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Act CLVI of 1997
on Non-Profit Organizations
In the interest of preserving the local traditio ns of non-governmental and non-profit oriented
organizations, to simplify control regarding their pub lic welfare activities and financial management, to
promote their public welfare activities and to govern better their relations with the state budget, Parliament
hereby passes the following Act:
Chapter I
GENERAL PROVISIONS
Purpose of this Act
Section 1.
The purpose of this Act is to define the forms of non-profit organizations, the conditions for the
acquisition and termination of non-profit status, the or der of operation and financial management of non-
profit organizations, the regulations on records and reports, and the provisions on the legal supervision of
operations and asset management.
Forms of Non-Profit Organizations
Section 2.
(1) The following Hungarian-registered entities may qualify as non-profit organizations:
a) non-governmental organizations, not including insuranc e associations, political parties and employers’
and employees’ advocate associations,
b) foundations,
c) public foundations,
d)
e) public corporations, if so permitted by the law on the establishment of such.
f) national associations of specific sports.
g) nonprofit business association.
h) the Hungarian Board of Accreditation for Higher Education, the Higher Education and Research
Council and the Hungaria n Rectors’ Conference.
i) European groupings of territorial cooperation.
j) institutions of higher learning not financed from the central budget,
k) social cooperatives engaged in activities for the benefit of the public.
l) water associations.
(2) The organizations described in Paragraphs a)-e) of Subsection (1) may also qualify as non-profit
organizations if simultaneously filing for non-profit status in the application for registration as required by
the applicable legal regulations.
Chapter II

CONDITIONS FOR RECEIVING NON-PROFIT STATUS AND THE
BENEFITS GRANTED TO N ON-PROFIT ORGANIZATIONS

Conditions for Receiving Non-Profit Status
Section 3.
An organization eligible to be qualified as a non -profit organization (hereinafter referred to as
“organization”) shall be granted non-profit status upon being registered as a non-profit or priority non-profit
organization (hereinafter referred to as “registration under non-profit status”).
Section 4.
(1) For registration under non-profit status the orga nization’s instrument of constitution shall include:
a) the list of public welfare activities, as specified in this Act, conducted by the organization and, if the
organization has members, that it does not preclude par ties other than its members from benefiting from its
public welfare services;
b) a clause stating that the organization conducts entr epreneurial activities solely in the interest of and
without jeopardizing its public welfare objectives;
c) a clause stating that the organization does not distribute its business profits, but rather utilizes such
profits for the activities defined in its instrument of constitution;
d) a clause stating that the organization is not involved in direct political activities, furthermore, that it is
independent from and does not provide financial aid to political parties.
(2) The instrument of constitution of a non-profit organization must also satisfy other requirements set
forth in this Act (Section 7) in addition to those prescr ibed in Subsection (1).
Section 5.
For registration under priority non-profit status, an organization’s instrument of constitution shall include
the following, in addition to the provisions of Section 4:
a) a clause stating that the organiza tion performs public duties which, by virtue of law or in accordance
with the provisions of other legal regulations based on the authorization granted by law, are to be provided
by a state agency or by a local government, and furthermore
b) a statement that the organization publishes the principle data and information on its activities set forth
in its instrument of constitution in a media publication with local or national circulation.
Benefits Granted to Non-Profit Organizations, Supporters of Non-Profit
Organizations and to Users of the Services of Non-Profit Organizations

Section 6.
(1) Pursuant to Act LXXXI of 1996 on Corporate Tax and Dividend Tax, Act CXVII of 1995 on
Personal Income Tax, Act XCIII of 1990 of Duties, Act C of 1990 on Local Taxes and Act C of 1995 on
Customs Law, Customs Proceedings and Customs Admi nistration, as well as other applicable legal
regulations, the following entitlements, in the extent and under the conditions prescribed therein, shall be
granted
a) to a non-profit organization:
1. corporate tax exemption on the activities set forth in its instrument of constitution,
2. corporate tax relief on its entrepreneurial activities,
3. allowances on local taxes,

