Kako to rade u Madžarskoj?

FOREWORD
Chapter II. of the government’s programme, entitled “Act now and for all” adopted in May 2002 deals
with civil society under the heading:“Autonomous civil society regarded as a partner by the State”.The
title itself is important. Using the word “autonomous” the state affirms its respect for the autonomy and
independence of civil society from the state. Partnership can only be formed among equal parties, not in
the context of superior-inferior relationship.Thus the government’s programme expresses the need for a
civil society that is willing to act for the common good and that forms a partnership with the state.
The parties have made the first steps towards the development of the social dialogue along these principals,
as it is evident for both sides, that a functioning civil society is inconceivable without the adequate
conditions guaranteed by the state.The primary responsibility of the state is to ensure the legal environment
enabling operation and to create opportunities for all in accessing funds. Unstable, under-financed
civil society organisations (often struggling for survival) are not able to carry out their work of high social
value, and will make it impossible for them to take-over services contracted out by the state and local
authorities.
This dialogue characterised the preparation of the Civil Strategy of the Government and the National
Civil Fund, Act L of 2003. Hundreds of opinions articulated at forums, conferences, workshops, through
traditional and electronic correspondence, Internet forums formed and improved the drafts till the final
versions were agreed on. Partnership does not equal paternalism; the “benignant state” cannot make decisions
without having asked the concerned parties in advance.Thus the government considers the opinions
of representatives of civil organisations on matters affecting civil society indispensable and of high
importance.
The social dialogue of civil society is not only an intention and expectation on a governmental level, but
in the everyday mechanism of line ministries, as well on a county and local authority level.The majority
of the civil organisations never come into direct contact with the government, as their natural partner
is the local authority in the area they carry out their primary activities.The professional bodies interact
mainly with the ministries. Accordingly the dialogue is multi-level, its content is diverse, and it can only
be substantive if it concerns the real problems.
The recognition of these real problems has given birth to the Civil Strategy of the Government and the
Act on the National Civil Fund.These two documents have set out goals for years to come, but they do
not just aim at the future, they address the realities of today.
Equal Opportunities Government Office
Directorate for Civil Relations
REPUBLIC OF HUNGARY CIVIL STRATEGY OF THE GOVERNMENT April 2003 INTRODUCTION The democratic coalition, the national government of the centre accepts as its own the ideal of civil society,
but it does not wish to appropriate it.The government does not want to rule but serve, and can only
do so in co-operation with its citizens, and in partnership with the organisations of civil society. Civil
society is one of the foundations on which the activities of the government are based.
The government is committed to the ideal of civil society both in theory and practice. The government
is firmly resolved to keep the nation on the path of European social evolution, which
is historically the route to the freedom of citizens, civil associations, and self-organisation.The Hungarian
nation can be proud of the liberal thinkers of the Reform Age in the 19th century, and later, the greatest
Hungarian social scientists who always stood for this route.
Civil society in Hungary
Civil society has significant historical precedents in Hungary. The political transformation in 1989
brought with it the re-birth and strengthening of civil society.The rhythm of life of civil society should
not be determined by the cycle of parliamentary elections. The significance of civil society derives
from its operation independently from the government. The democratic coalition, the national
government of the centre will do everything in its power to broaden and strengthen civil society, which
is the solid basis of a truly democratic society.
There is no democracy, national solidarity, social dialogue, and workable interest reconciliation
system without a strong civil society. The future Hungary is only able to offer to its citizens
security and welfare if they can count on the systematic representation of their interests and aspirations,
if the community is built on co-operation and solidarity.Together with the democratic institutions based
on representation the government values the functioning of direct democracy of which civil society
organisations (CSOs) are a continuous part.The civil sector embodies such human values as independence,
personal initiatives, pluralism and solidarity.
The operation of CSOs is served by government policy that deems indispensable the civil control
of government and local authorities, the division of work between the government/local authorities,
business sector and civil society organisations and their co-operation. Government policies respect
the independence of the organisations, and increase their resources without making its assistance subject
to considerations of political parties.The government recognises that the effectiveness of the operation
of state functions is increased by sharing public functions – in full or in part – with society through the
co-operation of state bodies and institutions with the civil sector.

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Inevitably, since the political transformation the progress and development of civil society in Hungary has
not yet reached the extent that can be regarded as satisfactory. The government therefore endeavours
to ensure that the results achieved are preserved, the already created structures of civil
society are maintained and strengthened, and a society based on citizens’ democracy is
developed further. The government will not directly interfere or adopt a paternalistic attitude, and it
therefore expects its citizens to establish and develop further civil society for themselves and their fellow
citizens. Only in this manner can Hungary belong to every citizen.
The government – in accordance with its duties deriving from the constitution of Hungary – feels
responsibility towards Hungarian civil society in neighbouring countries and supports it. It assists the cooperation
and the development of contacts between the Hungarian civil sector in Hungary and in neighbouring
countries.The strengthening of Hungarian civil society in neighbouring countries is one of the
cornerstones of Hungarians remaining in their place of birth and retaining their national identity.
I. CHARACTERISTICS OF THE HUNGARIAN CIVIL SECTOR
In Hungary today it is an accepted paradigm that in a market economy and democratic society three sectors
normally come into existence: the business, state (local authority) and civil sectors.
The division of labour and the co-operation between the three sectors is in the process of development.
At the same time and in conjunction with the results achieved there are irregularities (or sometimes too
strict regulations) and uncertainty.
There are some unclear concepts: civil society is broader than the total number of formalised civil society
organisations, since it also includes informal associations and individual initiatives. The international
literature precisely defines the criteria that characterise CSOs: institutionalisation, internal
organisational structure, independence from the government, self-representation,
self-governance, prohibition of profit distribution, and volunteerism. Organisations established
for political or religious purposes are not considered to be classical civil society organisations.
These criteria are also confirmed in Hungary’s literature on the subject.
In Hungary today, in accordance with current legislation, there are some 60,000 different nonprofit
organisations that mostly comply with the above criteria and are registered in court. Of these the
Central Statistical Office considers 47,000 to be operational.This number indicates that since the time of
the political transformation a main feature has been the quantitative increase of CSOs, which was especially
the case in the first half of the 1990s.
The large number of CSOs increasingly ensures a framework for the self-organisation of
society. The classical signs of autonomy, volunteerism, and self-organisation and donation have appeared
and tens of thousands of citizens are offered a place for the development of their individual capabilities.
The development of cross-sectoral public services has started. CSOs provide alternative or additional possibilities
in the areas of education, culture, health and social welfare. The creativity of citizens and their
empathy towards those who are living on the periphery of society has become apparent. A diverse and
varied Hungarian civil sector has developed in one decade.

