Increased Tax Deduction Limit For Donations Extended Until 2026

History of the Arrangement

The increased limit was first implemented in response to the COVID-19 pandemic for the years 2020 and 2021. It was subsequently extended for 2022 and 2023 in connection with the conflict in Ukraine. The new proposal intends its application for 2024, 2025, and 2026.

Conditions for Individual and Corporate Taxpayers

For individuals, the basic conditions for claiming donations as a non-taxable part of the tax base remain unchanged - the aggregate value of donations must amount to at least CZK 1,000 or exceed 2% of the tax base, and for legal entities, the value of each single donation must amount to at least CZK 2,000, with a maximum deduction of 30% of the tax base for both individuals and legal entities.

Extended Options for Donations to Ukraine

The proposal also includes an extension of the possibility to deduct donations provided to Ukraine until 2026. Tax-deductible donations include those made to:

• Czech fundraising organizers
• directly to Ukraine (e.g., through the Ukrainian embassy)
• Ukrainian territorial administrative units
• legal entities or individuals with their registered office or residence in Ukraine.

These recipients must meet the conditions specified in Section 15(1) or Section 20(8) of the Income Tax Act.

For donations to individuals, standard conditions for gift recipients must be met (for example, in the case of minor children dependent on the care of another person or persons receiving disability pension). The application of the extended scope of purposes for which donations can be provided will also be prolonged. This means that it will still be possible to deduct the value of donations provided to support Ukraine's defense efforts from the tax base. Support for Ukraine's defense efforts means anything that can help Ukraine in the war conflict and is not considered charitable or humanitarian aid. This includes, for example, provision of military material, weapons, ammunition, military accessories for army members or volunteers, etc.

Donations for Natural Disaster Victims

According to the Income Tax Act, the value of donations provided to the following entities can be deducted from the tax base:

• municipalities and regions
• state organizational units
• legal entities with registered office in the Czech Republic
• legal entities that organize public collections.

These donations must be provided for purposes defined by law, which also include financing the removal of natural disaster consequences (Section 15(1) of the Income Tax Act - individuals and Section 20(8) of the Income Tax Act - legal entities).

Both financial and non-monetary donations, including the provision of services, can be claimed as a deductible item. In the case of non-monetary donations, companies and individual entrepreneurs have the option to either:

• include the donation in tax-deductible expenses according to Section 24(2)(zp) of the Income Tax Act, or
• claim it as a deductible item from the tax base,

and we remind that both options cannot be used simultaneously.

Practical Impact

The extension of the increased limit represents significant support for donors and enables greater tax optimization while maintaining charitable purposes. The original limit of 15% of the tax base is thus doubled to 30%, creating room for more substantial support of charitable projects while reducing the tax burden of the donor.

Should you have any questions regarding the above, please do not hesitate to contact our experts.

Authors:

Gabriela Ivanco, Tax Department Manager

Anna Klímová, Newsletter Editor