4. discount rates on duties,
5. customs allowances,
6. other benefits described in legal regulations,
b) personal tax exemption for the users of services provided by a non-profit organization as a designated
provision, in respect of the service received,
c) corporate tax relief or personal tax relief to the supporters of non-profit organizations in respect of
contributions provided for the objective(s), as set fort h in its instrument of constitution, of a non-profit
organization (hereinafter referred to as “donation”),
d) special benefits, in respect of recurrent dona tions, to the supporters described in Paragraph c), as of
the second year of providing such donations.
(2)
(3) A non-profit organization which has public debts as described in the Act on the Rules of Taxation
shall not be eligible for the aforementioned entitlements.
Chapter III
OPERATIONAL AND MANAGEMENT SYSTEM OF NON-PROFIT ORGANIZATIONS

Regulations Pertaining to Pub lic Welfare Oriented Functions
Section 7.
(1) The meetings of the supreme body, or if not the same, the meetings of the administrative and
representative organ (hereinafter jointly referred to as “executive body”) shall be open to the public.
(2) If the supreme body of the non-profit organization is made up of several members (persons), the
instrument of constitution shall lay down the rules
a) on the intervals of meetings of the executive body, to be held at least once a year, on the procedure of
calling such meetings and notificati on of the agenda, on public access and quorum of the meetings and the
procedure of adopting resolutions,
b) on cases of conflict of interest of the non-profit organization’s executive officers,
c) on the establishment, jurisdiction and operation of a separate body, other than the executive body, if
such is required to be established or appointed to su pervise the operations and financial affairs of the non-
profit organization (hereinafter referred to as “supervisory body”), furthermore
d) on the manner of approval of the non-profit organization’s annual report.
(3) The instrument of constitution or, by virtue of au thorization granted therein, the internal regulations
of a non-profit organization shall prescribe
a) to have records maintained to identify the contents, date and scope of decisions passed by the
executive body, and the numerical ratio of those (including names where possible) in support of or against
such decisions,
b) the manner of announcing or publishing the decisions of the executive body to those concerned,
c) the order of review of documents related to the operation of the non-profit organization, and
d) the operation of the non-profit organization, the method of using the services and the publication of its
annual report.
(4) Where the supreme body consists of a single member (person), Subsection (1) of Section 168 of the
Companies Act shall apply with the exception that such member (person) shall call a meeting prior to
adopting a decision so as to hear the opinion of the supervisory body and that of the administrative and
representative body, if other than the supreme body, or shall obtain their opinion in writing. Said written
opinions and the records of the aforementioned meetings shall be open to the public.

