a public private partnership as well as other relevant issues related to the public private partnership. It establishes the general ground rules for establishing public-private partnerships where delegation of public services to private entities (including CSOs) is made possible. The law does not limit the private partners to business entities and in theory a registered CSO may be part of such an agreement.

    Law on social protection
    The 2019 Law on Social protection enables outsourcing of social protection services to associations (not foundations) and their authorization as social services providers. The outsourcing may be done on central level, by the MLSP and on local level, by the municipalities. The types of services that may be performed by the CSOs include: social services at home (care and personal assistants), social services in the community (daycare, resocialization etc.), extra family care, informing and referral, expert help and assistance and counseling. While some of the services can be performed solely based on licensing, in some specific cases (for example shelter centers) the CSOs must found a separate establishment.

    Law on free legal aid
    This law allows CSOs to get an authorization to provide primary legal aid (legal information, advice, referral, form filling and other services) to impoverished people. It sets the criteria for authorization, types of services that can be provided, funding and oversight. For the provision of services, the CSOs may seek reimbursement upon meeting the required criteria or apply for grant support. The Ministry of Justice publishes a public call for supporting projects related to legal aid and access to justice once per year.

    Other laws relevant to provision of services by CSOs
    There are some other laws related to CSOs as providers of public services who are to a lesser extent relevant for the enabling environment for CSOs to operate in. These are:

    • The Law on protection from domestic and gender-based violence which provides legislative grounds for CSOs to provide services to victims of domestic and gender-based violence;
    • The Law on civil protection which regulates the role of CSOs as providers of services for civil protection in case of natural disasters or other emergencies, the possibility for officialization of the cooperation with a contract and co-funding;
    • The Law on protection and wellbeing of animals which provides grounds for greater support of CSOs working on animal rights in public services related to the wellbeing of animals.

    One of the prerequisites for guaranteeing democracy is to ensure participation of citizens and civil society at large in political decision-making. The Council for Cooperation between the Government and Civil Society (hereinafter the Council) represents in itself the highest level of CSOs’ participation – a partnership between the Government and CSOs. Consequently, the Council creates the opportunity for inclusive policy making processes and targeted policies for civil society development demonstrating the Governments’ commitment to CSOs and open dialogue between the two sectors.

    The EU through the Guidelines for EU support to civil society in enlargement countries 2014-2020  considers the quality of the bodies for cooperation between the Government and CSOs in terms of: CSO representation in general as well as the representation of smaller CSOs; visibility and availability to constituencies, on Government’s perception of the quality of these structures and mechanisms and CSOs’ perception of these structures and mechanisms.

    The Council is an advisory body to the Government of the Republic of North Macedonia established with the aim to promote the cooperation and dialogue development with the civil society sector in the country. With 15 members of the public institutions and 16 CSO representatives, the Council has been actively initiating discussions on issues pertinent to civil society.

    The Civil Society Representatives of the Council are elected in an open and transparent procedure providing representativeness of a group, platform or CSOs and/or certain expertise in one of the fields prescribed by the Decision for Establishment of the Council.

    The Government representatives in the Council are appointed by the Government from different institutions aiming to provide opportunities for dialogue and consultation in the field of civil society development between the Government and civil society.

    (Content and structure as well as modalities of its feeding with information to be discussed and agreed upon with the Council)

    LEGAL FRAMEWORK FOR CIVIL SOCIETY DEVELOPMENT AND OPERATION

    A favorable legal environment for CSOs goes beyond the governments’ obligation not to interfere arbitrarily in civil society activities and requires a proactive and supportive legislation. Additionally, it is closely related to the need of legal certainty where vague definition and provisions may be (mis)used by governments to target CSOs. It encompasses a wide range of laws regulating: establishment, registration, funding, taxation and participation in policy and decision-making processes.

