The purpose of the ICNL project component is: 
1.  To nourish a continuing NGO state relationship; 
2.  In coordination, cooperation, and collaboration with USAID, its contractors and 
grantees, to assist in the construction of a comprehensive legal and fiscal framework 
that will enable the NGO sector to thrive in the region and contribute in a 
meaningful way to the development of civil society. 
Negative Provisions Eliminated from the Draft Amendments to the Civil Code 
In April 2003 a special working group appointed by the President started working on reforming the 
Civil Code. Unfortunately, from what they proposed certain provisions could have been interpreted to: 
(i) prohibit NGOs from conducting economic activities directly, allowing these activities only by 
establishing a subsidiary; and, (ii) prohibit NGOs and political parties from receiving outside financial 
assistance (grants, donations etc.).  The working group eliminated the confusing provisions from the 
draft after convincing arguments made by ICNL's expert who participated in the working group. 
Law on State Registration of the Legal Entities was Signed by the President and Entered into Force   
On April 22 the law  On state registration of the legal entities  was signed by the President, allowing 
for a simplified single registration procedure for both commercial and some non commercial entities. 
In addition to improvements in the registration procedure, the law reduces non commercial 
organization (NCO) registration fees and the period for application review. During 2002 to 2003, 
ICNL worked closely with the drafters, providing them with technical assistance to make the drafting 
process transparent and participatory.  Broad dissemination of the draft law and an educational 
campaign conducted by ICNL resulted in dozens of NGOs contributing by presenting their comments 
and participating in discussions of the draft law with the drafters.  The NGOs' advocacy campaign led 
to substantial improvements in the draft law.   For example, provisions requiring yearly re registration 
with a state fee payment and a burdensome registration procedure different from the procedure for 
commercial entities were eliminated under pressure from the campaign.  
Law on Charitable Activity was Signed by the President and Entered into Force 
In April 2002, the Law on Charitable Activity was signed by the President and came into force.  The 
new law helps to improve implementation of the tax code provisions related to tax treatment of 
charities. Prior to adoption of this law the tax code provisions on tax benefits for charities were 
implemented inconsistently, as the tax code did not provide for a clear definition and a mechanism to 
distinguish between charities and other NGOs. For example, based on the interpretation of a 
 charitable organization , an NGO could have been taxed in one region, and exempt from tax in 
another region.  Or, previously given tax benefits to NGOs could have been withdrawn with penalties 
levied, depending on the interpretation of the law by each particular tax inspector. From 2000 to 2002, 
ICNL worked to educate the NGO community and its legal experts on the issues of taxation and 
charitable status of NGOs, resulting in a grass roots initiative to draft a law providing a favorable 
regime for charities. Throughout the drafting process ICNL worked closely with the NGO 
government working group providing it with recommendations on the draft law and helping to 
organize public discussions and public hearings. The new law is another result of the joint drafting 
effort by NGOs and the government, assisted by ICNL.



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