Donation receipts for tax purposes for the year 2018 will be sent by email to all registered Good Angels to January 20, 2019. As of the same date, you can also download the same in your Angel Account. For the receipt to be accepted by the relevant tax authority, your identification data needs to be accurate and complete (name and surname (and date of birth, where appropriate), permanent address, name of a company, registered office and company ID No.). If you need to change your data, kindly do so in your Angel Account, where you can also preview the same, or contact us at firstname.lastname@example.org. If you have not received the receipt and cannot view it in your Angel Account either, please, contact us as well. Thank you.
Recently, we have received numerous questions whether financial contributions to the GOOD ANGEL System are deductible in terms of the Income Taxes Act, and which documents Good Angels will receive and when. In this article we would like to clarify all your queries accordingly. Information is valid as of January 1, 2019 (last update was effected on December 27, 2018) and applies to contributions made from January 1, 2018. Note: As of January 1, 2014 the term “donation” used in the Act was replaced by the term “gratuitous performance provided“.
Is the activity of GOOD ANGEL tax-deductible?
Under the Income Taxes Act, both individuals and legal entities may deduct from their income gratuitous performance provided (among others) to legal entities that have registered office in the territory of a member state of the European Union and to legal entities that organize public fundraising collections. The GOOD ANGEL Foundation has been granted an approval for its public fundraising collection by the Prague Municipal Authority; in addition, all contributions received from Good Angels are provably distributed to families facing adverse life situation as a result of a serious illness. Therefore, the gratuitous performance provided to us by Good Angels may be deemed deductible in terms of the Income Taxes Act without any reservations. However, it is a little bit more complicated. Each donor may deduct gratuitous performance only under certain conditions specified by law. These conditions will be summarized in the following paragraphs.
How will provision of gratuitous performance be proved?
By January 20 of each year, the GOOD ANGEL Foundation will issue to all donors - Good Angels - a receipt confirming gratuitous performance provided in the taxable period of the preceding year (i.e. confirming the amounts credited to GOOD ANGEL account by December 31 of the preceding year) and these receipts will be sent electronically to email addresses of all Good Angels. An exemption only applies if such gratuitous performance is provided anonymously, i.e. without the registration in the GOOD ANGEL System. Such receipts may only be sent to a donor as soon as the same has been identified. If a donor is identified by means of an email address only, in view of the tax authority the receipt confirming the gratuitous performance provided is non-deductible. In such a case, it is necessary that the donor enters their identification data (name and address) in our client system and applies for the issuance of a new receipt at our email address at email@example.com.
What conditions apply to natural persons?
If you are a natural person (whether an employee or a self-employed person), the provision of Section 15 (1) of the Income Taxes Act applies to you. Deductibility depends mainly on the total amount of your gratuitous performance (i.e. the sum of “donations” for the entire calendar year) and the amount of your tax base. Gratuitous performance shall be deductible if their value amounts to no less than 2% of the tax base or CZK 1000. The total deduction may not exceed 15% of the tax base. In practice, this means that if you contribute CZK 1000 and more, you do not have to verify if it corresponds to more than 2% of the tax base. You only need to make sure whether the total amount of contributions does not exceed 15% of the tax base. In certain cases, you do not have to submit your tax return by yourself. If using the form entitled “tax statement on income from dependent activities (employment) and emoluments“ and the services of your payroll accountant that submits all requited documents for you, you just need to deliver the receipts confirming gratuitous performance to your payroll department along with other documents (such as a certificate of interest paid, certificate of life insurance premium paid or certificate of supplementary pension payments made). If you prepare your tax return yourself, you deduct the amount of gratuitous performance provided (to all organizations) in such return and submit the receipt confirming gratuitous performance as a schedule to your relevant local tax authority.
What conditions apply to legal entities?
Donors being legal entities are subject to the provision of Section 20 (8) of the Income Taxes Act, which allows the same to deduct gratuitous performance from CZK 2000 up to 10 % of the tax base reduced under Section 34 of the Income Taxes Act. Similarly, all amounts provided as gratuitous performance during the relevant calendar year are added up, however, each donation has to amount to no less than CZK 2000. Donations will be deducted based on delivered receipts confirming gratuitous performance (or donation agreements, if a Good Angel requested the same). In such cases due to complex nature of tax base calculation, deduction of gratuitous performance is effected by an accounting firm or (more often) by a tax consultant that prepares a tax return.
Are there special cases?
If you are a donor and a tax resident of another EU or non-EU country, you are strongly advised to consult tax deductibility of your contributions to GOOD ANGEL with your tax advisor.
Finally, we would like to note that deductibility of gratuitous performance - donations - in each case depends on the specific situation of individual donors. Therefore, the GOOD ANGEL Foundation cannot guarantee tax deductibility in each individual case. However, we believe that in the vast majority of cases, donors will be able to deduct their gratuitous performance (donations) in their tax statements or returns and that this article will be helpful in navigating through these issues.
Martina Hovorková, DOBRÝ ANDĚL
Notice on the form of tax receipts
In recent years, we have seen significant changes related to the quality and in particular the form of allowable documents, whether accounting or tax. The changes ensue from applicable EU directives that are reflected in the Czech legislation through the Accounting Act, VAT Act and other regulations. At the turn of the first decade, equality of printed and electronic documents was introduced. In 2013 further simplification followed, when electronic signatures or signs (newly seals) or special documents submitted electronically ceased to be mandatory.
