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Path: Home Page > Main menu > Positions > Position No. 5/2004 - The amount of paid union dues as an income tax deductible

 

Position No. 5/2004 - The amount of paid union dues as an income tax deductible

 
 
 

The following material has been prepared in co-operation with the Czech-Moravian Chamber of Trade Unions.

May 2004

Act No. 586/1992 Coll., on Income Taxes, was amended by Act No. 438/2003 Coll. and a majority of the new provisions took effect on 1 January 2004. This is also the case of Article 15(14) and Article 38 l (1) (j) of the aforementioned Act. Under Article 15(14), the taxpayer who is a member of a trade-union organisation will at the end of 2004 for the first time have the opportunity to deduct from his or her tax base the amount of paid trade-union dues up to the maximum yearly limit stipulated by law. The first limit is set at 1,5 % of taxable income, the second is the maximum amount of CZK 3000 per tax year. Under Article 38 l (1) (j) the employee must claim the deduction within the statutory time limit with his employer by submitting to him a certificate issued by the trade-union organisation and certifying the amount of paid union dues.

The amendment is in line with the aims of the Czech-Moravian Chamber of Trade Unions, since it provides trade union members with an opportunity for tax reduction. However, the trade-union organisation must issue to its members on request a certificate stating the amount of paid union dues, as required by law. This procedure should pose no problem to those organisations that themselves regularly collect union dues from their members.

There is, however, a significant number of trade-union organisations for which the membership dues are collected by the employer who deducts the appropriate amount from the employees' wages and transfers the sum thus collected to the account of the trade-union organisation. If trade-union dues are paid in this way, it is necessary to consider the possibility of conflict with Act No. 101/2000 Coll., on the Protection of Personal Data. The problem of fee deduction in itself was addressed by the employers and trade unions in co-operation with the Office for Personal Data Protection (hereinafter referred to as "Office"). This led to the issuing of Position No. 2/2001 "Processing of the sensitive personal data -trade union membership - in connection with the return of membership fees". The aforementioned position was published in the Journal of the Office for Personal Data Protection, part 12 of 23 October 2001. However, in connection with the income tax law amendment the problem of potential collision arises again, in a different aspect.

Employer deducts trade-union dues on the basis of an agreement on wage deductions between the employee and the trade-union organisation, which has been submitted to him, and transfers the appropriate amounts to the account of the trade-union organisation. At this stage, the employer can opt between the following procedures:

  1. Each month the employer provides the trade-union organisation with information on paid dues by submitting to it a written list with the names of the employees and the respective amounts of fee deductions;

  2. The employer transfers to the account of the trade-union organisation only the total sum of deducted trade-union dues, without any concrete information on the members.

Case 1

In this case the trade-union organisation has no major problem with establishing on the basis of the submitted lists the total yearly amount of deducted trade-union dues and issuing the required certificates to its members.

Case 2

In this case the trade-union organisation must first find out how much each of its members has paid to the account. It may do so in one of the following ways:

Option A - If the amount of the membership fee is fixed and does not depend on wage (salary) level, the employer should without hesitation comply with the request of the trade-union organisation as a creditor and provide it with the required information on the respective amounts paid by individual "debtors" to meet the obligation in question (the "obligation" being the claim of the trade-union organisation to the corresponding sum of union dues). The same principle should also apply in those cases where the membership fee is defined as a percentage from the member's wages; however, here one may encounter the objection that the employer would thus provide another subject, though only indirectly, with personal data of the employee, i.e. the amount of his or her wage (salary). The consent of the employee with the processing of the said data may be deduced from the agreement on wage deductions, which the employee concluded knowing that the trade-union organisation would learn the amount of his or her net income if the membership fee is defined as a percentage from this amount.

Option B - This option is in our opinion more "elegant" and in principle it also meets the requirements of Act No. 101/2000 Coll. Under Article 5(2) (a) of the said Act, the data controller may process the data even without the consent of the data subject, if the processing is expressly required by lex specialis (special law) or if it is necessary for the fulfilment of duties ensuing from a special law. In doing so he is only obliged under Para. 3 of the same provision to respect the right of the data subject to the protection of his or her private life. The special law in question here is the already mentioned Income Tax Act, which stipulates the right to deduct trade-union dues from the income tax base and in connection with this right imposes a corresponding obligation to submit a certificate stating the amount of union dues paid. If the deductions of trade-union dues are made by the employer and for the purpose of establishing their amount the trade union is obliged to issue the taxpayer a certificate, it is not a violation of the Act on Personal Data Protection if the employer provides the trade-union organisation with an annual report on union dues paid by individual taxpayers.

Under Article 18(b), the Income Tax Act also justifies the fact that the employer submitting such report need not notify the Office for Personal Data Protection about his intention to process sensitive personal data.

Option C - The employee = trade union member = taxpayer asks the employer to issue him a certificate stating the amounts that have been deducted from his wages and transferred to a specific account. It is not necessary to specify the purpose of the deductions; the number of the account provides all information needed by the trade-union organisation. The employee submits the certificate to the trade-union organisation and the organisation, after having checked its bank account, issues him an identical certificate in accordance with Article 38 l (1)(j) of the Income Tax Act. This procedure also meets the requirements of Act No. 101/2000 Coll., as well as the criteria laid down in the aforementioned position of the Office for Personal Data Protection. Since it may be expected that employees will be interested in ways to reduce their tax burden, it should not be a problem to persuade them to use this procedure.

Any of the three procedures described above provides the employee with a certificate of the trade-union organisation stating the amount of trade-union dues paid during the relevant tax year. The next step involves two possibilities:

  1. the employee files his or her own tax return, or

  2. the employee does not have this obligation and the calculation of the final tax amount is carried out by the employer.

Case 1

The employee deducts from his or her income tax base the sum stated in the certificate issued by the trade-union organisation; if the sum exceeds the limits stipulated by the Income Tax Act (i.e. it amounts to more than 1,5 % of the tax base or to more than CZK 3000), he or she deducts only the sums eligible for deduction. The certificate issued by the trade-union organisation forms an annex to the tax return form.

Case 2

At the end of the tax year, the employee asks the employer to take the sum of deducted trade-union dues into account when calculating the final amount of his or her income tax for the relevant year in the same way as it is done with money paid into supplementary pension schemes or life insurance.



Certificate issued by the trade-union organisation
for the purpose of claiming a tax deduction on the basis of paid trade-union dues

Grassroots (local) trade-union organisation ...........................................................
...............................................................................................................
Office .........................................................................................................

certifies in accordance with Article 15(14) of the Act No. 586/1992, on Income Taxes, as amended, that its member
.................................................................................................................
(name and surname, personal identification number)
paid in the year ........ the amount of ...................................................................,
in writing ....................................................................................................,
in trade-union dues to the aforementioned organisation.

The present certificate is issued under Article 38 l (1) (j) of the same Act.
Date, signature and stamp of the trade-union organisation

 

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