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Tax Exemptions for Non-Profit Organizations in Europe

In an effort to promote public benefit and charitable activities, European governments have established tax exemptions for non-profit organizations (NPOs) that align with their mission and goals.

Income Tax Exemption

Under the Income Tax Law, NPOs registered in any member state of the European Union, Norway, or Iceland are exempt from paying income tax on donations received for specific purposes. These purposes include:

  • Science and learning
  • Research and development
  • Culture
  • Other public benefit activities (Income Tax Law Articles 15(1) and 20(8))

Deductions for Donations

Individual donors or contributors can make monetary or non-monetary donations to NPOs, which may be subject to specific conditions. These contracts must outline:

  • The purpose of using the donated assets
  • The manner of using the donated assets
  • Any conditions for returning the assets in case of misuse or inability to properly use them

Additionally, foreign legal entities that organize a “public collection” can deduct donations from their taxable income if the funds are used for public benefit purposes such as:

  • Humanitarian aid
  • Charitable goals
  • Education
  • Environmental protection (Public Collections Law Article 1)

Dissolution of NPOs

When an NPO dissolves, its assets must be liquidated and distributed according to the organization’s bylaws. The liquidating officer sells the association’s property only to pay off debts, and any remaining balance is used for public benefit purposes.

If it is not possible to use the liquidation balance in accordance with the bylaws, the liquidating officer must:

  • Offer it to another NPO with a similar purpose
  • Offer it to the community where the association has its seat
  • Transfer it under the control of the respective regional self-government

Key Laws and Regulations

The following laws and regulations govern non-profit organizations in Europe:

  • Constitution of the Czech Republic
  • Act on Income Tax
  • Civil Code
  • Law on Public Collections
  • Public Registers Act

By understanding these tax exemptions, deductions, and dissolution procedures, non-profit organizations can better navigate the complex legal landscape and focus on their mission to promote public benefit and charitable activities.