Tax analysis of gift application as a deductible item from the tax base

The Czech Republic:

1. Providing a gift by a natural person (also applies to a natural person - entrepreneur)

In the event that a gift is provided by a natural person pursuant to Act No. 586/1992 Coll., on Income Taxes (hereinafter referred to as the "Income Tax Act"), up to 15 % of the tax base if the aggregate value of these transactions exceeds 2 % of the tax base or is at least CZK 1,000.

The only condition that the recipient must fulfill is that it must be a registered church according to Act No. 3/2002 Coll., on churches and religious societies. Pursuant to the Income Tax Act, it is also possible to claim as a non-taxable part of the tax base a gift granted to persons resident in the territory of another Member State of the European Union or a State constituting the European Economic Area other than the Czech Republic, i.e. it is a registered church or religious society.

The donor must prove the donation by a document containing sufficient identification data about the donor, the donor recipient, the value of the donation, the purpose and date of the donation. It is therefore necessary to have the so-called confirmation of the donation from the recipient, or the gift contract, the confirmation of payment of the gift by means of an account statement (i.e. confirmation of payment made by a payment card) is not sufficient in this sense. Gifts provided abroad are only redeemable on the basis of a tax return; A tax non-resident can only redeem a gift if 90 % of its worldwide taxable income comes from sources in the Czech Republic and is also a tax resident of a Member State of the European Union or a European Economic Area state.

2. Providing a gift by a legal entity


In the case of a gift by a legal entity, the Income Tax Act allows deducting from the tax base the aggregate value of free supplies in a taxable period, i.e. a calendar or business year, up to a maximum of 10 % of the tax base. If the 10 % tax base reduction is less than CZK 2,000, only the amount representing 10 % of the tax base will be deducted if the minimum value of CZK 2,000 is met.

Again, the condition of a registered church or religious society that may have its seat outside the Czech Republic must be fulfilled, i.e. in the territory of another Member State of the European Union or a State forming the European Economic Area other than the Czech Republic. The donation may also include non-monetary benefits, including services that are valued under the Valuation Act.

The donor must provide proof of free performance with a document from which it must be clear, where the recipient is, its value, its subject, its purpose for which it was provided and the date of provision. It is therefore necessary to have the so-called confirmation of the donation from the recipient or the gift contract, the confirmation of payment of the gift by means of an account statement (i.e. confirmation of payment made by a payment card) is not sufficient in this sense.

At the same time, we would like to draw attention to the fact that donation is a bilateral relationship, but with one-sided fulfillment, i.e. any contractual consideration in the form of the publication of the donor's name or logo may lead to confusion with advertising. In such a case, the income from the gift would be considered as advertising income and would be subject to the recipient's income tax and at the same time a tax deductible cost of advertising on the part of the donor if it had spent it on achieving, securing and maintaining taxable income.
 

Slovakia:


For both of these persons (providers), any donation (monetary, non-monetary) spent for any purpose (e.g., a church gift) is an expense that is not related to taxable income, even if the taxpayer accounts for it. This means that for a legal entity as well as for a natural person - entrepreneur, the expenditure incurred in order to provide a gift is non-taxable expenditure and thus increases the corporate tax of the legal entity or natural person.
 

In the case of legal entities, the amount of the monetary donation may affect the amount of the tax redistribution (assignment). If a legal entity has donated funds (including through a POS terminal) at least equal to 0.5 % of the tax paid, it is possible to redistribute the corporate income tax paid to specific non-profit organizations of 2 %. If this is not the case, only 1 % of the tax paid may be redistributed.
 

However, the assignment regime is not a tax relief, it is only a redistribution of the tax already paid (i.e. the tax will not go to the state budget but will go to the account of a particular non-profit organization).