Can non-profit organizations pay trade tax?
February 1, 2024 | 55,00 EUR | answered by Dora Krause
Dear tax advisor,
I urgently need your help regarding the taxation of our non-profit organization.
Our organization, which has been dedicated to promoting education and culture for many years, recently established a business operation to generate additional income. Now we are wondering whether our organization is required to pay trade tax.
So far, we were under the impression that non-profit organizations are exempt from trade tax. However, we recently learned that there may be exceptions and in some cases trade tax liability exists.
This information is causing us great concern as we do not know if our organization may have to pay trade tax retroactively and what impact this would have on our financial situation.
Can you please explain to us under what circumstances non-profit organizations must pay trade tax? Are there ways to avoid or minimize this tax liability? We would be very grateful for your support and advice on this matter.
Thank you in advance.
Sincerely,
Renate Schneider
Dear Mrs. Schneider,
Thank you for your inquiry regarding the taxation of your non-profit organization with an additional business operation. It is understandable that you are concerned about whether your organization may have to pay trade tax and what impact that could have on your financial situation.
In principle, non-profit organizations are exempt from trade tax if they exclusively pursue tax-privileged purposes. This means that the organization must dedicate itself exclusively to charitable purposes such as education, culture, sports, welfare, or similar within the framework of its statutes. However, once the organization also operates economic business activities, trade tax liability may arise.
An economic business operation exists when the organization regularly and sustainably generates income that exceeds mere cost coverage. This may be the case, for example, if the organization sells tickets, conducts advertising, or rents out premises.
In this case, the organization may have to pay trade tax. However, there are ways to avoid or minimize this tax liability. For example, under certain conditions, the organization can claim an exemption or outsource the income from the economic business operation to a separate subsidiary.
It is important that you consult an experienced tax advisor who is familiar with the taxation of non-profit organizations in this case. They can explain to you exactly under what circumstances trade tax liability exists and what options there are to avoid or minimize it.
I am available for a detailed consultation and will help you find the best solution for your organization. Please do not hesitate to contact me to schedule a consultation appointment.
Best regards,
Dora Krause
