What is a public benefit organization?

Public benefit organizations (PBOs) are organizations whose statutes state that their purpose is public benefit activity. 

PBO status sends a clear message to the public, the organization’s cooperation partners and potential donors that the organization operates for the common good of society, and the status also provides an opportunity to promote the attraction of donations from businesses and private individuals.

The basic principles of public benefit activity are set out in the Public Benefit Organization Law.

In accordance with Section 9 of the PBO Law, a donation is property or financial resources that a person (donor), free of charge, on the basis of a mutual agreement, transfers to a public benefit organization for achieving the objectives specified in its statutes and to which tax relief may be applied.
For the donor to receive tax deductions, it is important to observe the principle that the organization has no consideration/reciprocal obligation toward the donor – for example, advertising the donor’s brand or services. 

Public benefit organizations can attract donors:

• natural persons who are entitled to use the tax deductions provided for in the law “On Personal Income Tax”, while setting a limitation regarding the amount of donations -  eligible expenses in total must not exceed 50 percent of the taxpayer’s taxable income for the taxation year, but not more than 600 euros.

*Eligible expenses include expenses not only for donations to public benefit organizations and political parties, but also for education and medical expenses.

• legal persons who are entitled to use the tax deductions provided for in the Corporate Income Tax Law (Section 12) – for residents and permanent establishments, the tax may be reduced in three ways (choosing only one of the following reliefs and applying it throughout the reporting year):

1) not include the donated amount in the taxable base, but not more than 5% of the previous reporting year’s profit after calculated taxes;
2) not include the donated amount in the taxable base, but not more than 2% of the total gross wages calculated for employees in the previous reporting year, from which state social insurance contributions were made;
3) reduce the calculated CIT on dividends by 75% of the donated amount, but not exceeding 20% of the calculated CIT on dividends. If choosing this method, the donation amount does not reduce the taxable base, but rather the CIT on dividends;*