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Among CSOs there are:
• self-motivated organisations;
• organisations providing services and collecting and distributing donations;
• advocacy organisations;
and their alliances and umbrella organisations.
Together with the positive tendencies described above, the sector faces a number of tensions:
– Strong differentiation has evolved among CSOs. There is a majority of classical organisations
(private foundations, associations, social organisations) that are mostly economically weak and fragile.
Public foundations, public bodies and public benefit organisations comprise 5.4% of the sector
and at the same time received 40% of the total income of the civil sector in 2000. Organisations with
their headquarters in the capital (Budapest) received 63% of the revenue.A narrow circle of professional
organisations has evolved which mostly obtain their revenue from public budgetary funds, and
are strongly bound to the government and local authorities.
– In 47 items of the 2001-2002 budgetary legislation of Hungary, almost HUF 150 billion were allocated
as funds available for civil society organisations with a lack of principles set for accountability
and transparency. Because of the lack of publicity a large number of CSOs are not aware of the
availability of these funds and there is no information on their utilisation.
– In total 28.4% of the civil sector’s income came from budgetary sources in 2000 (in 2002 it will
probably reach 30%). This figure has increased from previous years, but is still below the level of
European Union countries (40% to 60%). The Hungarian civil sector is under-financed by
the government and local authorities. The distribution of the budgetary funds is unbalanced.
– Since the political transformation – with differing intensity – the civil sector has been also subject
to the policy of “governmental domination”, which has strengthened the divisions, the lack of
solidarity and the expectations of paternalism. The feeling of political dependency became especially
apparent in the past four years.
– Following the formalisation of the status-legislation of CSOs the time has come to differentiate
their financial legislation. Today, almost the same obligations apply to an organisation with
an annual income of one hundred thousand HUF and one with one hundred million HUF in bookkeeping,
the supply of information and the declaration of income.
– The sector is divided: instead of co-operation rivalry dominates. A unified model of representation
has not developed. A few umbrella organisations operate with some trying to present
themselves as the sole, legitimate representatives of civil society.
The objective development of the sector, the accumulated experiences, the need for democracy in society,
the desire for public good and the change in the political environment have created an opportunity
for Hungarian CSOs to achieve a qualitative improvement in the coming period.A necessary
stipulation for this is a conscious civil strategy on the part of the government, which is
both tolerant and self-restraining.

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II. PRINCIPLES OF THE CIVIL STRATEGY OF THE GOVERNMENT
The key statement of the civil strategy of the government is in the government’s programme under the
heading: “Autonomous civil society regarded as a partner by the State” (Chapter II, paragraph
“A”, point 4). In accordance with its programme the government
• recognises and acknowledges the importance of CSOs in the achievement of democracy in
society, and the establishment of the citizens’ rights and individuality;
• respects the independence of CSOs, considers the control by CSOs to be natural and necessary;
• wishes to end the political dependence of CSOs;
• regards CSOs as important actors in the process of European integration of cultures, citizens
and individuals;
• regards as indispensable the activities of CSOs in the field of volunteerism, self-organisation,
self-help and the strength of social solidarity in shaping the nation and the creation of variety
in everyday life;
• considers CSOs and their legitimate representatives to be an organic part of social dialogue and
interest reconciliation in society;
• wishes to support the regional co-ordination of CSOs in order to promote their operating and
advocacy positions;
• in the spirit of open legislation ensures the possibility of participation of CSOs in the preparation
of laws and expression of their opinion;
• ensures the legal framework for the operation of CSOs;
• participates in the creation of financial resources indispensable for the activities and operation
of CSOs;
• relies on CSOs, on the basis of the principle of sector-impartiality, in the provision of public
services and a wider division of labour in: health care, education, social services, culture, environment,
nature, etc.;
• expects CSOs to take an active role in the development of a knowledge-based and information
society;
• creates legislation to enable CSOs to join in the processes of local and regional development;
• relies on CSOs in serving different fields of interest protection (e.g. consumer protection, environment,
human rights, minority rights, health care);
• promotes the integration of Hungarian CSOs into the European and international networks of
CSOs, the development of “civil diplomacy”;
• is ready to establish partnership relations on an equal footing with legitimately chosen representatives
delegated by the civil sector;
• promotes the development and strengthening of a coherent public policy approach that values
the civil sector;
• expects all bodies of public administration to display, in their attitudes and activities, an exemplary
model for the local authorities to follow the above principles;
• expects ministries and bodies of national authority to determine their own tasks in this field in
the spirit of the government’s civil strategy, and to develop these tasks in conjunction with partner
CSOs into civil strategies for their own sectors.