(5) Where the supreme body consists of a single member (person), the instrument of constitution shall
govern
a) the manner of exercising the right of opinion specified in Subsection (4),
b) the issues referred to in Paragraph a) of Subsection (2), apart from the question of quorum, if the
aforementioned opinion is conveyed in a meeting, and
c) the issues referred to in Paragraphs b)-d) of Subsection (2) and in Subsection (3).
Section 8.
(1) A person may not take part in an executive body resolution, if, by virtue of such resolution, he or a
close relative [Paragraph b) of Section 685 of the Civil Code] or spouse (hereinafter jointly referred to as
“relative”) of his
a) is released from obligations or liabilities, or
b) receives any other benefit, or is otherwise interest ed in the legal transaction. A non-pecuniary service
provided by a non-profit organization as a designated provision which may be used by anyone without
restriction, or a designated provision provided, by virtue of membership, by a non-governmental
organization to its member in accordance with its instrument of constitution shall not be construed as a
benefit.
(2) A person
a) who is the chairperson or me mber of the executive body,
b) who is in the employment of the non-profit organization to perform work other than his official duties
or is in any other work-related legal relationship, unless otherwise provided for by law,
c) who benefits from a designated provision of the non-profit organization, not including a non-
pecuniary service provided to and used by anyone without restriction and a designated provision provided,
by virtue of membership, by a non-governmental organization to its member in accordance with its
instrument of constitution, furthermore
d) who is a relative of any of the persons described in Paragraphs a)-c)
may not be the chairperson or member, or auditor of the supervisory body.
Section 9.
(1) A person who has been in a management position, for at least one year within two years prior to the
dissolution of a non-profit organization which has any public debt according to the Act on the Rules of
Taxation, shall not be allowed to take office in a management position of another non-profit organization
for two years following the aforementioned dissolution.
(2) A senior officer, or person nominated as such, sh all be required to notify all non-profit organizations
in advance if he is employed in the same position at another non-profit organization at the same time.
Section 9/A.
Section 10.
(1) If the annual revenues of a non-profit organization exceed five million HUF, a supervisory body shall
be created, separately from the execu tive body, even if such obligation does not exist by virtue of some
other legal regulation.
(2) The supervisory body shall establish its own procedural order.
Section 11.
(1) The supervisory body shall oversee the operations and financial management of the non-profit
organization. In this function, it may request reports from the senior officers and information from the

employees of the organization, furthermore it may review and audit the non-profit organization’s books and
records. (2) Members of the supervisory body may participate with the right of consultation in the meetings of the
non-profit organization’s executive body, or shall do so if expressly stipulated by legal regulation or in the
instrument of constitution.
(3) The supervisory body shall notify, and request a meeting of the executive body with the power to act
in the event of finding
a) any legal violation in the course of operation of the organization or any other event (omission)
otherwise causing severe injury to the interests of th e organization, the termination or abatement of which
requires the decision of the execu tive body with the power to act;
b) any fact substantiating some degree of liability of a senior officer.
(4) The executive body with the power to act shall be convened at the initiative of the supervisory body,
within thirty days of the filing of such. In the event of failure to convene such meeting within the
aforementioned deadline, conv ening such meeting shall fall within the jurisdiction of the supervisory body.
(5) If the body with the power to act fails to implem ent the measures necessary to restore legal operation,
the supervisory body shall be required to notify the agency exercising legal supervision without delay.
Rules for Soliciting Charitable Donations
Section 12.
(1) Solicitation of charitable donations in the name of or on behalf of a non-profit organization may not
lead to any harassment of or nuisance to sponsors or other persons, nor any violation of personal rights and
human dignity.
(2) Solicitation of charitable donations in the name of or on behalf of a non-profit organization may only
be carried out in possession of a written authorization by the non-profit organization.
Section 13.
Donations to a non-profit organization shall be registered at book value or, in the absence of such, at
customary market value.
General Provisions on Financial Management
Section 14.
(1) Non-profit organizations shall not distribute bu siness profits, as such shall be applied for the
activities defined in the instrument of constitution.
(2) With the exception of normative subsidies, a n on-profit organization may receive subsidies from the
subsystems of the state budget only on the basis of a written agreement. Such agreement shall stipulate the
conditions and methods of accounting for such subsidies.
(3) The availability of the subsidies described in Subsection (2), and the extent and conditions of such,
shall be made public through the media. The designated provisions provided by a non-profit organization
shall be public information and accessible by all parties.
(4) Non-profit organizations may not extend any designated provisions to management personnel and to
sponsors, or to the relatives of such persons, with th e exception of services which may be used by anyone
without restriction and designated provisions provided, by virtue of membership, by non-governmental
organizations.
Section 15.

