Civic association

What it means

A civic association is a legal person that gathers people around a shared purpose: sport, culture, a neighbourhood or a professional field. Three founders are enough, it comes into being on registration with the Ministry of the Interior, and members do not answer for its debts.

It is a non-profit organisation made of people rather than of assets, which is how it differs from a foundation, a pool of assets tied to a purpose. It may run a surplus but cannot share it out, only put it back into the activity.

An association may also trade, but only alongside its main purpose and with a trade licence. For it business is a way to fund the activity, not the aim, and income from it is taxable, unlike gifts and membership fees.

How it works in practice

Once registered it receives an IČO, opens a bank account and becomes an accounting entity filing its statements with the Register of Financial Statements. If it does not trade and its income stays under the limit in the Accounting Act, single-entry bookkeeping is open to it.

It files an income tax return only when it has income subject to tax: gifts are outside the tax base and membership fees set by the statutes are exempt. To receive a share of paid tax it must be certified by a notary every single year.

With grants from a municipality, region or ministry we keep the spending so that it can be reported project by project. Each project gets its own sub-analysis and documents are tagged at the moment of posting, because the grant provider wants to see exactly where the money went.

What to watch out for

A notary certifies only an organisation with no arrears on levies, and only in the autumn window that closes in mid-December. Miss the date or carry arrears at either insurer, and the association loses a full year of assignation income.

Fees paid in cash to coaches or organisers without a contract are income on which tax, and often contributions, must be withheld. Such work is covered by, for example, a work performance agreement; without one the association pays the tax and contributions retrospectively after an inspection.