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III. ELEMENTS OF THE CIVIL STRATEGY OF THE GOVERNMENT
1. The government will make the operational and financial regulations of CSOs transparent, consistent
and simpler.To achieve this it shall ensure that the necessary proposed legislation is tabled
in Parliament.
• There is a need to amend the existing status-legislation (law on association, Civil Code) regulating
the foundation and operation of CSOs in accordance with the changing circumstances.
The necessity and possibility of a comprehensive law on civil society should be considered.
• With five years of experience, the effectiveness of Act CLVI of 1997 on public benefit
organisations needs to be analysed and its review and internal legal harmonisation carried out.
• The possible benefits of providing state properties to CSOs must be examined.
• There is a need to make more accurate regulations in the transfer of duties to organisations of
public benefit status and in the formal and fiscal conditions of co-operation in public service
provision, that are encompassed in the Public Finance Act and government regulations.
• The so-called “1%”Act (Act CXXVI of 1996) must be reviewed and the following considered:
– “civilianisation” of the circle of beneficiaries (at present government funds, budgetary institutions
and other organisations can also be beneficiaries);
– appropriate conditions must be created for the non-allocated portion of the 1% income tax to
serve the interest of the civil sector.
• Together with the review of book-keeping it is necessary to differentiate the legislation regulating
the operation and finances of CSOs in accordance with the size of their
income, since almost half (48.5%) of the CSOs have an annual income of less than 500,000
HUF. Under the Act on Accounting it is still possible for other organisations that have an annual
income below 50 million HUF to choose single-entry book-keeping.
2. The government notably increases funds for CSOs, and ensures that the necessary legislative
proposals are submitted to Parliament. By the end of the current governmental cycle the target is to
increase the share of public funds in the income of the civil sector to 40% (the lower level of
European Union countries). At the same time, the government will ensure and call to account the
publicity of the tendering, allocation and utilisation of public funds:
• Besides the availability of public funds, normative assistance should also be increased,
with the reduction of individual decisions.The objective basis for this is the establishment of the
principle of neutrality in the provision of public services in the civil sector.
• The transfer of public services and their contracting out must also be accompanied by the
hand-over of the necessary resources.
• There is a need to carry out an itemised examination of funds directed to civil society in
the annual budgetary legislation, and easy-to-follow regulation must be established.
• The foundations exclusively founded by governmental (budgetary) institutions must be transformed
into public foundations, and further financing must be made provisional on this
transformation.
• The government will submit proposed legislation for the establishment of a National Civil
Fund. The source of finance of the Fund will comprise the non-allocated portion of the 1%
income tax and other revenues. Civil sector representatives must comprise the majority in the
bodies that decide on grants from the National Civil Fund. The establishment of the National
Civil Fund does not result in the decrease of other financial sources of CSOs.

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• Additional problems are posed in grant-giving to mostly small (but very useful) organisations
which are important mainly to small communities. These organisations do not provide public
services and have limited chance of winning programme-financing grants. The National Civil
Fund (and many similar local funds) provides solutions for them too.
• The possibility must be examined to ascertain that profits re-invested by CSOs in their own basic
activity qualify for exemption from company tax.
3. CSOs shall be active participants in the decision-making process on the strategic questions which
are decisive for the future of Hungary. The priority question in the current governmental cycle is
Hungary’s accession to the European Union. Hungary’s membership also means the integration
of its civil sector, every citizen and also every CSO. CSOs have an important role in ensuring
the success of the referendum on EU membership, in providing information on the European Union
to citizens. Great importance is attached to the:
• impact of the integration of European Union policies on the economy;
• freedom of movement of goods, services, persons and capital from the perspective of the civil sector;
• establishment of contacts with international development and aid organisations, and the availability
of various European Union grant schemes to CSOs;
• assistance provided by the government to CSOs for effectively obtaining funds from European
Union sources;
• integration of the European Union’s positions and recommendations into Hungarian legislation;
• synchronisation of the national interests with the European ideal.
The independence of the civil sector, the clarity of funding and grants to CSOs, and the professionalism
of the services provided by CSOs are all equally important expectations of the European
Union.The government ensures that these expectations are met in legislation and co-operation with
CSOs.
4. The unified registration of CSOs that receive grants from budgetary sources will provide the possibility
to exclude parallel financing, and will make it possible to develop and monitor the co-financing
system, and to explore disproportions, deficiencies, territorial inconsistencies and sectoral differences
in the financing mechanism. A long-term target is the simplification of public debts
registration, and to reduce the bureaucracy involved in the certification of justification for grants.
5. Private giving and volunteerism can be an important resource for the civil sector. At present,
the personal income tax legislation allows private persons to reclaim 30% of their cash donations
from their income tax. In the case of organisations of public benefit and special public benefit status
the maximum limit is 50,000 HUF, and 100,000 HUF respectively. These amounts do not
encourage giving. Private persons cannot obtain benefits either through in-kind donation or voluntary
work. The strategic aim is to encourage private persons to increasingly contribute to the
resources of CSOs.Therefore the following actions should be considered:
• to allow income taxpayers to deduct a greater proportion of a donation from their taxes;
• the better recognition of voluntary work through legal regulation promoting voluntary work.
6. An important element of the government’s strategy is to involve CSOs in the preparation of
legislation which regulates the civil sector’s activities and serves its interests. At both governmental
and ministerial level there is a need to establish mechanisms of co-operation and chan-