    In the Republic of North Macedonia, the national legislation on CSOs includes a comprehensive and quite heterogeneous group of laws, by-laws, rules of procedure, decisions as well as acts of soft law such as codes. The normative framework on CSOs is in general in line with international standards however there are certain issues and challenges that have an adverse impact on the civil society environment.

    NORMATIVE, INSTITUTIONAL & FINANCIAL LEGISLATIVE FRAMEWORK

    Establishment, registration, status and funding

    Law on Associations and Foundations
    As central piece of legislation the Law on Associations and Foundations (LAF) regulates the manner, the requirements and the procedure for establishment, registration and termination of CSOs, the forms of CSOs, the available assets, the supervision, the status changes and the status of organisations of public interest. Adopted in 2010 with two minor amendments in 2011 and 2016, the LAF provides the legislative framework for CSOs operations in the country for over 10 years. Several reports and assessments, point to the need for an in-depth assessment and revision of the LAF. The key issues are listed below.

    • The principle of non-party activity is not in compliance with the key role of CSOs in democratic societies to enhance and participate in public debate on all issues of public interest.
    • The provisions on public interest organisations set in the law are not meeting their legislative objective and are not operational in practice.
    • Lack of sufficient clarity and precision in defining the criteria under which the CSO may conduct an economic activity.
    • The legal source for state funding (Art. 49 par. 2) leaves significant discretion to the Government and the municipalities on setting the criteria and procedure for allocation of funds.
    • The law does not foresee any obligations to the state organs for ensuring favorable support environment for CSOs.

    Law on one stop shop
    This law and the corresponding by-law regulate the manner, procedure and forms for registration of establishment and/or statutory change to the register of other legal entities. On the other hand, the National Classification of Activities provides the lists of activities, profit and non-profit, that needs to be assigned to each organisation. Key issues that should be subject to a further review regarding this law and the classification are:

    • The forms and procedures are identical for trade, as well as for other legal entities which causes problems in the practice;
    • The procedure for enlisting establishment and registration does not allow decision-making using electronic means;
    • The status of founders of trade entities and founders of CSOs regarding the registration process is almost identical which is not in compliance with the laws regulating companies and CSOs and may cause problems in practice;
    • The CSOs in overwhelming numbers use the generic code for activities from the National Classification (94.99 – Actions of other organisations based upon membership not stated else) which have its effects on the possibility to conduct economic activities.

    Law on games of chance and entertainment games
    Though regulating an unrelated subject area, this law is relevant for the CSOs since it secures that the funds collected from the organisation of games of chance and entertainment games shall be used for financing of: national disability organisations, their associations, association for prevention of domestic violence and the Red Cross. The amount to be allocated accounts for 50% from all received funds but between 60 and 120 million MKD. The allocation is done by the Government on the basis of program proposed from the MLSP. This legislative solution had raised concerns whether is the most appropriate for allocating the funds. Key concerns identified are:

    • The limited number and type of organisations that may benefit from the funds;
    • The practice has shown that the allocated amounts is always near the legal minimum which is not more than 6% from the total income;
    • Lack of competitive and merits-based process for allocation of the funds.

    Law on Disability Organisations
    The Law on Disability Organisations regulates the status, specific services that the disability organisations provide and their funding. The law contains some statutory provisions on the Disability Organisations as a specific sub-form of CSOs and it prescribes the criteria for obtaining such status. The law also sets the framework for the National Disability Organisations and for their funding. There are some articulated concerns regarding the function and the status of these organisations and whether the current model suits best to the interest of the persons with disabilities. A more in-depth analysis of the law is necessary to be planned in the next Strategy for cooperation and development of civil society. 

    Fiscal status and regulatory compliance

    Law on accounting for non-profit organisations
    This law and its by-laws set up a separate accounting system for the non-profit organisations differing from the accounting for companies in order to respond to the specific needs of the CSOs. It regulates the manner and requirements for the accounting of non-profit organisations, the types of business books and data processing, the rules for incomes and expenditure, the obligations for financial reporting as well as the sanctions for failure to comply. A recent assessment identifies the following gaps related to this law:

    • Lack of international standard on accounting for non-profits leaves it to the state to regulate this area, often inconsistently which has negative impact on CSOs, increased costs and problems with financial institutions (banks);
    • Problems with reporting income from economic activities;
    • Inadequate chart of accounts for non-profits.

