Act no. 586/1992 Coll., on income taxes as amended (hereinafter the “ITA”) governs provided gratuitous transactions (donations) from the perspective of being able to subtract their value from the tax base in the stipulation of article 15/1 (for persons, who provided gratuitous transactions) and in the stipulation of article 20/8 (for legal entities, who provided gratuitous transactions).

For many years, the ITA has made it possible for persons and legal entities to subtract the value of provided gratuitous transactions (donations) from the tax base after the specified conditions have been met. With regard to the extraordinary events in the recent weeks (tornado, wind storm, floods), we bring a brief overview of the tax regime of provided gratuitous transactions, including novelties applicable for the years 2020 to 2022.

In general, it is possible to subtract from the tax base the value of gratuitous transactions (donations) provided to:

• municipalities;
• regions;
• organisational units of the state;
• legal entities with registered office on the territory of the Czech Republic, as well as to legal entities, who are organisers of public collections under a special act;

for ecological, medical, humanitarian, charity purposes, for the police, for fire protection, for protection of animals or their health.

At the same time, it is possible to subtract the value of a gratuitous transactions (donation) provided to natural persons, who are:

• providers of healthcare services or are operating schools or school facilities and facilities caring for stray or abandoned animals or caring for individual animals from endangered species, for financing these facilities;
• receivers of disability pension or who were receivers of disability pension as of the date of granting of old-age pension or who are underage dependent on the care of another person, for medical devices or special aids under the act governing provision of benefits to persons with disabilities and for possessions, which facilitate education and placement in employment for these people.

It is possible to subtract the value of the gratuitous transactions (donation), in case the value of provided gratuitous transactions (donation) in the taxable period:

• in total exceeds 2 % of the tax base or reaches a minimum of CZK 1,000 (according to the stipulation of article 15/1 of the ITA – i.e. for taxpayers, who are natural persons) – in total, a maximum of 30 % of the tax base can be subtracted (the 30 % limit applies to the taxable periods of 2020 and 2021);
• reaches a minimum of CZK 2,000 (according to the stipulation of article 20/8 of the ITA – i.e. for taxpayers, who are legal entities) – in total a maximum of 30 % of the tax based reduced under article 34 of the ITA can be subtracted for taxable periods, which ended in the period from 1 March 2020 to 28 February 2022 (in another period a maximum of 10 %).

You can find more in the information of the Financial Administration of CR (available here), which, among other things, points out the impossibility of combining the stipulation of article 24/2/zp of the ITA (expenses made as part of assistance provided in the form of non-monetary transactions in relation to removing consequences of natural disasters) and the stipulation of article 15/1 of the ITA, or the stipulation of article 20/8 of the ITA. In this information, the Financial Administration of CR also describes the documents needed for substantiating provided gratuitous transaction.

We continue to monitor the situation in the above-mentioned area and we will inform you about further changes.

In case of any questions regarding this issue, please, do not hesitate to contact us.