INPROFORUM 2017

Transformation of a Civil Association from the Accounting and Tax Point of View
Marie Vejsadová Dryjová

Language: en
Last modified: 2018-04-10

Abstract


Act No. 83/1990 Coll., on Associations of Citizens, which regulated the establishment and status of civil associations, was abolished with effect from 1 January 2014 and the legislation of the associations has been moved to the new Civil Code. The civil associations were automatically transformed by the Ministery of Interior of the Czech Republic into a new legal form of registered association. Consequently, the new Civil Code enables civil associations to be transformed into newly established legal forms, institutions or social cooperatives. The transformation of a civil association into the new legal form has brought a series of other changes in accounting and tax areas. Act No. 563/1991 Coll., on Accountancy, allows both associations and institutions to keep accounts in a simplified manner which brings some advantages for an organisation; e.g. an organisation is not required to make provisions and adjustments, and reevaluate property at its fair value and may calculate its accounting in groups of accounts instead of particular accounts. Since these organisations are mostly financed from public resources the reporting and drawing of which requires precise bookkeeping, they usually undertake full accounting. Simplified bookkeeping would bring some administrative difficulties for the organisations. Taxation will also differ due to the choice of legal form. A registered association is taxed in accordance with  Act No. 586/1992 Coll.,on Income Tax, as a publicly beneficial taxpayer with a narrow tax base, while an institution is a taxpayer with a broad tax base. The basic difference in taxation consists in the fact that a taxpayer with a broad tax base taxes all income except for investment subsidies while a taxpayer with a narrow tax base only taxes income from main activities which are profitable and income which is legally subject to taxation.

Keywords


civil association; registered association; institution; Civil Code; transformation

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