How are events of an association treated for tax purposes?
January 13, 2023 | 40,00 EUR | answered by Dora Krause
Dear Sir or Madam,
I have a question regarding the tax treatment of events organized by a non-profit organization. My name is Anna Jung and I am a board member of a charitable organization that regularly organizes events such as charity galas, sports tournaments, or cultural events to raise funds for charitable purposes.
So far, we have always recorded the income from these events as donations and claimed the expenses as operating expenses. However, I have concerns about whether this approach is correct from a tax perspective and whether we may be overlooking tax benefits or making mistakes.
Therefore, I would like to know how events organized by a non-profit organization should be treated for tax purposes. Are there specific regulations or requirements that we need to consider? Should we record the income and expenses separately or combine them? Are there ways to take advantage of tax benefits or minimize the tax burden?
I would greatly appreciate a detailed explanation and recommendations so that we can act in a tax-compliant manner as an organization and effectively plan our events.
Thank you in advance for your support.
Sincerely,
Anna Jung
Dear Mrs. Jung,
Thank you for your inquiry regarding the tax treatment of events organized by a nonprofit organization. It is very important for organizations to fulfill their tax obligations correctly in order to take advantage of possible tax benefits and avoid errors.
Nonprofit organizations are subject to special tax regulations outlined in the Fiscal Code (AO) and in the Law on Nonprofit Organizations. Nonprofit organizations are exempt from corporate tax if they exclusively and directly pursue charitable, benevolent, or religious purposes.
When conducting events for fundraising purposes, organizations must ensure that the income is treated as income from either a purposeful operation or a commercial business operation. There are differences depending on the type of event. Charity galas or cultural events are usually classified as income from purposeful operations, while sports tournaments could potentially be classified as income from commercial business operations.
It is important to separate income and expenses to ensure a clear distinction between tax-exempt income from the organization's statutory activities and taxable income from commercial business operations. Expenses incurred for events can be claimed as operating expenses, but only within the scope of the organization's tax-exempt activities.
To take advantage of tax benefits and minimize tax liability, I recommend consulting with a tax advisor. An experienced tax advisor can help optimize the tax aspects of your events and potentially create tax-efficient structures.
I hope this information is helpful to you and I am available for any further questions you may have. Thank you for your commitment to the nonprofit sector and best wishes for your future events.
Sincerely,
Dora Krause
Tax Advisor