(1) A non-profit organization shall be entitled to award any of its designated provisions by way of tender
as per the rules set forth in its instrument of constitution. In this case the tender may not prescribe any
conditions from which it is apparent, considering all ap plicable circumstances of the case, that the tender
has already been decided (fictitious tender).
(2) No designated provision may be awarded on the basis of fictitious tender.
Section 16.
(1) Non-profit organizations may not issue bills of exchange or other debt securities.
(2) A non-profit organization, not including non-profit corporations,
a) may not borrow business loans, for improvement purposes, in an extent that may jeopardize its public
welfare activities;
b) may not pledge any subsidy received from the subsyste ms of the state budget as collateral for a loan,
and may not apply such as a loan payment.
Section 17.
Non-profit organizations engaged in investment activ ities shall draw up their investment regulations,
which shall be approved by their supreme body.
Books and Records
Section 18.
(1) Non-profit organizations shall register their revenues and expenses derived from non-profit and
business activities separately.
(2) The following shall be deemed revenues of a non-profit organization:
a) contributions and donations receive d from its founder, from the subsystems of the state budget or
from any other sponsor for its public welfare objectives or to cover operating expenses;
b) revenues generated by its non-profit activities or revenues directly associated with such;
c) revenues generated by other designated activities or revenues directly associated with such;
d) revenues from investment of the organization’s assets;
e) membership fees;
f) other revenues defined by law;
g) revenues from entrepreneurial activities.
(3) The following shall be deemed expenditures of a non-profit organization:
a) direct costs incurred in connection with public welfare activities (expenses, expenditures);
b) direct costs incurred in connection with other designated activities (expenses, expenditures);
c) direct costs incurred in connection with business activities (expenses, expenditures);
d) indirect costs incurred in connection with pub lic welfare activities and other business activities
(expenses, expenditures), which shall be divi ded in proportion to the respective revenues.
(4) As for other aspects, the relevant provisions on accounting shall be observed regarding the books and
records of non-profit organizations.
Reporting Regulations
Section 19.
(1) Non-profit organizations shall prepare a report on public welfare activities simultaneously upon
approval of the annual report.

(2) Approval of the report on public welfare activities shall fall within the exclusive jurisdiction of the
supreme body.
(3) Reports on public welfare activities shall contain the following:
a) the accounting report;
b) the utilization of budgetary subsidies;
c) a statement on the utilization of property assets;
d) a statement on designated provisions;
e) the amounts of subsidies received from budgetary or gans, off-budget state funds, local governments
or associations of community local governments, or from agencies of such;
f) the value or amount of any remuneration extended to the senior officers of the non-profit organization;
g) a brief description of th e public welfare activities.
(4) Reports on public welfare activities by non-profit organizations shall be available for review by the
public, and anyone may make copies of such at his own expense.
(5) Nonprofit organizations shall publish their repo rt on public welfare activities as referred to in
Subsection (2) on their official website by 30 June following the year to which it pertains, or in some other
forum that is accessible by the general public.
(6) The provision set forth in Paragraph a) of Subsection (3) shall not apply to the application of
accounting regulations pertaini ng to the obligation of filing, depositing and publication of annual reports.
Section 20.
Upon termination of its non-profit status, a non-pr ofit organization shall be liable to settle all its
outstanding public debts and to perform its other contractual obligations for public services for the
applicable period of time.
Chapter IV
SUPERVISION AND REGISTR ATION OF NON-PROFIT
ORGANIZATIONS AND COURT PROCEEDINGS PERTAINING TO
NON-PROFIT ORGANIZATIONS
Supervision of Non-Profit Organizations

Section 21.
Public benefit organizations shall be supervised by the state tax authority for tax purposes, by the State
Audit Office for auditing the appropriation of budgetary subsidies, by the internal control body described in
specific other legislation for monito ring the appropriation of financial aid received from the central
government or from local authorities, or from interna tional sources, and, in accordance with the applicable
provisions, by the public prosecutor’s office – with regard to public benefit operations – for judicial
purposes.
Regulations Pertaining to Procee dings for the Registration, Re-
categorization and Cancellation from the Register of Non-Profit
Organizations

Section 22.

