Can our association also make profits and how are they taxed?
March 4, 2023 | 50,00 EUR | answered by Günther Schmidt
Dear tax consultant,
I am reaching out to you as a board member of a non-profit organization with some questions regarding the taxation of profits. Our organization regularly organizes events and projects that generate income. So far, we have always used this income for charitable purposes, but now we are considering the possibility of making profits.
However, we are unsure about how profits are taxed in a non-profit organization. Are there any restrictions or tax rates that we need to consider when making profits? What tax benefits do we have as a non-profit organization and how can we make the most of them?
Our goal is to make the finances of our organization transparent and compliant with the law. We want to ensure that we fulfill all tax obligations while strengthening the financial foundation of our organization. Can you support us and show us the possibilities of earning profits and handling them correctly from a tax perspective?
We look forward to your expert advice and thank you in advance for your support.
Sincerely,
Albrecht Voigt
Dear Mr. Voigt,
Thank you for your inquiry regarding the taxation of profits in a non-profit association. It is commendable that as a board member, you want to manage the finances of your association transparently and in compliance with the law. I am happy to provide you with detailed information on this topic.
In principle, it is possible for non-profit associations to make profits. However, these profits must be used immediately and exclusively for non-profit purposes. It is important that the intention to make a profit is not the main focus and that the profits only serve secondary purposes. Otherwise, the association could lose its non-profit status.
Non-profit associations enjoy special tax advantages. They are generally exempt from corporate tax as long as the income is used exclusively and directly for non-profit purposes. Donations to non-profit associations are also tax deductible, which can be an incentive for donors to support your organization.
If your association makes profits, these must be reported in the annual financial statements. It is important that the profits are transparently documented and it is clear how they are being used for non-profit purposes. It is recommended to work regularly with a tax advisor to ensure that all tax obligations are met.
To treat profits correctly for tax purposes, it is advisable to reinvest them within the framework of non-profit purposes. This can be done, for example, by implementing new projects, expanding services, or supporting non-profit initiatives. It is important that the profits are not used for private purposes or for the personal enrichment of the association members.
I am available to assist you in optimizing the use of tax benefits for non-profit associations. Together, we can find ways for you to make profits while strengthening the financial foundation of your association.
I look forward to working with you and am available for any further questions you may have.
Best regards,
Günther Schmidt
Tax Advisor
