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Foundations and endowment funds

By foundation we mean a special-purpose association of assets established by its founder to permanently achieve socially or economically useful goals. Its name must include the word "foundation" and, as a rule, a designation indicating its purpose. The foundation, as a non-profit organization, can run a business only as a secondary activity.

On the other hand, the endowment fund is easier to establish, administer and manage, has no obligatory endowment capital and, unlike a foundation, does not have to be permanent.


The purpose of the foundation

The foundation may have a public benefit or charitable purpose depending on who the foundation supports. However, a foundation cannot be set up to support political parties and movements or to serve exclusively for-profit purposes, because, as stated above, the foundation, as a non-profit institution, can only conduct business in support of its main purpose. In the event that the foundation fulfils a prohibited purpose, the court may annul it and order its liquidation. The founder is obliged to define the purpose in his founding legal proceedings. The purpose can be set in general or, conversely, in great detail, more purposes can be determined and the sequence of their fulfilment. The accuracy of the definition of the purpose in the founding legal proceedings is also important from the point of view of exercising the will of the members of the foundation's bodies. The broader definition of the foundation's goals gives, of course, members of the foundation's bodies a wider scope for exercising a will different from the will of the founder.

Establishment and creation of the foundation

The foundation may be established by a founding legal act or by law. It is established by a foundation charter in the form of a notarial deed. It can be a deed of incorporation or a last will in the event of death. The foundation charter is carried out by one or more persons. If there are several founders, they must act unanimously in matters of the foundation.

The foundation will be created in accordance with § 315 of the Civil Code by entry in the public register (foundation register).

Organizational structure of the foundation - foundation bodies

The statutory body of the foundation is the Board of Directors, which has at least 3 members. The Board of Directors performs everything that is not entrusted to other bodies of the foundation. A legal entity may also be a member of the Board of Directors.

The control and revision body of the foundation is the supervisory board. It must be established whenever the amount of the endowment capital exceeds CZK 5,000,000. If the supervisory board is not established, its function is performed by the auditor.

The foundation is required to publish an annual report (unlike the endowment fund), which contains the financial statements and an overview of all the foundation's activities.

Foundation assets and foundation capital

The foundation is obliged to create foundation capital consisting of the foundation principal, the financial value of which is at least CZK 500,000. The assets of the foundation consist of the foundation principal (deposits or also donations) and other assets.

The board of directors of the foundation may decide to increase the foundation's capital or may reduce the foundation's capital by shortening the foundation's principal, if this requires an interest in the more economical fulfilment of its purpose.

The foundation has a mandatory audit from an annual turnover of 10 times its foundation capital.

Dissolution, termination and change of the foundation

  • Cancellation with liquidation
    will occur if the purpose is achieved, at the end of the agreed period or by a court decision in cases stipulated by law. The foundation is prohibited from monetizing assets beyond its debts and disposes of the liquidation balance in accordance with the foundation's charter.
  • Cancellation without liquidation
    is possible in the case of a merger by merging or changing the legal form, both options must be allowed by the foundation charter. It is possible to change from the endowment fund to the foundation and from the foundation to the endowment fund, the board of directors decides on it.

The legal existence of foundations ends with the deletion of the foundation from the foundation register.

Endowment fund

Establishment and creation of a foundation fund

The endowment fund is established by drawing up a charter, which, unlike the foundation, this charter does not have to take the form of a notarial deed, but it is recommended to verify only the signatures of the founders.

In accordance with § 397 of the Civil Code, the endowment fund will be created on the day of entry in the endowment register.

The assets of the endowment fund consist of deposits and donations, the subject of which may not meet the assumption of permanent income. The endowment fund does not create endowment principal or endowment capital.

Organizational structure of the endowment fund - bodies of the endowment fund

The body of the endowment fund is the board of directors, which performs everything that is not entrusted to other bodies of the endowment fund. It has at least three members (the number of members may not be divisible by three), the term of office is five years, unless the charter provides otherwise. A legal entity may also be a member of the board of directors.

A legal entity may also be an auditor. The term of office of the auditor is five years, unless the foundation charter provides otherwise. If the auditor is a legal entity, it may be elected for an indefinite period. The auditor is elected and removed by the board of directors.

Cancellation, termination and change of the endowment fund

If the endowment fund can no longer fulfil its purpose, the board of directors decides on the dissolution of the endowment fund with liquidation and elects a liquidator. This may be due to achieving the purpose of the endowment fund. The founder may also limit the duration of the endowment fund to a certain period in the founding legal proceedings. If it expires, the endowment fund is canceled. It will be terminated on the day of its deletion from the Foundation Register.

Tax benefits of the foundation and the endowment fund as a public benefit taxpayer

Like other non-profit legal entities and organizations, foundations and endowment funds may also use the following tax benefits, provided that they are also a public benefit taxpayer in accordance with the provisions of Section 18a et seq. of the Income Tax Act and does not serve only private purposes:

  • Tax exemption for gift income
  • Income from gainful activity up to the amount of CZK 300,000 per year
  • The possibility of drawing subsidies
  • Exemption from income tax for income from property forming the endowment capital or income from its sale

Our company will arrange for you all administrative necessities connected with the establishment and existence of a foundation or endowment fund:

  • Establishment of a new foundation or endowment fund and entry in the endowment register
  • Changes, updates and modifications of the founding charter of an existing foundation or endowment fund
  • Election and entry of new bodies in the foundation register
  • Registration with the tax office, health insurance company and social security administration
  • Bookkeeping and payroll
  • Tax and legal advice on the use of a foundation or endowment fund
  • Cancellation and liquidation of the foundation or endowment fund, including deletion from the endowment register

Tailor-made foundation and endowment fund

We will tailor your foundation or endowment fund to you professionally and quickly without unnecessary paperwork and delays. We will tailor the founding charter of the foundation or the endowment fund to you and we will solve all other administrative and legal requirements, including entry in the endowment register.

We will also offer you the opportunity to use one of our virtual headquarters throughout the Czech Republic, which also applies to foundations.

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