Tax assignation

What it means

Assignation directs a share of income tax already paid to a chosen non-profit. The company gives nothing extra: it only decides where part of the tax it owes anyway ends up.

A company assigns 1 %, or 2 % if during the year it donated at least 0.5 % of the tax paid for a public benefit purpose. The declaration sits inside the tax return; there is no separate form.

Assignation is neither a donation nor sponsorship. A donation comes out of the company’s own money; sponsorship is a deal with something in return and is judged by the contract. With assignation the company pays not a single euro more: the state sends a non-profit organisation part of the tax it would otherwise keep. That is why assignation never appears in the company’s books.

How it works in practice

The recipient must appear on the notarial chamber’s list by the set date. If it does not, the share simply goes to the state and nothing can be fixed after filing.

The donation that unlocks the 2 % rate is a non-deductible expense in the books. So the decision should weigh the donation and the assignation together, not the percentage alone.

When preparing the return we ask the client in advance for the recipient’s name and IČO and check it against the list. For the 2 % rate we add the donation papers: the deed of gift, proof of payment and the purpose the gift was made for. They are filed with the return, because in a tax audit they are what proves the condition was met.

What to watch out for

The donation condition attaches to the year the tax relates to, not the year the return is filed. Companies read it the other way round, donate in March and then find it does not help last year’s 2 %.

Assignation is also lost if the tax is not paid within the deadline for filing the return. A company that files on time but pays the tax a few days late forfeits the right to assign, and the chosen organisation receives nothing. With a filing extension the deadline moves with it, but the payment must still arrive before it ends.