How can a club deduct sponsorship funds from taxes?
September 11, 2023 | 50,00 EUR | answered by Dora Krause
Dear tax advisor,
I am Daniel Gehrmann, and the chairman of a non-profit organization dedicated to promoting youth in the field of music. We rely on sponsorship funds to be able to realize our projects and events. However, we have no experience with the tax deductibility of sponsorship funds and are unsure how to proceed.
Our organization is recognized as a non-profit and thus meets the requirements for tax benefits. We regularly receive donations and sponsorship funds from companies that support our project. These funds go directly towards financing our events, workshops, and projects for young people. Now, the question arises for us how we can deduct these sponsorship funds for tax purposes in order to improve our financial situation and secure the projects sustainably.
We are concerned that we may not be taking advantage of tax benefits and therefore giving away funds that could support us in our work. Therefore, we are seeking clear guidance and advice on how to correctly declare and deduct sponsorship funds in our tax return. What are the options for non-profit organizations to claim sponsorship funds for tax purposes? Are there specific forms or evidence that we need for this?
We would greatly appreciate your support and expertise in this area to optimize our financial situation and secure our projects in the long term.
Sincerely,
Daniel Gehrmann
Dear Mr. Gehrmann,
Thank you for your inquiry regarding the tax deductibility of sponsorship funds for your non-profit organization. It is important that you educate yourself on this topic in order to optimize the financial situation of your organization and secure projects in the long term.
In general, sponsorship funds for non-profit organizations can be tax deductible if they meet certain requirements. First of all, it is important that your organization is recognized as non-profit. This means that it can be identified as tax advantageous according to § 52 of the Fiscal Code (Abgabenordnung). In the case of your organization, as you have already mentioned that it is recognized as non-profit.
Sponsorship funds can be recorded as operating income and are treated taxwise as donations. This means that they are generally tax-free, as long as they flow without consideration and serve the non-profit purpose of the organization. In your case, where the sponsorship funds flow directly into the financing of events, workshops, and projects for young people, this is the case.
In order to claim the sponsorship funds for tax purposes, you must declare them in your tax return. There are special forms that you can use for this, such as the attachment EÜR for the income-expenditure calculation or the attachment S for income from self-employment. In these forms, you can enter the sponsorship funds as operating income and, if necessary, offset expenses for the projects.
It is important that you carefully document all income and expenses and keep proof of it. These can be, for example, donation receipts from the companies that transferred the sponsorship funds, as well as invoices for expenses related to the projects.
I recommend that you contact a tax advisor who specializes in the taxation of non-profit organizations. They can provide you with individual advice and help you correctly declare and deduct the sponsorship funds in your tax return.
I hope that this information was helpful to you and I am available for any further questions.
Best regards,
Dora Krause, Tax Advisor