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nels of communication which ensure interactive contacts.Various, often opposing and rival opinions
should be received with empathy and tolerance.An important element of regulation of the civil sector
is a positive attitude of the government and governmental offices towards CSOs which are inexperienced
in public administration practices. For this purpose public administration examinations
and related training should be broadened with topics related to the civil sector and CSOs.
7. Since CSOs – to differing extent – are present in every area of life (education, culture, health care
and social welfare, environment and nature, public safety, sport, local development, consumer protection,
human rights, etc.), they should be involved not only in the legislation affecting the civil sector
but also in the process of open legislation procedure.The legislation on lobbying and advocacy
to be enacted should have a separate chapter on CSOs.
8. The Hungarian civil sector employed 62,500 persons in 2000, and the number of voluntary workers
exceeded 400,000. Due to the contracting out of public services to CSOs the number of voluntary
workers and employees is expected to increase in the future, which could become a new
ground for creating workplaces. The development of human resources is also a demand in
the civil sector. In higher education and equally in technical education it is possible and necessary
to teach the topics related to civil and nonprofit organisations in the framework of accredited education.
It seems useful to extend scholarships and study visits abroad for future graduates interested
in the civil sector. At the same time the establishment of separate nonprofit majors in the curriculum
cannot be a strategic target.
9. Civil organisations could be the actual and many-sided users of the information system
of the government and solid partners in the development of information society. Telecottages
and Civil Services Centres, civil IT initiatives are the most important information bases for
local CSOs, which can become the creators and users of the interactive exchange of information
and electronic transactions. The public educational institutions and information bases operating as
businesses can be used for this purpose.The aim of the government strategy and its principal interest
is to help these organisations and to co-operate in creating the objective conditions for the above
activities.
10. The government considers it timely and important to establish, similarly to already operational Civil
Service Centres in 19 counties, the Budapest Regional Civil Service Centre in the capital. It is
ready to assist financially the service centre in co-operation with the Municipality of Budapest,
whilst respecting the principle of autonomy.
11. In the realistic evaluation of the social processes and the activities of the civil sector, the government
is committed to rely on the supply of statistical data and relevant research, including publicity
and availability. In addition to the evaluation of the general tendencies in the civil sector, it is
important to encourage and support those specific research activities which are aimed at analysing
the effects of contracting out public services, the consequences of European Union accession, volunteerism,
the democratisation of society, and the role of CSOs in these processes.
12. The partnership between the government and the civil sector makes a legitimate representation
of the civil sector necessary. It is the internal affair of civil society to establish such a representation.
It is the government’s basic strategic interest to support the autonomous establishment

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of such a partner.At present previous unsuccessful attempts and passionate arguments require a high
degree of tact and self-restraint. At the same time, it is not in the interest of the sector for the
appointment of a legitimate civil representation to remain unsolved or deferred for a long time. The
rights of this civil representation could include:
• participation in the preparation of legislation relating to the civil sector;
• giving opinion on the chapters in the annual budgetary legislation relating to the civil sector;
• advocating civil sectoral interests at government bodies dealing with social dialogue, and in different
reconciliation procedures and processes;
• initiatives to further develop activities of the state;
• practising all advocacy functions which are deemed necessary by the civil representation.
13. The government and the future civil representation in collaboration with civil society experts will
examine the social necessity of and legal requirement for the establishment of a civil public
body.The work of this public body could include:
• assistance in the registration of CSOs;
• giving opinion in judging public benefit status of CSOs;
• providing supervision of the above process;
• collecting, keeping a record of public benefit reports and reports on the use of 1% income tax
allocations;
• on demand co-operation in registration and annulment procedures, legal supervision, Audit
Office, tax authority and public administration procedures;
• publication of the Public Grant Journal;
• carrying out expert activity on questions of civil society;
• on demand carrying out legal information activity, legal justification, arbitration preceding legal
dispute;
• providing services (information, tenders, legal and financial consultancy, training, etc.) for CSOs.
14. In order to give greater direction to the social dialogue, and for as long as other structures are unable
to fulfil the task, the government will provide opportunities for the main actors of civil society to
undertake, on a voluntary basis, a dialogue with government representatives on issues of mutual concern.
It looks forward to hearing from CSOs that are willing to describe the processes underway in
society, to present any problems arising, and to co-operate in overcoming such problems.
Reflecting the subject areas raised by CSOs, the government undertakes to appoint government staff
in charge of holding discussions, to examine the problems in all detail, and to make such discussions
regular and open to the public.

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A SUMMARY OF THE ACT CXXVI OF 1996 ON THE USE OF A SPECIFIED PORTION OF PERSONAL INCOME TAX ACCORDING TO THE DESIGNATION OF THE TAXPAYER (AS WAS AMENDED BY THE ACT CXXIX OF 1997)* The Act CXVII of 1995 on Personal Income Tax grants private individuals the right to designate, in a
statement, the use of a specified portion of their tax paid for the taxable year. For the purpose of the Act
CXXVI of 1996, tax paid is the amount which is left after deductions have been taken from the amount
due on the consolidated tax base in the individual’s tax return or in the employer’s account, if made in
lieu of a tax return. It is required that the private individual has paid his tax prior to the deadline for submitting
tax returns and has not been allowed to defer payment or received a postponement of payment
beyond September 30th in the year of the designation statement.
1. Extent of the ”Specified Amount”
The 1996 version of the Act on the Use of a Specified Portion of Personal Income Tax According to the
Designation of the Taxpayer limited the possible designation to one percent of the tax paid.The change
in the system for church financing has initiated the 1997 amendment.According to the law in force, private
individuals may ”offer” one percent of their personal income tax to the civil sector and an additional
one percent to churches. Each of the two amounts must be at least HUF 100.
If an individual has designated the above-mentioned specified amount(s), and the transfer has already
occurred, the amount cannot be modified later on as a result of either a revision by tax authorities or a
self-revision by the individual. If one of these revisions finds that the tax amount due on the consolidated
tax base is lower than the amount on the tax return, the individual must pay the difference between
the specified amount and the actual amount which will be designated, only if this amount is at least HUF
1000 and has been transferred to the beneficiary.
2. Beneficiaries / Beneficiary Organisations
The Act recognizes two categories of potential beneficiaries. Certain organisations of the civil non-profit
sector belong to the first, while churches and advance (earmarked) budgetary purposes belong to the
second.The Act determines the requirements of the beneficiary status differently for the two categories.
2.1. Beneficiaries in the first category:
a.) Civil society organisations, with the exception of political parties and interest groups for employers
and employees, which were established on the basis of the Act II of 1989 on Freedom of Association and
foundations fulfiling the following requirements constitute one ”component” of this category.They must
be registered by the court at least three years prior to the first day of the year in which the designation

