Transparent Account: how to gain trust and avoid tax problems

What is a transparent account

A transparent account is a special type of bank account where all incoming and outgoing transactions are publicly available. Its main objective is to ensure the maximum level of trust and transparency towards the public. The Transparency Account has become particularly popular with political parties and movements that are obliged to disclose their funding, non-profit organisations and foundations that often organise fundraisers, and associations and initiatives that want to strengthen their credibility with donors.

Unlike a current account, a transparent account provides online access to payment history so that anyone can check who has contributed to the account and what the money has been used for.

The Transparency Account is regulated mainly by laws on banks, political parties, and accounting and tax regulations. A bank offering such an account is obliged to provide the technical means to make the data publicly available in accordance with the law.

What about the control of transparent accounts?

The owner of a transparent account, i.e., for example, a non-profit organisation, foundation, association or political party or movement, is always legally and factually responsible for ensuring that the funds in the account are used exclusively for the purposes that correspond to its statutes, charter or other legal basis of activity. This means that if the purpose of the foundation is, for example, to promote education, the funds raised through the transparent account must be used specifically for educational projects, scholarships or similar activities. Any deviation from this framework could constitute a violation of the law, jeopardize the credibility of the organization and, in the extreme case, lead to interference with its existence.

The rules are even stricter for political parties and movements. These entities are legally obliged to keep a transparent account for the financing of their activities and in particular for the purposes of election campaigns. All income and expenditure must be published in full and is subject to scrutiny by the Office for the Supervision of the Management of Political Parties and Political Movements. The transparent account here is not only a credibility tool, but also a mandatory mechanism to ensure that political funding is transparent and that rules on donations, limits or state contributions are not circumvented.

For non-profit organisations, foundations or associations, maintaining a transparent account is not always mandatory. Rather, in many cases it is a voluntary step aimed at strengthening donor and public trust. A non-profit using a transparent account sends a clear signal that it has nothing to hide and is managing openly. This can be a great advantage in public fundraising, as donors can immediately check whether their contribution has arrived and see how it is being used.

The difference between political parties and non-profit organisations is therefore crucial. Political entities are obliged by law to keep a transparent account and its maintenance is regularly audited. Non-profit entities, on the other hand, maintain it voluntarily, but even here they must use the money in accordance with their objectives.

How to create a transparent account and how it works

Setting up a transparent account is usually the same as opening a current account at a bank that offers this service. The only difference is that the client agrees to disclose the movements.

The management of a transparent account is that all payments are published online and anyone can access them without having to log in or enter special data. The public can thus view account movements in real time and easily filter individual transactions by date, amount or purpose of payment. This makes the management of the funds as transparent as possible, and donors can be sure that their donation has actually reached the right place.

In the case of public collections, they can also keep track of how the target amount is being met and how the money is being used, which significantly strengthens trust in the organisation managing the account.

What about the taxation of the transparent account

The taxation of a transparent account is a topic that is of interest to almost everyone who works with this type of account and is therefore one of the most common questions we encounter. Although the transparent account itself is merely a technical means of receiving and recording money, the legal and tax obligations depend on who maintains the account and for what purposes it is used.

For non-profit organisations, the situation is usually the simplest – most donations that come into the account are exempt from income tax. Therefore, if, for example, an association or foundation receives a financial contribution from a donor to support its activities, it does not have to tax it. However, the problem arises when the account would start to receive income that no longer falls into the category of donations but represents a form of business or other taxable activity. A typical example would be where an organisation receives payments for services rendered or goods sold through a transparent account. In such a case, it is already taxable income which must be included in the tax return.

For political parties and movements, the maintenance of a transparent account is mandatory and subject to strict regulation. All income must be properly documented and audited as it has a direct impact on the financing of political competition. Nevertheless, even here, there may be situations where some income is subject to taxation, for example if it is income that does not fall within the normal framework of donations or state contributions.

For private individuals, the situation is most sensitive. If an individual were to set up a transparent account, for example, for a public collection for personal purposes, the tax authorities may consider the funds to be income and require them to be taxed. A typical example would be a public collection for medical treatment or other personal needs – in such a case, the exact nature and regulation of the collection would matter.

In practice, this means that if, for example, a foundation receives a donation of CZK 100,000, it is in most cases tax-exempt income. However, if the same foundation started collecting payments for its services through a transparent account, this would already be business income, which must be taxed. Therefore, it is always important to keep accurate records of all income and expenses, carefully distinguishing between donations and taxable income.

Transparent account and data protection

The GDPR plays a big role in transparent accounts, as this is where donors’ personal data is processed and disclosed. When setting up a transparent account, banks usually display the name of the donor, the amount sent and the text in the message to the recipient. This means that anyone from the public can view these details without having to have special permissions or log in. From a privacy perspective, it is therefore highly important that donorsare clearly and comprehensibly informed in advance that their data will be publicly available within the transparent account and that it will not be possible to hide it afterwards.

The possibility to donate completely anonymously is very limited in transparent accounts. One of the few ways to remain anonymous may be, for example, by depositing cash directly into the account via the bank’s cashier. However, even this way is not completely without limitations, as banks have their own limits and anti-money laundering and anti-terrorist financing rules come into play. Therefore, for larger amounts, identification of the donor is almost always necessary.

It is for these reasons that organisations using a transparent account should thoroughly inform donors about what data will be disclosed and give them the opportunity to decide whether they want to contribute in this way. We recommend including this notice directly on the organisation’s website or in the donation appeal. This will prevent misunderstandings and possible complaints about data breaches.

Summary

A transparent account is a special bank account where all incoming and outgoing payments are publicly accessible. While political entities are obliged by law to maintain a transparent account and their income and expenditure are subject to strict control by the Office for Supervision of the Management of Political Parties and Movements, for non-profit organisations it is more of a voluntary step aimed at increasing donor confidence. Managing the account is simple – all payments are visible online and the public can filter them by amount, purpose or date, ensuring maximum transparency. From a tax perspective, donations are usually tax exempt, but the problem arises when income from business or other taxable activities is received through the account; for private individuals, the tax authorities may consider the funds collected as their own income. Data protection is also an important aspect – banks publish the name of the donor, the amount and a message to the recipient, which means that each donor must be informed in advance that their data will be publicly available.