Under applicable legal regulation, entities issuing a document are liable for its credibility, which may be proved by an audit trail. Essentially, the material content of a documents is examined; in case of tax receipts it is the very fact that the transactions in question have been effected. As a clear-cut evidence to prove transactions we use our internal system (which after closing each calendar month disallows almost all operations with the contributions by Good Angels) and also documents in the form of bank statements. As we only have non-cash transactions, such documents issued by an independent bank are perfect for such purpose.
Given the increasing number of donors who submit their tax returns electronically, effective as of the year 2016, we decided (despite not being obligated to do so under law) to sign all tax receipts issued in PDF format by an electronic signature in the form of a qualified certificate.
Any Good Angel has the right to obtain a document also in a printed copy (sent by mail) upon request, as the electronic form is equivalent to the paper one. Considering excessive costs related to printing, and postage and packing, in particular, as well as our capacity, we would appreciate if only electronic documents were issued. Preferably, a receipt is not printed at all and it is submitted directly to the tax authority by a Good Angel in an electronic form only.
Accounting Act, Section 33 - forms of accounting records
VAT Act, Section 34 - Securing Credibility of Origin, Integrity of Content and Legibility of Tax Receipts and Section 35 Tax Receipt Keeping
Ihned.cz (Hospodářské noviny daily) website
Schedule - Extracts from the Income Taxes Act
Section 15 (1): It is possible to deduct from the tax base the value of gratuitous performance provided to municipalities, regions, government branches, legal entities with a registered office in the territory of the Czech Republic as well as legal entities that organize public fundraising collections under a special Act, i.e. for science and education, research and development purposes, culture, schools, the police, fire protection, the support and protection of young people, the protection of animals and their well-being, for social, healthcare, environmental, humanitarian and charitable purposes, religious purposes for registered churches and religious societies, physical education and sports purposes, and to political parties, political movements, European political parties or European political foundations for their activities, to natural persons with their residence in the territory of the Czech Republic who are providers of healthcare services or run schools and educational establishments and facilities for the protection of stray and abandoned animals or for the care of individual animals of endangered animal species, in order to finance such establishments and facilities, to natural persons with their residence in the territory of the Czech Republic who are recipients of a disability pension or were recipients of a disability pension as of the day of becoming eligible for the retirement pension or who are minors depending on care provided by another person under a special legal regulation, for medical devices up to the amount not covered by health insurance companies, or for special aids under the Act regulating the provision of allowances to disabled persons up to the amount not covered by a contribution from the State budget, and for property facilitating the education and employment of such persons, provided the total value of gratuitous performance in the period of taxation exceeds 2 % of the tax base or amounts to at least 1000 CZK. A similar procedure shall apply for gratuitous performance to finance removing the consequences of a natural disaster occurring in the territory of the EU Member State or a State of the European Economic Area. The total deduction may not exceed 15 % of the tax base. As gratuitous performance for healthcare purposes, the value of one donation of blood or blood components from a donor who was not provided with financial compensation for the expenses connected with the donation of blood or blood components under the Act regulating specific health services, except for compensation for the proven travel expenses connected with the donation, shall be valued at a sum of 3,000 CZK, the value of donation of an organ from a living donor shall be valued at a sum of 20,000 CZK, and the value of one donation of hematopoietic cells, except for compensation for the proven travel expenses connected with the donation, shall be valued at a sum of 20,000 CZK. The provision of this Subsection shall also apply to gratuitous performance provided to legal entities or natural persons with a registered office or residence in the territory of an EU Member State or a State of the European Economic Area other than the Czech Republic, provided the recipient of the gratuitous performance and the purpose of the gratuitous performance fulfil the conditions stipulated by this Act. If gratuitous performance is provided by spouses from their tenancy by entirety, the deduction may be used by one of them or by both of them in proportionate parts.
Section 20 (8): It is possible to deduct from a tax base reduced under Section 34 the value of gratuitous performance provided to municipalities, regions, government branches, legal entities with their registered office in the territory of the Czech Republic, as well as legal entities that organize public fundraising collections under a special Act, for science and education, research and development purposes, culture, schools, the police, fire protection, the support and protection of young people, the protection of animals and their well-being, for social, healthcare, environmental, humanitarian and charitable purposes, religious purposes for registered churches and religious societies, physical education and sports purposes, and to political parties, political movements, European political parties or European political foundations for their activities, to natural persons with their residence in the territory of the Czech Republic who are providers of health-care services or run schools and educational establishments or facilities for the protection of abandoned animals or endangered animal species, in order to finance such establishments and facilities, to natural persons with their residence in the territory of the Czech Republic who are recipients of a disability pension or who are minors with serious long-term disability requiring special care under a special legal regulation, for medical devices up to the amount not covered by health insurance companies or for special aids under the Act regulating the provisions of allowances to disabled persons up to the amount not covered by a contribution from the State budget, and for property facilitating the education and employment of such persons, provided the value of the gratuitous performance amounts to at least 2000 CZK. A similar procedure shall apply for gratuitous performance provided to secondary schools and vocational colleges to finance material or equipment or repair and refurbishment of facilities used for work-based learning, to finance removing the consequences of a natural disaster occurring in the territory of the EU Member State, Norway or Island. For tangible or intangible assets, the value of the gratuitous performance is not higher than the net book value of tangible assets (Section 29 (2)), or the value shown in the accounts under a special legal regulation for other assets. In total, it is possible to deduct no more than 10 % of the tax base reduced under Section 34. Gratuitous performance, which corresponds to relief applied to partial levies in respect of lotteries and other similar games, shall not be included in such deduction limits. Such deduction may not be used by publicly beneficial payers.