In the new constitution of the Czech Republic freedom of association was ensured and the main legal framework governing the civic sector came to consist of five basic regulations. These regulations were the Civil Code, the Citizens Civil Law Associations Act, the Act on Public Benefit Corporations, the Law on Religions and Religious Congregations and the Act on Foundations and Endowment Funds. Some of these new laws were amended and changed after they were enacted, due to the lack of technical support when they were created. All these changes made the legal framework governing the civic sector in the Czech Republic somewhat complex.

More

In the Czech Republic the organizations in the civic sector are divided into associations, foundations and funds and public benefit corporations. The associations are membership organizations with a not-for-profit purpose. They are founded by at least three natural persons creating a Preparatory (Founding) Committee. This committee thereafter registers the association at the Department of Civic Affairs of the Ministry of Interior of the Czech Republic. Foundations and funds are characterized by being grant-making organizations with a public benefit purpose. They are established by the founder either through an agreement or through a will. The main difference between foundations and funds is that foundations are required to have an endowment of a value of more than $15,000 and they can only use the income from that endowment for their purpose. A fund is not required to have an endowment and may use all its property for the purpose for which the fund was established. Finally, public benefit corporations are new kinds of civic organizations, which are regulated in the Act on Public Benefit Corporations. These organizations are not-for-profit organizations without members and with the aim to provide services to the public.

According to the legal framework for the civic sector, not-for-profit organizations need to have one or two internal governance organs. The rules for these organs should be specified in each organization’s governing documents, and the regulation for the liability of these organs can be found in the Civil Code.

The Czech Republic tax legislation is making the distinction between public benefit and mutual benefit organizations, and it provides tax exemptions for several categories of civic organizations. The organizations that fulfill the requirements may be exempt from corporate income tax, value added tax, and sometimes also real estate tax and tax on donated assets. Moreover, the Czech legal framework is also providing tax deductions for donations to not-for-profit organizations.

For foreign organizations the rules state that they are allowed to operate in the country and establish branch offices if they register with the Ministry of Interior according to the Act on Conditions for Activities of Organizations with an International Element.

Analysis provided by: Maria Bideke, International lawyer and Director of Law Association Justice International.

Hide