Philanthropy and the tax issues

Philanthropy and the tax issues

Magdalena Sławińska-Rzemek, Tax advisor
V4 Group: Legal, Tax & Audit Advisory Group

Helping others matters. Nowadays both the young and the elderly are aware of this. However, not everyone knows or remembers that donations can also bring financial benefits to the donor himself. This is due to the tax deductions.

Why tax relief for donors?

Tax breaks are introduced by the legislator to promote certain activities of taxpayers, beneficial from the point of view of society. Philanthropic activities are such a socially desirable behavior. Donors may take advantage of tax preferences at the stage of submitting the annual settlement.

Tax preferences for givers in the Visegrad Group countries

Polish tax regulations allow philanthropist to deduct donation from the income obtained in the tax year. However, the amount deducted cannot be higher than 6, and in the case of legal persons 10 percent of the obtained annual income. It is also possible to deduct from the income the entire amount of the donation transferred to church charity and care activities (after meeting the formal conditions described in the regulations).

Slovakia is the weakest compared to the group, it does not support charity in tax settlements.

In the Czech Republic, a natural person may deduct from the income the amount of the donation, but not more than 15% of the income, if the donation is higher than 2% of the income or is at least CZK 1,000. However, a legal person may deduct a donation from the income, but not more than 10% of the income if the donation is at least CZK 2,000.

In Hungary, no tax preferences are foreseen for individuals, but very large preferences – up to 50% of income – are foreseen for donations made by legal persons, provided that donation agreements have been concluded with the recipient.

Which country supports philanthropy the most?

When analyzing the solutions presented in the countries of the Visegrad Group, the greatest tax benefits will be obtained by donors in Poland who donate to church charity and care. Both natural and legal persons will benefit from them. In Hungary, philanthropic activities of legal entities are very strongly promoted, and the tax benefits of such activities are the option of deducting the donation up to 50% of annual income. In the Czech Republic, philanthropic activities of individuals are promoted – they can deduct donations up to 15% of income. In Slovakia, however, philanthropists are left only with moral satisfaction, because they cannot currently count on tax breaks.

Calculator for Philanthropists

Make a calculation with just 4 clics: https://ceeimpact.org/calculator/