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* The summary hereby was published by the kind permission of the International Centre for Not-for-Profit Law,
CEE Office: Apáczai Csere Jánosi u. 17., Budapest 1052 Hungary,T:+36 1 318 6923, F: +36 1 266 1479.
statement was made and they must effectively pursue a public benefit activity as defined by the Act on
Public Benefit Organisations and set forth in their founding documents for at least one year before the
first day of the year in which the designation statement was made.
b.) Public foundations pursuing public benefit activities also belong to this category.
These organisations have additional criteria with which they must comply.These provisions require that
these organisations:
• have their headquarters in Hungary;
• operate for the interests of the domestic population, or of ethnic Hungarians living outside the
country;
• declare that they do not pursue direct political activity, their organisations are independent of political
parties and do not provide them with financial support. In addition, they must amend their
founding documents accordingly. (Direct political activity includes political party activity and the
nomination of candidates for the parliamentary elections and the elections at county, or
Metropolitan level.);
• declare that they do not have public debts due and registered by the Customs and Excise Guard, the
social security administration, or state tax authorities;
• obtain a certificate, issued within the previous 30 days, from the local government tax authorities
confirming that they have no registered public debts due;
• declare that they effectively pursue a public benefit activity as defined by the Act on Public Benefit
Organisations, in accordance with their founding documents, uninterruptedly for a period of not
less than one year prior to the year of the designation statements, in compliance with all legal provisions
relating thereto.
If an organisation has registered public debts due, it still can be beneficiary, provided that it complies with
all the other requirements. In addition, it must inform the tax authorities to use the amounts transferred
by the designation statements to pay its public debts and provide the names of the organisations to whom
the debts is owed and the order of paying the debts.
c.) Certain national public collections and other cultural institutions (e.g. the Hungarian National
Museum, the Hungarian State Opera, the Hungarian National Gallery, the National Theatre, the National
Archives), the Hungarian Academy of Sciences, the Central Fund for Technological Development, the
National Scientific Research Fund, the Child and Youth Program, the Higher Education Development
Program, the separate state financial fund, theaters, public collections, institutions of public education
which had received an individual subsidy from a local government or from the central budget in any of
the three years prior to the first day of the year in which the designation statement takes place, the building
program of the new National Theatre also belong to the first category.
All the organisations in this category must publish a record detailing the way in which the transferred
funds were spent through October 31st of the year following the year of the transfer.
2.2. Beneficiaries in the second category:
a.) Any church, religious denomination or religious community established under the Act IV of 1990 on
Freedom of Conscience, Religion and Churches (hereinafter: churches), belongs to the second category
if they were registered by the court before the first day of the year in which the designation statement
was. However, an organisational unit or institution of a church cannot be a beneficiary.

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b.) Any advanced or earmarked purpose defined by Parliament in its chapter in the Act on (State) Budget
relating to the year of the designation statement also belongs to this category.
The Office for Taxation and Financial Control provides the beneficiaries in this second category with
“so-called” technical numbers. For an advanced budgetary purpose, this is an ex officio obligation of the
president of the Office. Churches may obtain technical numbers based on their application and the certification
of their registration.
3. Invalid Designations
The following instances are examples of an invalid designation statement enumerated by the Act:
a.) The private individual has designated the one percent of his tax paid to two or more beneficiaries, or
the designated one percent is below HUF 100.
b.) Both of the two beneficiaries belong either to the first, or to the second category of organisations.
c.) The designation statement contains incorrect or illegible tax (or technical) number, or no number at
all, except, if the church or earmarked budgetary purpose can be identified without it.
d.) The designation, the envelope, or their filing/forwarding does not comply with the prescribed rules.
e.) The beneficiary of the first category does not fulfil the requirements as instructed by the Office, or
does not fulfil its obligation relating to statements and information.
4. Designation Procedure
An individual taxpayer may make designation statement(s) on a form, which can be obtained at the
Office for Taxation and Financial Control or on a sheet of paper of the same size and the appropriate
information on it.The tax number, or in case of organisations belonging to the second category of beneficiaries,
the technical number of the beneficiary must be indicated on the form in every case.The indication
of the name of the beneficiary is not mandatory.Taxpayers must put the completed designation
form(s) into a postal standard size envelope, seal it and write their name, address and tax identification
code on the envelope.They must place the envelope containing the designation statement(s) in their tax
return package. In the event that the personal income tax is reported by the employer in stead of an individual
tax return, the individual must give the designation statement in the envelope to the employer no
later than March 25th of the year following the taxable year. In the latter case, individuals must sign the
sealed side of the envelope.The employer gives a receipt about the delivery of the envelope.The employer
is not privy to the content of the statement. He must send the intact envelope, together with other
information, to the competent tax authority in accordance with the rules governing the employer’s tax
account in lieu of the individual tax return.
5. Obligations of Tax Authorities
5.1. Data Protection
The information on the envelope and in the designation statement is considered confidential tax information
and consequently it is subject to the rules of data protection.Tax authorities may provide private

