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Legal and fiscal conditions for foundations in the Czech Republic

Legal and fiscal conditions for foundations in the Czech Republic. Existing basic NGO types in the Czech Republic. civic associations – membership NGOs – 38 000 public benefit corporations – non-membership NGOs providing services – 560 foundations – endowed entities – 300

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Legal and fiscal conditions for foundations in the Czech Republic

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  1. Legal and fiscal conditions for foundations in the Czech Republic

  2. Existing basic NGO types in the Czech Republic • civic associations – membership NGOs – 38 000 • public benefit corporations – non-membership NGOs providing services – 560 • foundations – endowed entities – 300 • non-endowed foundations – operating foundations – 800

  3. Development of the Czech foundation sector after 1989 • Foundation sector before 1997 – 4 700 registered foundations (no endowment) • New registration procedure for endowed foundations - after 1997 – 300 registered endowed foundations • New type of non-endowed foundations (Operating foundations) after 1997 – 800 registered • Liquidation or transformation for remaining 3 600 organizations

  4. Legal regulations for endowments of foundations • Act on Foundations and Non-endowed foundations - adopted in 1997 • Act on Income Tax • Act on Donation Tax

  5. Foundations assets Other assets • all sources of the foundation not registered at courts Endowments • foundation register • minimal endowment for 0,5 million CZK (USD 15 000,-) • no limitation for structure of the endowment(financial means, securities, real estate and moveable, other property rights and other property values that fulfill the assumption of permanent revenues and are not burdened by rights of lien)

  6. Endowment building in the Czech Republic - Foundation Investment Fund • government rebuilding the foundation sector • 1 % of stocks from the privatization • 37 mill. USD in cash distributed + 20 mill. USD in stocks (strategic companies) • 38 recipients from the 1st round in 1999 • 64 foundations in the 2nd round in 2001 • contributions given into endowments under strict rules

  7. Czech foundations and their endowments • registered endowment of the Czech foundations exceeds 90 million of USD

  8. How have Czech foundations managed their endowments so far? • Strict limitations for registered endowments versus no limitation for registering endowments • Difficult and long registration procedure • Investment restrictions for endowments set by the law • special bank account • securities guaranteed by the state (any state) • Investment exception for the FIF contribution • Czech Donors Forum gained exception from the government for Pooled Investment Fund • originally for FIF contribution only

  9. Amendments to the Law on Foundations and Tax Law • prepared by the Czech Donors Forum in close cooperation with experts • adopted by Parliaments in April 2002 • in force since July 1st 2002

  10. Amendments bring new rules for investing endowments • wide investment instrument for foundations • rules for safe investing • professional management of endowments by financial institution • capital income taxed free • easier registration procedure for endowments

  11. New investment instruments for endowments • investment instruments emitted in OECD state valued in CZK or any other currency • financial market instruments • bonds registered at public markets in any OECD state • shares of pooled investment funds (max. 30% stocks in portfolio) • securities emitted by central banks or states • real estates

  12. Rules for safe investments Total amount of the following instruments cannot exceed 30% of total endowment value: • investment instrument in foreign currency • shares of investment funds other than collective investment funds • bonds with lower rating that rating of the Czech Republic with no state guarantee

  13. Change of the concept of endowments in the Czech Republic • obligatory registration assets as a tool for transparency of the foundation sector in 1997 • long-term stability for foundations – permanent source for foundations – after FIF • strategic goal for the future

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