Deduction of donations – what should employees know?

25. 2. 2016

In connection with the approaching deadline for filing tax returns employees often also ask whether they too can deduct gifts that they have provided in the previous year. In this regard an employee has the same opportunities as an entrepreneur.The donations provided by an employee are deducted by the employer in the annual tax settlement. The employee must hand over to his/her employer all the documents concerning a donation that has been provided by 15 February of the following year. This may be, for example, a donation contract, confirmation of blood donation, a bank account statement or just a bill slip. It must be clear from the document that it was a gift that was provided and it is not for payment of, for example, some healthcare charge, etc. So what then must the accounting document contain? This can be summed up in the following points:

- Who provided the gift

- Who was the gift intended for

- The purpose of the gift

- The amount of the gift

- The date on which the gift was provided

The sum total of the donations is not restricted in any way, but for tax purposes the lower limit of the minimum gift amount is CZK 1,000 and the upper limit is 15% of the annual tax base. How does an employee work out how much his/her tax base is and whether a donation can be applied in full?

The answer is best illustrated by the following example:

The employee had an annual assessment base ...................................... CZK 350,000

Insurance premium for the employer was 34% of this amount, i.e. .............. CZK 119,000

The tax base is set at ......................................................................... CZK 469,000

The employee donated a total of CZK 50,000 to an association's sporting activities. Can the employer deduct the full amount of the gift for him?

Reply: Yes, in the annual accounts the entire amount of the donation is eligible as 15 % of the CZK 469,000 tax base is CZK 70,350. The CZK 50,000 donation meets both criteria.

And what gifts can be deducted by an employee? Section 15 of the Income Tax Act gives the full list. It can be briefly summarised that donations must be for good causes, such as for the financing of science, research, culture, education, sport, healthcare, environmental protection, animal welfare, etc. If an employee takes proof of payment of a donation to his/her employer's payroll department, they will certainly provide help.

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