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individuals only with information about their own data and designation statements, while beneficiaries
may receive information only about the amounts transferred to them.Tax authorities mark the envelope
and the designation statement contained therein with an identical identification code.The processing and
storing of these documents take place separately, in such a way, that no person has simultaneous access to
both documents.Tax authorities only grant permission to authorized persons, acting in the course of legal
proceedings concerning the fulfilment of the designation statements to link these two documents together.
The tax authorities must store these documents for five years after the designation statement was filed.
If legal proceedings, involving the designation statement, are commenced the documents must be maintained
until the proceedings are concluded by a final judgement. After this date, the envelopes and the
designation statements must be destroyed.
5.2.Transfer
Through September 1st of every year, tax authorities instruct the beneficiary civil society organisations,
foundations and public foundations to certify that they have fulfiled the prescribed requirements. Namely,
that they have their headquarters in Hungary, they operate in the interests of the domestic population or
ethnic Hungarians living abroad, they are not engaged in prohibited political activity, they effectively pursue
a public benefit activity and they don’t have registered and due public debts, or if they do, the specification
of the order of paying these debts.The organisations have 30 days to fulfil their obligations.This
deadline is strict, and if neglected, results in the loss of the designated funds. In case the beneficiaries in
question certify the fulfilment of requirements unsuccessfully, or fail to fulfil their obligations in this
regard, the tax authorities pass a resolution. This resolution can only be altered by the court, which has
registered the beneficiary organisation, if the requirements are actually met, on the basis of the application
of the organisation, within 15 days through a non-contentious procedure.
The Office for Taxation and Financial Control transfers the funds to the beneficiaries of the first category
within 30 days after filing their required statements and certifications, or through October 31st of the
year of the designation statement at the latest. If the organisation has public debts, the Office deducts these
debts from the funds before transfers them to the beneficiaries.
The Office transfers the funds to the beneficiaries of the second category through January 10th of the
subsequent year following the designation statement at latest.The reason for the extended time of transfer
(in comparison with the first category) is that in 1998 churches will also receive support under the
Act on State Budget and the Act on the Financial Conditions of Religious and Public Purpose Activities
of Churches in Hungary.
5.3. Information
Every year, the President of the Office informs the Office of the Prime Minister and the Ministry of
Financial Affairs about the funds transferred to churches or advanced budgetary purposes by designation
statements through August 31st. In addition, he reports on the number of designation statements that
relate to churches.The Minister of Financial Affairs publishes a report on the second category, detailing
the number of designation statements and the amount due to each of the beneficiaries as of September
15th of that year.
5.4. Control
The funds transferred to the beneficiaries in the first category are considered budgetary support of such
a nature, that tax authorities are entitled to control the appropriate use of such funds for public purpose
activities. If the funds are not used for public purposes, tax authorities can adopt a resolution, which can
require the funds to be repaid.

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DEMONSTRATION OF THE USE OF A SPECIFIED PORTION (1%) OF PERSONAL INCOME TAX ACCORDING TO THE DESIGNATION OF THE TAXPAYER FOR CIVIL ORGANISATIONS BASED ON THE ACT CXXVI OF 1996. — 15 — — 16 — SUMMARY OF THE ACT L OF 23 JUNE 2003 ON THE ESTABLISHMENT OF THE NATIONAL CIVIL FUND 1. Background
The second chapter “Autonomous civil society regarded as a partner by the State” of the Hungarian
Government’s programme states aims and tasks. In relation to this it sees to encourage the establishment
of civil decision-making organisations independent from the Government, as well to participate in the
creation of financial resources available for civil organisations, and to prefer to give state support on a normative
basis.
As the first step between civil organisations and government the Prime Minister’s Office – together with
the Parliamentary Committee for Civil Organisations – presented its proposals in line with these principles
on the Civil Forum held on 11 July 2002, and gave account of the preparations of the Civil Strategy
of the Government.
In order to fulfil the objectives stated in the Government’s Programme the Inter-ministerial Co-ordination
Committee for Civil Affairs adopted the first version of the Civil Strategy of the Government in
autumn 2002 and launched it for extensive public discussion. In the course of the discussions the civil
organisations articulated the need for a more transparent support system that is tailored to the needs and
activities of their non-profit nature.
The Prime Minister announced on a conference organised jointly by the Parliamentary Committee for Civil
Organisations and the Prime Minister’s Office that the Government considers the support of civil organisations
as a priority, so the National Civil Fund should support the activities of the civil sector from 2003.
On the whole such a situation evolved where the needs of the civil sector and the intentions of the government
coincide and create favourable conditions to establish a new system of support. Civil Society
may receive a significant support from the resources of the Fund to co-operate to realise the most important
social and governmental tasks successfully. By developing the proper system of support a more effective
and successful co-operation can be expected from civil organisations for example on the areas of
social and medical attendance, rehabilitation, disability affairs, ageing, education, children and youth protection,
environmental issues, nature protection, culture and traditions, legal protection or readiness to the
accession to the European Union.
2. Purpose of the Civil Fund
The purpose for the creation of the Civil Fund is to guarantee the support for operational costs of registered
civil organisations in Hungary from the centralised state budget by law.The main purpose of the
Fund is to contribute to the operational costs of civil organisations, so the law assigns at least 60 percent
of the resources as a guarantee to this purpose. Other supportable objectives from the Fund are not that
restricted in order to enable the Council (that is the governing body of the Fund) and the Colleges (that
are the operative bodies) to draw their decisions based on the real necessities and missing needs of civil

