Can a club engage in economic activities and still remain charitable?
March 25, 2024 | 50,00 EUR | answered by Siegfried Eckstein
Dear tax consultant for association taxation and non-profit status,
I am Jürgen Breitwieser, chairman of a non-profit organization dedicated to promoting education and culture. Lately, we have been considering integrating economic activities into our association to generate additional income and further expand our projects. However, we are concerned about whether we can maintain our non-profit status despite these economic activities.
Currently, our association solely relies on donations and grants to fund our projects. However, we see the potential to generate income through the sale of merchandise or organizing events that could help us secure our work in the long term.
Our concern is that we are not sure to what extent we can engage in economic activities without jeopardizing our non-profit status. Therefore, I would like to know from you if it is possible for a non-profit organization to conduct economic activities and, if so, what requirements and limitations need to be considered.
Can you possibly provide us with tips on how to integrate economic activities into our association without losing the tax benefits and non-profit status? We want to ensure that we comply with all legal requirements while improving our financial situation.
Thank you in advance for your support and advice.
Sincerely,
Jürgen Breitwieser
Dear Jürgen Breitwieser,
Thank you for your inquiry regarding the integration of economic activities into your charitable organization. It is indeed possible for a charitable organization to engage in economic activities as long as they are within the scope of the statutes and purpose of the organization, and the income is used exclusively to fulfill the charitable purpose.
In general, there are two forms of economic activities that a charitable organization can engage in: commercial operations and purpose enterprises. Commercial operations are activities that are not directly related to the charitable purpose and are subject to corporate income tax. This income must be taxed, but the organization remains charitable. On the other hand, purpose enterprises are activities that serve the charitable purpose and are exempt from corporate income tax.
To engage in economic activities as a charitable organization, you should ensure that they do not exceed the main purpose of the organization and that the income is used exclusively to fulfill the charitable purpose. Furthermore, you should clearly define in the statutes of your organization which economic activities are allowed and how the income should be used.
It is advisable to seek advice from a tax consultant specializing in non-profit organization taxation before engaging in economic activities to ensure compliance with all legal requirements. A tax consultant can also help you optimize the taxation of economic activities and maintain the charitable status of your organization.
I hope this information is helpful to you and wish you success in integrating economic activities into your organization. If you have any further questions or need assistance, I am happy to help.
Best regards,
Siegfried Eckstein, Tax Consultant