    Law on donations and sponsorships
    This law regulates the criteria and procedure for stimulation of donations and sponsorships in public interest affairs through tax exemptions. Though the law is in force for almost 15 years and was amended several times, key challenges in ensuring its effectiveness remain unaddressed. The current law does not provide the necessary stimulus for increasing donations and sponsorships in the areas of public interests. The following issues need to be addressed by legislative amendments:

    • Inconsistent terminology used especially regarding the terms public service and public interest;
    • Unreasonably long and complex administrative procedure for obtaining relief;
    • The public interest is determined for the specific donation, not for the receiver;
    • Lack of harmonisation between the public interest in the context of this law and the Law on Associations and Foundations;
    • The law omits to make distinction between profit and non-profit receivers of donations and sponsorships;
    • Restrictive approach towards cross-border philanthropy;
    • There is lack of proportionality between the relief received and the regulatory burden.

    Law on corporate tax
    In 2018 a significant amendment to the Law on corporate tax for the CSOs was adopted. It aimed to surpass the long-lasting ambiguous status of the non-profit entities regarding calculation and payment of tax that is in essence related to profit. It stated clearly that the CSOs are not subject to this tax for their income generated by: membership fees, trusts, endowments, donations, grants, gifts etc. However, if CSOs generate income from economic activity they are obliged to pay corporate tax in the amount of 1% from the total income from economic activity if the income is greater than 1.000.000 denars. This is a significant improvement that enables conducting economic activities however additional amendments in LAF concerning the preconditions for conducting economic activities and in the law and by-laws on accounting for non-profits on documenting and reporting generated income are still necessary

    Law on personal income tax
    This law regulates determination of taxable income and the obligation for payment of personal income tax. The recent amendments of this law to great extent clarify and improve the legislative framework relevant for CSOs on what is considered taxable income. Transactions related to transport, accommodation, food for events organised by CSO with proper documentation are exempt from taxation.  The new law from 2018 and subsequent amendments in general responded to the need and requests of the civil society organisations for exemption of certain transactions characteristic for the CSOs activities (travel costs for training, accommodation and refreshment for workshops) from the obligation to calculate and pay personal income tax.

    Law on value added tax
    Obligation of CSOs as vendors or buyers of goods and services subject to VAT as well as VAT exemption procedure. Key issue is the prolongation of the VAT exemption procedure impacting negatively on the implementation of projects by CSOs when such exemption is required by the donor. The law does not foresee any tax relief for public interest organisations. Key issue remains the prolongation of the VAT exemption procedure impacting negatively on the implementation of projects by CSOs when such exemption is required by the donor.

    Employment and volunteering

    Law on employment relations
    This is the central law regulating the rights and duties of CSOs as employers towards the employee as well as towards the state institutions. The generic approach in defining the rights and obligations of the employer is appropriate for the business sector however, it does not consider the specifics of the CSOs as employees. This could be addressed through a collective agreement however in absence of such document the Law remains the key document regulating employment. The ongoing process (in early stage) of drafting the new Law on Employment Relations is an opportunity for improvement of the regulatory framework. Consideration should be given to amend the criteria for signing collective agreements to better suit to the specifics of the CSO sector.

    Law on occupational safety and health
    This law sets the standards and obligations to all employers (including CSOs) regarding the occupational safety and health requirements. The requirements are mandatory and failure to comply with them may lead to fines. It is however noticeable that the standards are set to suit the business sector. For CSOs meeting the requirements such as security plans, documents and equipment can be costly and reflect negatively on the decision on employment vs the use of contractual services.