(1) Applications for registration under nonprofit status, for reassignment between nonprofit categories or
for cancellation from the register shall be submitted to the court competent for registration, or if the
organization in question is to be registered by a body other than the court, submitted to this body
(hereinafter referred to collectively as “court”).
(2) Applicants shall indicate the requested non-profit category in the application for registration in the
register of non-profit organizations. Only one non-profit category may be indicated in the application.
(3) The court shall decide on the registration, re-categorization and cancellation of a non-profit
organization in non-contentious proceedings, with priority, and shall send its resolution to the public
prosecutor’s office as well.
(4) A non-profit organization shall file a petition for ca ncellation of its non-profit status, or reassignment
to a lower non-profit category, within 60 days if it fails to satisfy the conditions set forth in Sections 4-5 of
this Act.
Section 23.
The public prosecutor’s office may file to have the non-profit status of a non-profit organization
canceled, or for reassignment to a lower non-profit category, with the court competent for registration if the
operation and asset management of such non-profit organization violates the provisions set forth in this
Act, in its instrument of constitution or in the internal regulations drawn up on the basis of such, and if the
organization in question fails to remedy the situation in spite of notification by public prosecutor’s office.
Court Registration of Non-Profit Organizations
Section 24.
(1) Upon registration in the register of non-profit organizations, the dates of acquisition, alteration or
cancellation of non-profit status shall be added to the data and information of the organization on record.
(2) The information in the court register on non-profit organizations, as described in Subsection (1), shall
be available to the public.
Section 25.
Data managed on the basis of this Act may be used for statistical purposes and may be disclosed for
statistical use in such a manner which precludes identification of the person concerned.
Chapter V
CLOSING PROVISIONS
Interpretative provisions
Section 26.
For the purposes of this Act
a) “designated provision ” means any pecuniary and non-pecuniary service provided within the
framework of the non-profit or ganization’s designated activity;
b) “designated activity ” means all activities directly associated with the achievement of the objective set
forth in the instrument of constitution;
c) “public welfare activities” means the following designated activities as set forth in the organization’s
instrument of constitution for the benefit of society and for the common interests of individuals:
1. health preservation, disease prevention, therapeutic and medical rehabilitation activities,

2. social activities, family counseling, care for the elderly,
3. scientific activities, research,
4. school instruction and education, personal ability development, dissemination of knowledge,
5. cultural activities,
6. preservation of cultural heritage,
7. preservation of historical monuments,
8. nature preservation, animal protection,
9. environmental protection,
10. children and juvenile protection, children and juvenile advocate services,
11. promotion of equal opportunity within society for underprivileged groups,
12. protection of human and civil rights,
13. activities in connection with ethnic minorities living in Hungary and with Hungarian nationals living
outside of Hungary,
14. sports, not including sports activities involving professionals and those performed under contract
within the framework of a civil law relationship,
15. protection of public order and traffic safety, voluntary fire fighting, rescue, and disaster preparedness
and response activities,
16. consumer protection,
17. rehabilitative employment,
18. promotion of employment and training for underprivileged groups in the labor market, including
placement by the hiring-out of wo rkers, and associated services,
19. promotion of the country’s Euro-Atlantic integration,
20. services provided to and available solely for non-profit organizations;
21. activities associated with flood and water damage control;
22. activities associated with the construction, maintenance and operation of roads, bridges and tunnels;
23. crime prevention and protection of victims;
24. the supply of electronic pub lic services as basic services.
d) “direct political activities ” means political party functions, and delegation of nominees in
parliamentary, county and Budapest municipal government elections;
e) “management personnel ” means the persons described in the organization’s instrument of constitution
as officers in management position or otherwise ve sted with decision-making powers, and persons
authorized to represent the organization and to dispose over its current account by virtue of the instrument
of constitution or on the basis of a contract or a resolution by the supreme body of the organization;
f) “supreme body ” means the executive body (organization) of a foundation or public foundation, the
supreme body of a non-governmental organization, the meeting of members for nonprofit unlimited
partnership and nonprofit limited partnerships, the members’ meeting for public companies, the general
meeting of a nonprofit public limited liability company, and the sole member (shareholder) for single-
member nonprofit business associations;
g) “instrument of constitution ” means the statutes of a non-gover nmental organization, the deed of
foundation of a foundation or public f oundation, articles of association (statutes, deed of foundation) of a
nonprofit business association;
h) “non-pecuniary contribution ” means the permanent or tempor ary gratuitous conveyance or
endorsement, in full or in part, of a marketable thing or an intellectual product having pecuniary value, or a
right of pecuniary value in part or in full, or the provision of a service;
i) “tender ” means an open or invitational announcement to describe the conditions for the comparison of
bidders, the designated provision to be awarded, all major requirements for evaluation and assessment
(including dates of submission and evaluation, and those having powers to evaluate the bids);
j) “contribution ” means monetary and non-monetary donations and grants;

