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. Last Updated: 07/27/2016

Soros Freezes $1.5M in Aid to Avoid Tax

The Russian branch of U.S. financier George Soros' charitable foundation has frozen $1.5 million in grants, fearing the funds will be subject to the 35.9 percent social contributions tax that came into effect Jan. 1.

Officials from the Moscow office of Soros's Open Society Institute said Tuesday they have suspended their grant payments to individuals this year and were in talks with tax officials to clarify the rules introduced by the new Tax Code. The moratorium does not apply to grants to organizations.

Some experts argued the new legislation does not impose the tax on charitable funding for projects by nonprofit organizations, and said the confusion stems from murky wording in the guidelines that accompany the Tax Code.

"The tax authorities worded the text in such a way that the accents are in the wrong place," said Natalya Burtseva, director of the legal department at the Moscow branch of Charities Aid Foundation, an NGO that counsels philanthropic organizations, by telephone Tuesday.

Burtseva said the guidelines, which are used by tax inspectors, cite the text of the law only partially. As a result, some types of payments exempt from the social contributions tax end up sounding as if they aren't.

The confusion has left charitable organizations waiting to see whether amendments will be made.

"Charity is an expression of good will. … Nobody wants to run a charity expecting this will include legal suits against tax authorities," Burtseva said.

According to Yekaterina Genieva, president of OSI in Russia, the tax would force the foundation to abandon grants to individuals, which account for 7 percent to 10 percent of the $80 million it gives out annually in Russia.

"Soros doesn't want to pay this tax," Genieva said in a telephone interview Tuesday. "It would take some $2 million a year from our budget, which would otherwise be directed to charitable causes."

Genieva said the tax could eradicate many good projects.

"Someone will stop fighting drug abuse, some scientists will not be able to attend conferences, someone will stop caring for sick children."

An unnamed Tax Ministry official quoted by Interfax said that, under the new code, charitable grants from Russia-based organizations were not tax-exempt, but added that the ministry has appealed to the State Duma and the Finance Ministry to amend the law.

Deputy Prime Minister Valentina Matviyenko attempted to quell fears about the tax Tuesday.

"We will try to make sure charitable aid coming to Russia is not taxed," she told Ekho Moskvy radio. "It is ideologically wrong – people are helping us and we try to tax them."