At its meeting in January 2023, the Government of the Czech Republic approved a proposal to extend the validity of measures in the field of taxation in connection with the military conflict on the territory of Ukraine caused by the invasion of the army of the Russian Federation. This measure was originally adopted by Act No. 128/2022 Coll., which indirectly amended the income Taxes Act and which originally applied only to donations provided in 2022. However, as the armed conflict in Ukraine continues to rage on, while citizens and business entities continue to provide assistance to Ukraine and its population, the government approved the extension of these measures for 2023.
The aim of the aforementioned measure was the tax support for the taxpayer's charitable activity to help Ukraine and its people in the ongoing war with the Russian Federation. The measures have brought the following changes in the area of gifts for 2022:
- the range of subjects to whom the gift can be given has been extended,
- the range of the purposes for which the gift may be given has been extended,
- the range of entities that can apply the deduction has been extended,
- the period (after the 2020 and 2021 coronavirus pandemics) was extended, allowing the increased maximum limit for the deduction of gifts of 30% of the tax base to be used.
These measures have now been extended to 2023, when they will be applied in the following manner:
With regard to point 1, donations provided in 2023 not only to the Czech organisers of collections can be deducted from taxes, but also those provided directly to Ukraine (e.g., through the Ukrainian Embassy or directly to the Ukrainian Ministry of Defence), its territorial administrative offices and legal or natural persons whose registered office or residence is located within Ukraine, if the conditions of the beneficiary and the purpose for which the gratuitous fulfilment can be deducted from the tax base are met.
With regard to point 2, a tax-deductible donation can be provided for traditional scientific, educational, cultural and similar charitable purposes, as well as in military assistance to Ukraine. Supporting Ukraine’s defence efforts means anything that can help Ukraine in the military conflict and is not charitable or humanitarian aid. This includes, for example, military equipment, weapons, ammunition, and military accessories for military officers or volunteers.
With regard to point 3, a taxpayer who is a resident of Ukraine will be able to deduct the gift from his/her tax base if the total of his/her income from the resources in the Czech Republic amounts to at least 90% of his/her total income in the given year. Another facilitation of the situation for natural persons is the fact that if a taxpayer/natural person provides a gift to Ukraine through its representative office in the Czech Republic, then the taxpayer who is an employee and should not, if he would not wish to claim the gift thus provided, be obliged to file a tax return (i.e., the employer could make an annual settlement of advances and tax benefits), he/she can claim the value of the gift thus provided as a non-taxable part of the tax base through his/her employer and is not obliged to file a tax return on personal income tax for this reason only, as would normally be the case.
Finally, with regard to point 4, the Income Tax Act specifies certain minimum and maximum limits for the tax deductibility of a gift for a natural person. For gifts made by individuals used as a non-taxable part of the tax base, their aggregate value must be at least CZK 1000 or exceed 2% of the tax base (it is enough to fulfil one of the two given conditions). As a standard (the last time in 2019), donations of a maximum amount of 15% of the tax base can be deducted. This maximum limit for the tax deductibility of a granted gift is therefore increased to 30% again for the donor for 2023, just as in the years 2020-2022.
Jana Nováková, Tax Senior
Gabriela Ivanco, Tax Manager