    Law on volunteering
    The purpose of this law was to encourage volunteering and to provide a clear and predictable framework that will ensure respect for the rights of the volunteer. It defines volunteering, delimits it from other types of unpaid work (internship) and regulates the conditions, manner, rights and duties and documentation of volunteer work.

    Law on unemployment insurance
    This law is affecting CSOs due to one provision (Art. 77) which regulates the criteria under which the right to monetary compensation in case of unemployment shall be terminated if among other things the beneficiary is the founder of a “company, enterprise or other legal entity” (including CSOs).

    Other relevant laws
    There are other laws related to the normative, institutional & financial framework that are to a lesser extent relevant for the enabling environment in which CSOs operate. These are:

    • the Law on Trade Companies which has subsidiary application to the rules concerning the name of CSOs as well as to the process of liquidation of a CSO,
    • the Law on civil procedure which regulates the procedure for termination of CSOs and resolving disputes between different CSOs,
    • the Law on consumer protection which regulates specific sub-forms of CSOs who are working on consumer protection issues and provides legal ground for funding,
    • and the Law on foreigners which regulates the procedure for obtaining a residence permit for foreign volunteers of foreign staff.

    IMPACTING POLICIES AND INVOLVEMENT IN DECISION-MAKING PROCESSES

    Law on public gatherings
    This law regulates the manner of realisation of the constitutionally guaranteed right to protest. Since the CSOs often resort to public protests as a tool for raising voice and concerns over certain policies as well as in other advocacy purposes, favorable legislation is quintessential for the CSOs to enjoy, without undue interference, the freedom of assembly. The law defines the meaning of the term public gathering and delimits it from other gatherings not related to expression of opinion or protest.

    Based on previous assessments key issues related to this law that are affecting CSOs are the following:

    • The duties of the organiser of the gathering are not defined with sufficient precision and clarity regarding: organisation of security service (Art. 4.1 LPG), threatening personal safety (Art. 4.3 LPG) and the correspondent misdemeanor sanctions for failure to comply;
    • Foreigners are required to seek permit for organising public gathering (Art.8 LPG);
    • The prescribed fines are relatively high and may discourage the use of this democratic tool.

    Law on free access to information
    Access to information is a key precondition for greater involvement of CSOs in policy making processes. The new law on free access to information was adopted in 2019 and it foresees several novelties that are expected to improve the access to information. It is based upon the principles of maximal openness, proactive obligation for publication of data, limited number of restrictions and procedures for facilitation of the access to information. In order to improve the enforcement, the new law transformed the regulatory institution Commission to an Agency with authority to sanction and fine responsible authorities that failed to comply with the law.

    Law on referendum and other means of direct democracy
    This law sets the procedure for initiating, administering and announcing referendum (national or local), civic initiative and town meeting. Though not very commonly used by CSOs they remain a significant tool for impacting policies and decisions and are fundamental for the democracy. There were several cases in the past period where local referendums were initiated by CSOs.

    The experience from the local referendums had shown several problems that are faced by CSOs when attempting to initiate a referendum for certain issue of public importance:

    • The required threshold of minimum 20% signatures supporting the initiative for the referendum from the voting age population of the concerned municipality (Art. 36 par. 1) is unjustifiably high and is discouraging the CSOs from promoting the local referendums as a tool for democratic participation.
    • The support of 20% signatures needing to be collected in 15 days puts an unnecessary burden on the CSO and acts as disincentive for the use of these important democratic tools.

    Law on lobbying
    Тhe new Law on lobbying has been adopted in June 2021. The new law contains provision stating that a civil initiative initiated by law, as well as communication between CSOs and foundations registered under the LAF and representatives, i.e. bodies of executive and legislative government and local self-government bodies, are not treated as lobbying.

