In 2023, our tax litigation specialists helped Česká spořitelna resolve a complicated and significant tax issue concerning the deduction of a donation from the tax base.
The background of the dispute was the decision of legislators to abolish anonymous bank books, with the depositors’ right becoming time-barred after a statutory period of time. From the beginning, Česká spořitelna did not wish to keep the significant deposits, but the legal regulation did not allow it to waive the deposits in advance. The bank had no interest in keeping the funds and the management decided to return them to the public.
To this end, the bank established the Depositum Bonum Foundation for the promotion of education, and donated the amount of the forfeited deposits to it.
As the donation met the conditions for reducing the tax base, the bank deducted it from the tax base so that the accounting and tax result of the receipt and subsequent donation of the deposits was zero in both cases. The tax administration did not approve of the deduction, and demanded that Česká spořitelna pay a significant amount of hundreds of millions of Czech crowns, even though the entire transaction had a zero tax impact. The revenue office argued, among other things, that the foundation did not spend all of the donated funds on charitable activities in the year the donation was received, and that the foundation’s placement of unspent funds in another form of financial assets, such as bonds, did not align with the charitable purpose of the donation that would entitle the bank to a deduction.
The case was taken up by our partners David Krch, Josef Žaloudek and František Korbel, and legal expert Alice Zemánková. Thanks to their involvement and the precise argumentation of our tax and legal litigation team in the administrative action filed, the Municipal Court in Prague reversed the decision of the revenue office, and thus the original decision of the tax administration was successfully overturned in favour of the bank.
“It was a precedent-setting decision. The court confirmed the interpretation that the placement of funds received as a gift in other financial assets does not exclude a publicly beneficial purpose, and that in this case neither the responsibility nor the burden of proof is transferred to the donor in respect of demonstrating to the revenue office that the donation was used for publicly beneficial purposes,” said tax partner David Krch.
