HAVEL & PARTNERS advised Česká spořitelna on the tax deductibility of a donation to an education foundation

10. 08. 2023

The law firm’s legal and tax experts provided comprehensive advice to Česká spořitelna in resolving a complicated tax issue related to a donation and its tax deductibility. The tax administration did not accept the reduction of the tax base in respect of a donation granted by Česká spořitelna to the Depositum Bonum Foundation. The tax administration argued that the foundation had not used all the donated funds in the tax period concerned. However, the decision of the tax administration was rejected by the Municipal Court in Prague and annulled for illegality.

The advice on the case was provided by a team specialising in tax proceedings and litigation led by partners David Krch, Josef Žaloudek and František Korbel and legal expert Alice Zemánková.

This is a precedent-setting decision, as it confirms that the liability and the burden of proof to substantiate to the tax administration within what period the donor spent the funds for publicly beneficial purposes are not shifted to the donor,” David Krch explained.

After the Passbook Act was repealed, Česká spořitelna was left with funds of nearly CZK 2 billion, which were not collected by the beneficiaries after the cancellation of the passbooks despite repeated requests from Česká spořitelna. Therefore, Česká spořitelna established the Depositum Bonum Foundation, which supports educational projects, and donated the funds to it. Subsequently, Česká spořitelna deducted this donation from its tax base based on the provisions of the Income Taxes Act, which allows the tax base to be reduced by the value of donations made to public institutions or non-profit organisations and foundations that raise funds publicly for science, education, research and other publicly beneficial purposes. 

However, the tax administration subsequently decided that the donation could not be deducted from the tax base. The administration argued, inter alia, that the donee, i.e. the foundation, was obliged to spend all the funds received in the year in which the donor claimed the tax base reduction. “However, the court accepted our reasoning that the donation for public benefit was made legally and in accordance with the conditions for reducing the tax base under the Income Taxes Act, even if the donation was not consumed in the year concerned,” says František Korbel, who represented Česká spořitelna in court as an attorney.

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