    Rules of procedure of the Government
    The Rules of Procedure of the Government prescribe an obligation to the Ministries to publish the draft laws on their web page and on ENER for consultation (Art. 68-a). The deadline of 20 days following the publication for interested parties (including CSOs) to provide opinion, comments and recommendations is significantly shorter compared to other countries from the region (for example a 30 days consultation period in Croatia). The Ministry in the report of regulatory impact assessment lists the received comments and if they are not accepted provides a proper justification for this. There is no obligation for publication of draft laws that need to be adopted in urgent procedure.

    Code of good practices for participation of civil society in policy making process
    The Code is not a law per se but a list of nonobligatory recommendations issued by the Government to the public administration on inclusion and participation of the civil society in the policy making process. It defines the area of cooperation, types and phases of cooperation (information, consultation, dialogue, partnership), and the instruments (ex. ENER web page, public events etc.). The Code sets the Unit for Cooperation with CSOs within the General Secretariat of the Government as key focal point between the CSOs and the public administration.

    RIA Guidelines
    The Guidelines and the Methodology are bylaws of the Government’s Rules on Procedure which are guiding the process of regulatory impact assessment. Similar to the Code of good practices for participation of civil society in policy making processes they are issued in the form of soft law. They regulate the process of assessment of the regulatory impact of proposed legislation. One of the key elements of the RIA is the process of consultation with stakeholders (including CSOs) where several guidelines are provided for the consultation process. However, the wording of the provisions and which form of consultation shall be used is left to the discretion of the Ministries and other bodies. In practice it is not uncommon to notice inconstant and divergent approaches on the implementation of the RIA process among different Ministries but occasionally even within the same Ministry for different legislative initiatives.

    Law on youth participation and youth policies
    This law was adopted in January 2021 and it aims to regulate the forms of youth organisations and participation of youth in decision making processes relevant to them. It defines the criteria for what can be considered a youth organisation as well as the role and function of national youth umbrella organisations and the national youth assembly. The Law also foresees the establishment of a national advisory body on youth policies as well as legal confirmation of the local youth counsels. The bylaws for its implementation are yet to be adopted and the law is still not fully operational.

    Other laws relevant for participation
    The involvement of CSOs in the policy making process in certain areas is subject of regulation of specific laws. Though the CSO development is not in the focus of these laws, the legislative solutions provided in them may have significant impact on the potential of a CSO to be an active participant in the policy and decision-making processes.

    • The Law on the Environment states that the associations (not the foundations) working on issues related to protection of the environment are a “concerned public” in the context of environmental legislation. This designation gives them a right to challenge the decisions of the Ministry for acceptance of the environmental plans and to even seek an injunction order. They also may challenge the A and B integrated permits who are compulsory for any entity that may pollute the environment. However, the practical experiences show that there is need to amplify the voice of CSOs in the area of environment.
    • The Law on Ombudsman involves the CSOs in the Mechanism for Civic Control, a body within the Ombudsman institution that works on monitoring of the public prosecution work on prevention and protection from acts of torture and inhuman and degrading treatment committed by the police or prison authorities.
    • The Law on Anti-discrimination gives authority to CSOs to initiate a court procedure (actio popularis) for protection from discrimination affecting more people. Related to this is also the recently drafted new Civil Procedure Code where a new special civil procedure for protection of collective rights and interests is envisioned. This procedure shall strengthen the status of CSOs in court procedures and their power to bring cases.
    • The Law on Agriculture and Rural Development foresees the establishment of local action groups as key stakeholders in the local development of the rural areas. The majority of existing LAG’s are registered as associations and they are regulated by the Rulebook on the criteria for enlisting into the registry of the local action groups.

    Besides the aforementioned laws there are additional laws related to the inclusion of CSOs in policy and decision-making processes which are to a lesser extent relevant for an enabling environment for CSOs to operate in. These are:

    • The Law on execution of sanctions which regulates the access of CSOs to prison facilities for the purpose of monitoring and protection of the rights of persons deprived of liberty.
    • The Law for protection of the nature which regulates the participation of CSOs in the work of the National council for protection of the nature.
    • The Law on spatial and urban planning which, though it does not explicitly stipulate the role of CSOs, it provides the framework for public participation and impact in the process of urban planning.