k) “investment activity ” means the activities involving the invest ment of the non-profit organization’s
own assets aimed for the acquisition of securities, ri ght of pecuniary value derived from membership in a
company, real property or some other property item requiring long-term investment;
l) “entrepreneurial activity ” means the business activities aimed for or resulting in the earning of income
and/or the acquisition of assets, not including designated activities which generate revenues and
contributions provided for public welfare activities;
m) “executive officer ” means the trustee of a foundation or p ublic foundation, and the chairperson or
member of the supervisory body (organization) of the managing body of such, furthermore, if the managing
body (organization) of a foundation is a separate lega l entity, unincorporated organization or a state agency,
the single leader of such managing body (organization) or the member of its body acting under such
authority; the chairperson and member of the administrative and representative body or supervisory body of
a non-governmental organization; the managing partner of a nonprofit unlimited partnership or a nonprofit
limited partnership; the managing director of a nonprofit private limited liability company; the chairperson
and member of supervisory board of a nonprofit public limited liability company; and the person in the
employ of an organization registered under nonprofit status or in any other work-related legal relationship
defined in the instrument of constitution as having exclusive powers;
n) ” recurrent donation” means a monetary contribution provided on the basis of an agreement between a
non-profit organization and its sponsor (includes the co nveyance of securities in respect of sponsors who
are not private individuals), if such sponsor agrees to provide the donation in the year when the agreement
is concluded (amended) and in at least three years follo wing thereafter at least once each year, in the same
or larger amount, without any consideration, whereby it shall not construed consideration if the non-profit
organization cites the name and/or activity of the sponsor in the course of providing public welfare
services.
Section 27.
(1) This Act shall enter into force on 1 January 1998. An organization established for conducting either
of the public welfare activities listed in Paragraph c) of Section 26 which is alread y registered at the time of
this Act entering into force and has submitted its application for registration in the register of non-profit
organizations by 1 June 1998, shall be authorized, as of 1 January 1998, to act under the non-profit
category indicated in the application until the resolution described in Subsection (3) of Section 22 becomes
definitive, or until such resolution is rejected.
(2) Organizations founded after 1 January 1998 shall be entitled to take advantage of the tax benefits and
exemptions granted to non-profit organizations as of the day of registration, if also registered under non-
profit status by the last day of the year when registered.
(3) An organization established using the assets recei ved from the subsystems of the state budget, or
receiving budgetary subsidies on a regular basis according to its instrument of constitution, shall apply for
registration under non-profit status by the deadline described in Subsection (1). In the event of failure to
comply, the budgetary subsidies shall be suspended, and the dissolution of the organization may also
requested in accordance with the applicable regulations.
(4) The Government is hereby authorized to establish special provisions on the conclusion of contracts
with non-profit organizations for th e performance of services falling under the scope of the Act on Public
Procurements.
(5) The obligation of registration under Subsection (3) shall not apply to bodies engaged in government
reserve management functions.