— 17 —
organisations. For these purposes only organisations bearing the status of being public beneficiary or
prominently public beneficiary organisations can be funded.
3. Financial resources of the Civil Fund
The 126th law of 1996 regulates the usage of a determined portion of the tax payer’s income according
to his/her decision; this is the so-called 1% law that allows the tax payers to determine twice 1% of their
tax. As so the tax payer can offer 1% of his/her tax towards a church or a priority activity of the government,
and another 1% to a registered civil organisation. Facts show that more than half of the tax payers
does not take this opportunity, in 2002 out of the 11 billion HUF that could have been given to civil
organisations, only 5,2 billion HUF was offered to beneficiaries. It was an old request of civil society to
have the entire amount available from the 1% law to be transferred to them.The Parliament considered
their request and decided on the creation of a resource for the Civil Fund. According to the law of the
Civil Fund the government guarantees the same amount for the Civil Fund that it was collected by civil
organisations through the 1% law. As an element of guarantee the law states that as long as the offered
sum does not reach 0.5 percent of the full amount paid as tax in the previous year, the government makes
up the difference. Further resources of the Civil Fund can be transactions and donations from private parties,
such as individuals, legal or non-legal entities.These are taken as undertakings of obligations of public
interest by the law that enables to apply that positive legal environment that the civil rights and financial
laws allow.The law also enables to have other resources - either support from other central budget
lines or other income declared in law - procured to the Fund in the future.
4. Beneficiaries of the Civil Fund
The law controls the circle of those civil organisations that are entitled to receive support from the Civil
Fund:
a.) those civil organisations (except parties, trade unions and federations of the employers and employees’
parts, insurance associations, as well churches) that were registered by the court a year before
the first day that the call for proposals or other common principles were laid down, and that practise
their activities according to their charter;
b.) those foundations (except the public foundations) that were registered by the court a year before
the first day that the call for proposals or other common principles were laid down, and that practise
their activities according to their deeds of foundation.
5. Organisational structure of the Civil Fund
The two main bodies of the Civil Fund are the Council of the Fund and the Colleges organised on
regional and/or professional basis.
The Council of the Fund is the supreme body that practices as a governing body, just like the Board
in case of civil organisations.
According to the law “the Council decides on the fundamental rules necessary for the operation of the

— 18 —
Fund, on the principles of support derived from the Fund, on he maximum sum available from the Fund
for one organisation for a year, on the division of resources among the Colleges, as well on other charges
delegated to it by the law”:
The Colleges are the operative, decision-making entities of the Fund, based on regional and professional
criteria of the civil sector. According to the law “the Colleges decide on the support of the beneficiaries,
on the call for proposals as well about their evaluation, based on the previous decision of the
Council on the principles of support, methods, amounts”.
The mechanism of the decision-making system is the following: the Council practises its rights to decide
only on strategic and structural questions, whereas the Colleges decide on direction, area,ways of the use
of available resources, as well on the final beneficiaries of grants and supports according to professional
criteria.
The functioning of both bodies is based on the active participation of the delegates from civil organisations,
as they are the members of the Colleges – with only one delegate coming from the government-,
and more than 70 per cent of the delegates in the Council are representatives of civil organisations.
The minister through the civil delegation system appoints the representatives in the Council and
Colleges. The law states in detail the regulations concerning the election process of the bodies. The
regional and nation-wide civil organisations participate through electors at the election system.The electors
are those people that propose the names for the members of the Council and the Colleges in the
name of their civil organisation.Those recommended for the posts are chosen on a short list to become
delegates of civil society, and so the representatives of the Council and Colleges elected through the civil
delegation system. In the frame of the civil delegation system only organisations whose activities effect at
least one county are entitled to delegate electors. In this case the civil organisation is looked on as the
organisation with regional scope, and as such is entitled to delegate an elector into that regional election
where the county lies in. In case the civil organisation functions at least in seven counties, it is considered
a civil organisation of nation-wide scope.This distinction is important from that point of view that
the regional and nation-wide organisations can elect at different electoral elections.The nation-wide civil
organisations are divided into five categories by the law, having professional criteria in mind. These are
the following:
a) health protection, illness prevention, curing, health rehabilitation activities, social activities, family
help, care for the elderly, rehabilitation through employment, help of disadvantageous groups;
b) cultural activities, education and training, capacity building, knowledge transfer, activities concerning
the national and ethnic minorities in Hungary, as well as the Hungarians living outside the borders
of Hungary;
c) nature and environment protection, animal protection, heritage protection;
d) interest articulation of children and youth, children and youth protection, sport, recreation time;
e) public order and transport safety protection, voluntary fire service, rescue, disaster recovery, human
and civil rights, consumer protection, promotion of the Euro-Atlantic integration, services provided
for non-profit organisations, other civil organisations working on non-profit activities.
The civil delegates of the Council and the Colleges are chosen on seven regional and five nation-wide
electoral elections regulated in details by the law and the executive order to the law.
The condition to have functioning Council and Colleges is to conduct successful election procedures, as
these bodies can only start operating when the Council is set-up with all members stated in the law.