    CSOs IN SOCIO-ECONOMIC DEVELOPMENT

    Law on concessions and public private partnerships
    This law regulates among other the contracts for establishment of a public private partnership as well as other relevant issues related to the public private partnership. It establishes the general ground rules for establishing public-private partnerships where delegation of public services to private entities (including CSOs) is made possible. The law does not limit the private partners to business entities and in theory a registered CSO may be part of such an agreement.

    Law on social protection
    The 2019 Law on Social protection enables outsourcing of social protection services to associations (not foundations) and their authorization as social services providers. The outsourcing may be done on central level, by the MLSP and on local level, by the municipalities. The types of services that may be performed by the CSOs include: social services at home (care and personal assistants), social services in the community (daycare, resocialization etc.), extra family care, informing and referral, expert help and assistance and counseling. While some of the services can be performed solely based on licensing, in some specific cases (for example shelter centers) the CSOs must found a separate establishment.

    Law on free legal aid
    This law allows CSOs to get an authorization to provide primary legal aid (legal information, advice, referral, form filling and other services) to impoverished people. It sets the criteria for authorization, types of services that can be provided, funding and oversight. For the provision of services, the CSOs may seek reimbursement upon meeting the required criteria or apply for grant support. The Ministry of Justice publishes a public call for supporting projects related to legal aid and access to justice once per year.

    Other laws relevant to provision of services by CSOs
    There are some other laws related to CSOs as providers of public services who are to a lesser extent relevant for the enabling environment for CSOs to operate in. These are:

    • The Law on protection from domestic and gender-based violence which provides legislative grounds for CSOs to provide services to victims of domestic and gender-based violence;
    • The Law on civil protection which regulates the role of CSOs as providers of services for civil protection in case of natural disasters or other emergencies, the possibility for officialization of the cooperation with a contract and co-funding;
    • The Law on protection and wellbeing of animals which provides grounds for greater support of CSOs working on animal rights in public services related to the wellbeing of animals.

    INSTITUTIONAL FRAMEWORK FOR COOPERATION WITH CSOs

    One of the prerequisites for guaranteeing democracy is to ensure participation of citizens and civil society at large in political decision-making. The Council for Cooperation between the Government and Civil Society (hereinafter the Council) represents in itself the highest level of CSOs’ participation – a partnership between the Government and CSOs. Consequently, the Council creates the opportunity for inclusive policy making processes and targeted policies for civil society development demonstrating the Governments’ commitment to CSOs and open dialogue between the two sectors.

    The EU through the Guidelines for EU support to civil society in enlargement countries 2014-2020  considers the quality of the bodies for cooperation between the Government and CSOs in terms of: CSO representation in general as well as the representation of smaller CSOs; visibility and availability to constituencies, on Government’s perception of the quality of these structures and mechanisms and CSOs’ perception of these structures and mechanisms.

    THE COUNCIL FOR COOPERATION WITH AND DEVELOPMENT OF THE CSOs

    The Council is an advisory body to the Government of the Republic of North Macedonia established with the aim to promote the cooperation and dialogue development with the civil society sector in the country. With 15 members of the public institutions and 16 CSO representatives, the Council has been actively initiating discussions on issues pertinent to civil society.

    The Civil Society Representatives of the Council are elected in an open and transparent procedure providing representativeness of a group, platform or CSOs and/or certain expertise in one of the fields prescribed by the Decision for Establishment of the Council.

    The Government representatives in the Council are appointed by the Government from different institutions aiming to provide opportunities for dialogue and consultation in the field of civil society development between the Government and civil society.

    DAILY WITH THE COUNCIL

    (Content and structure as well as modalities of its feeding with information to be discussed and agreed upon with the Council)