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Public Benefit Organizations in Hungary. Nilda Bullain European Center for Not-for-Profit Law (ECNL). Overview. PBO Law – when, why? PBO criteria PBO benefits Decision-making Impact?. PBO Law. Adopted in 1997 Governmental initiative – liberal coalition party

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Public benefit organizations in hungary

Public Benefit Organizations in Hungary

Nilda Bullain

European Center for Not-for-Profit Law (ECNL)


  • PBO Law – when, why?

  • PBO criteria

  • PBO benefits

  • Decision-making

  • Impact?

Pbo law

  • Adopted in 1997

  • Governmental initiative – liberal coalition party

  • Experts involved, NGOs consulted

  • Aim: to provide for greater accountability in the sector and to create the opportunity for private support of NGOs

  • Taxation status harmonization also important

Pbo criteria
PBO criteria

  • PBOs can be all nonprofit organizational forms existing in Hungary

    • Associations (not parties, trade unions and employers’ associations)

    • Foundations

    • Public foundations

    • Public benefit companies

    • Public associations (e.g. chambers) if the establishing law allows

    • National sports federations

Pbo criteria1
PBO criteria

  • Should conduct public benefit activities (PBA).

  • Should provide services beyond membership.

  • If it engages in economic activities, those should be related to PBA and should not jeopardize PBA.

  • Its profits should support the PBA and should not be distributed.

  • Does not conduct direct political activities, is independent from political parties and does not support such.

    All of this should be included in the founding statutes.

Pbo criteria2
PBO criteria

  • Outstanding PBOs should in addition include that:

    • It conducts a public task, the provision of which is according to law or regulation the duty of the central or local government.

    • It publishes the most important data of its operations and finances in the local or national media.

Pbo obligations
PBO obligations

  • Openness in decision-making (board meetings, registry of decisions etc.)

  • Conflict of interest rules in governance and management

  • Supervisory board above a certain budget (5 million HUF)

  • Publication of any governmental support through media

  • Should prepare investment policy and other financial control provisions

Pbo obligations1
PBO obligations

  • Needs to prepare annual public benefit report

    • Including activity and financial report;

    • Report on any budgetary support;

    • Report on any grants given;

    • Value or amount of compensation provided to leading officials (privacy issues!);

    • Report on assets management.

Pbo benefits
PBO benefits

  • Most significant benefit: ability to receive tax deductible donations

  • Additional benefits for long-term donations

  • Ability to provide income-tax free support to individuals

  • Increased benefits for economic activities compared to non-PBO NGOs

  • Outstanding category of PBOs even higher benefits

  • Profit tax, customs and charges exemptions are available for all NGOs

Decision making

  • Application to the courts at the time of registration or any time later.

  • Court has to check whether statutes contain required provisions.

  • In case of outstanding PBOs it usually asks for an actual contract to provide the public task.

  • There is no monitoring of fulfillment of the requirements other than the “usual” check-up of the public prosecutor.

Decision making1

  • Practical experience shows that PBO registration is cumbersome

  • Courts require copy-pasting of legal provisions in the statutes

  • Courts often require contracts or other supporting documents not stipulated in any law

  • Court practice differs widely in the country

Impact and learning points
Impact and learning points

  • About 45% of NGOs are now registered PBOs (36% by 2000)

  • Private and corporate donations have not increased significantly

  • On the other hand, state funding became increasingly directed towards PBOs only

  • NGOs regard PBO status good for two reasons:

    • Gives a certain prestige in the eyes of the public if they read “public benefit” in the name of the NGO.

    • Provides them with increased opportunities to apply for government funding.

Impact and learning points1
Impact and learning points

  • Key factors in deciding PBO regulatory approach:

    How much it will be tax oriented or include other goals?

    How low or high the treshold will be? (I.e. how easy or difficult it will be to become a PBO?) – “Elite” or “minimum standard” approach?

    How formal or substantial it will be? (I.e. check papers only or look at what you do?)