Do we as an association have to pay sales tax?
January 20, 2024 | 50,00 EUR | answered by Günther Schmidt
Dear tax advisor,
we, the association "Culture for Everyone e.V.", have been committed to promoting cultural projects and events in our region for many years. We finance our activities mainly through membership fees, donations, and income from events. Lately, we have been generating more income from the sale of merchandise items.
We are unsure whether we, as a non-profit organization, need to pay sales tax on this income. So far, we have not submitted any sales tax returns and are therefore somewhat concerned that we may be violating applicable tax regulations.
Could you please explain to us whether we need to pay sales tax as an association and, if so, how we can do this correctly? Are there possibly any exceptions for non-profit organizations regarding sales tax liability? We want to ensure that we comply with all tax regulations and avoid any legal issues.
Thank you in advance for your support and advice.
Sincerely,
Zofia Winterberg
Association "Culture for Everyone e.V."
Dear Ms. Winterberg,
Thank you for your inquiry regarding the value added tax (VAT) obligation for non-profit organizations. As a tax advisor specializing in club taxation and charitable status, I am happy to assist you and provide you with the relevant information on this topic.
In general, non-profit organizations are also subject to VAT if they engage in economic activities that are considered taxable. This includes the sale of goods and services. So, if your organization "Kultur für Alle e.V." sells merchandise items, VAT would typically apply.
However, there are also exceptions for non-profit organizations regarding VAT obligations. If the activities of the organization solely serve the realization of the charitable purpose and the economic activities are of subordinate importance, they can be classified as "operating for a purpose" or "statutory operations for a purpose". In this case, the income from these activities is not subject to VAT.
To determine whether your organization's activities are considered operations for a purpose and therefore exempt from VAT, a careful examination of the statute and the actual activities of your organization is necessary. It is important to carefully document all income and expenses to be able to provide evidence when needed.
I strongly recommend that you consult with a tax advisor specializing in the taxation of non-profit organizations. They can provide individual guidance and help you comply with tax regulations and avoid potential legal issues.
I hope this information is helpful to you. If you have any further questions, please feel free to contact me.
Sincerely,
Günther Schmidt
Tax advisor for club taxation / charitable status