— 19 —
A decisive actor of the activities of the Civil Fund is the Minister responsible for the National Civil
Fund, according to the operative law that is the Minister without portfolio responsible for Equal
Opportunities. The minister practices the great majority of her rights in co-operation with the Parliament’s
competent Committee (the Parliamentary Committee for Civil Organisation at present), the president and
the members of the Council, as well the minister also seeks the advice of noted people on questions regarding
the Fund. The Minister is helped to execute her duties and responsibilities by the Ministerial
Secretariat for the National Civil Fund, which prepares the decisions concerning these duties.
The Fund starts functioning with the proportional part of its 7 billion HUF budget in January 2004.
According to estimates it will manage more than ten thousand applications and around ten to twelve
thousand contracts of beneficiaries annually.To manage all administrative and organisational tasks it is
necessary to charge such a technical assistant organisation that can handle all that enormous workload.
The Technical Assistance Organisation of the Civil Fund is advertised through public procurement
procedure as prescribed in the executive order. One of the reasons of this solution is the “civil”
nature of the Fund, the other is the calculation and considerations done prior to the operation that show
the cost-effectiveness and more professional way of managing the Fund if a technical assistance organisation
is contracted.
6. Operation of the Fund
The Fund distributes money through call for applications based on decisions agreed on common principles.
The form of support can be either re-fundable or partially or entirely non-refundable. Colleges
always consider the concrete objectives and circumstance in each case.
The decisions, the uses of financial resources of the Fund are always public. For this reason the law directs
the establishment of the web page of the Civil Fund.The decisions of the Council and the Colleges must
be posted on this web page within 30 days of conclusion. On the web page access to the most important
legal documents regarding the Civil Fund and the operation of the Technical Assistance Organisation,
as well the members of the Council and the Colleges must be made public.The presidents of the Council
and the Colleges see to the publication of the decisions.To provide broader access the call for applications
must be advertised at least in two national newspapers, as well in the civil professional press.
By the creation of the law and the executive order an important step has been made towards the provision
of state resources for civil organisations. However, by the framing of the legal environment the government’s
assignments have not ended yet. Until the launching of the Civil Fund planned in January 2004
the Council and the Colleges must be established, the web page to provide publicity must be launched,
as well the Technical Assistant Organisation must be chosen through public procurement procedure.The
fulfilment of all these responsibilities cannot be imagined without the co-operation and partnership of
the civil organisations. As the Civil Fund can only function successfully with their active participation.

— 20 —
THE FIRST DECISIONS OF THE COUNCIL OF THE NATIONAL CIVIL FUND The elections of the civil delegation system took place during the month of January 2004. Due to prior
registration and procedures stated in the Government Decree No. 160 of 2003 and the regulations concerning
the formation of the governing bodies of the Civil Fund, the elections happened smoothly.
The first meeting of the Council occurred on 30-31 January 2004.The Council suggested that the following
Colleges should be established and their members elected during the second electoral elections
of the civil delegation system:
1) National Civil Fund (NCA) Regional College of West Transdanubia (9 civil delegate are nominated
by the electoral election of West Transdanubia +1 delegate nominated by the Minister)
2) NCA Regional College of Central Transdanubia (9 civil delegate are nominated by the electoral
election of Central Transdanubia +1 delegate nominated by the Minister)
3) NCA Regional College of South Transdanubia (9 civil delegate are nominated by the electoral election
of South Transdanubia +1 delegate nominated by the Minister)
4) NCA Regional College of Central Hungary (10 civil delegate are nominated by the electoral election
of Central Hungary +1 delegate nominated by the Minister)
5) NCA Regional College of North Hungary (9 civil delegate are nominated by the electoral election
of North Hungary +1 delegate nominated by the Minister)
6) NCA Regional College of North Great Plain (9 civil delegate are nominated by the electoral election
of North Great Plain +1 delegate nominated by the Minister)
7) NCA Regional College of South Great Plain (9 civil delegate are nominated by the electoral election
of South Great Plain +1 delegate nominated by the Minister)
8) NCA College for Nation-wide Civil Organisations (2-2 civil delegates are nominated by each electoral
meeting of the nation-wide organisations, altogether 10 delegates; +1 delegate nominated by
the Minister)
9) NCA College for Civil Service, Development and Information Provision (9 civil delegates +1 delegate
nominated by the Minister)
10) NCA College for Civil self-representation (advocacy), professional and territorial co-operation (10
civil delegates +1 delegate nominated by the Minister)
11) NCA College for International Civil Affairs and European Integration (10 civil delegates +1 delegate
nominated by the Minister)
The President of the Council is chosen from the its members.
The second series of electoral elections that is to elect the College members took place at the end of
February, and the first meetings of the Colleges are held in early March.The first call for application are
scheduled to appear the earliest in May 2004.

— 21 —
ESTABLISHMENT OF CIVIL ORGANISATIONS IN HUNGARY
The Right of Association of 1989 and the Civil Code of 1959 arrange the establishment of so-called civil
society organisations with legal entity, non-governmental organisations and foundations respectively, in
Hungary.*
ACT II OF 1989 ON THE RIGHT OF ASSOCIATION
For the purpose of accomplishing the freedom of association, and in keeping with the provisions of the
Constitution and of the International Covenant on Civil and Political Rights, Parliament enacts the following
Act:
Chapter I
General Provisions
Section 1
The right of association is a fundamental freedom to which everyone is entitled and which the Republic
of Hungary recognises, while ensuring its free exercise. Under the right of association everyone shall be
entitled to form organisations or communities with others or participate in the activities thereof.
Section 2
(1) Under the right of association, private individuals and legal persons, as well as the organisations of
such without legal personality, may form and operate – in acc