Guide for non-profit organisations Wishing to receive designated 1% amounts of paid personal income tax (SZJA) 1. What are the requirements for recipients of 1% amounts of paid income tax? The following non-profit organisations can receive 1% amounts of paid tax designated by taxpayers: i. Voluntary associations and foundations registered by the court at least 2 years before the year the taxpayer’s declaration designating 1% of paid tax is made (consequently before 1 January 2001); ii. Such voluntary associations or foundations having prominently public benefit status that verifies the prominent public benefit activity with a copy of the agreement with the state or local authority at least 1 year before the first day of the year when the taxpayer’s declaration designating 1% of paid tax is made; iii Public law foundations registered by the court before 1 January 2002; iv. Organisations additionally listed in the Act CXXVI of 1996, or specialised museums or specialised collections operating at a national level; v. Such libraries, archives, museums or other cultural or entertainment organisations that received budget support from an individual local authority, national or local minority selfgovernment, or central government in any of the three preceding years prior to the first day of the year the taxpayer’s declaration designating 1% of paid tax is made. There are some additional requirements for voluntary associations, foundations or public law foundations answering one of the first three required conditions to become a recipient of 1% transfers: Its headquarters are located in Hungary; It operates in favour of the Hungarian or Hungarian-speaking populations in neighbouring countries; It has to declare it performs no direct political / no political party activities; it puts no candidates in general elections, county or capital local authority elections; furthermore the organisation is independent of political parties, and does not support them; It has to declare that its statutes are or foundation deed is modified in line with the conditions mentioned above (modification has been presented to court); It has to declare that the organisation has no public liabilities (that is, debts to public bodies), or if it does, that any 1% amounts designated to it will be used to contribute to the clearing of the sums owed; It has to declare that from January 1 of the previous year that the organisation has performed public benefit activities effectively and without interruption and meets all legal requirements concerned. By 1 September at the latest, APEH (Office of Tax and Financial Supervision) will request organisations - to which 1% amounts have been designated - to make the required declarations that they fulfil the legal conditions required of recipients. The request has to be fulfilled within 30 days. If an organisation fails to meet the deadline, the provisions of Section 40 of the Act IV of 1957 are applied: failure to meet the deadline does not result forfeiture of 1% recipient status if the organisation can provide justifiable reasons for the delay and submit the documentation required.
2. So what should a non-profit organisation that wishes to receive 1% amounts of paid income tax do? A prospective recipient of designated 1% amounts should: be well-informed about the relevant regulations; make potential supporters aware of the possibility of allocating 1% paid tax and inform them of the tax-number of the organisation; declare within 30 days following APEH’s request that it meets the requirements concerning to its headquarters, activity, and the independence from direct political activities, organisational independence from political parties, and the absence of public liabilities - see point 1. By 1 September at the latest, APEH will request the concerned organisation to make the declaration. The request has to be fulfilled within 30 days - see point 1. (In case of a delay in meeting this deadline, justification for the delay can be presented within 8 days after the deadline. If the reasons of the delay are justifiable and provable and the organisation can submit the required documentation, the organisation does not forfeit its right to receive 1% amounts). As 30 days can be insufficient to modify the statutes/foundation deed of an organisation in a court, it is useful to initiate the necessary court procedure at an earlier stage. declare that the organisation has no custom liabilities, social insurance liabilities, neither public nor local tax liabilities; declare the organisation has performed an public benefit activity effectively and without interruption from 1 January the previous year and meets all legal requirements concerned.
3. What should the recipient do after using the 1% amount? The organisation has until 31 October 2004 to publish in the press (in the form of a press release) the purposes that the received 1 percents were used for. It has been possible for the organisations to set aside the 1% support since 1 January 2001, however in this case the press release should refer to the fact and the sum set aside. An original copy of the press release should be kept as proof of publishing. 4. What is the role of APEH (Office of Tax and Financial Supervision)? In the absence of the organisation’s required declarations APEH will not transfer any 1% amounts requested by a taxpayer. In those cases when APEH for some reason does not accept an organisation’s declaration, APEH has to state its decision which can be challenged in court by the organisation. If the required declarations from the organisation and their verification are complete (and their contents are not questionable), APEH is obliged to transfer the 1% amounts of paid tax allocated to the organisation by 30 November 2003. If the organisation authorises the tax office to liquidate its public liabilities (that is, use the 1% amounts allocated to the organisation to clear its public debts), APEH is obliged to do this by 30 November 2003 at the latest.
The use of 1% amounts transferred to the non-profit organisations can be supervised by APEH. If the organisation’s press release is found to be false, the organisation can be obliged by APEH to pay back the received 1% percent amounts to the central budget.