An Approving Commentary on the Judgement of the Supreme Administrative Court of 16 January 2025 (Case File II FSK 501/22)

The subject of this paper is an analysis of the relevance of tax law principles to the proper application of the income tax exemption of income of a church legal entity for religiously useful purposes. The Supreme Administrative Court upheld interpretation of the tax law that only entities directly involved in religious activities can benefit from this exemption. The article also addresses the problem of limiting aggressive tax optimisation involving church legal entities. The article points out the need to change the system of tax reliefs and preferences provided for religious associations. The ruling aims to reduce aggressive tax optimisation practices and ensure that tax exemptions are used for legitimate religious purposes, rather than for tax avoidance. This decision clarifies that only entities directly controlled by church legal entities are eligible for the exemption, reinforcing the importance of adhering to the true spirit of the law and preventing misuse. Finally, the ruling highlights the need for a deeper reflection on the systemic nature of tax exemptions for religious associations, suggesting that new tax solutions could be developed through bilateral agreements between the State and churches. This would align tax exemptions with modern tax principles.