How can a club maintain its non-profit status?
February 22, 2023 | 40,00 EUR | answered by Dora Krause
Dear tax advisor for association taxation,
I am reaching out to you as the chairman of a non-profit organization, as I am unsure about financial matters. Our association is dedicated to promoting art and culture, thereby meeting the requirements for tax-exempt status. However, I have heard that there are certain regulations that a non-profit organization must adhere to in order to maintain its tax-exempt status.
Currently, we are in a good financial position as we receive regular donations and generate revenue from events. However, I am concerned that we may inadvertently breach certain regulations and risk losing our tax-exempt status.
Therefore, my question to you is: What specific measures and regulations must our association follow to retain our tax-exempt status? Are there any pitfalls we should be aware of? And how can we ensure that we meet all tax requirements?
I would greatly appreciate your expertise and support in ensuring that our association continues to be recognized as tax-exempt in the future.
Kind regards,
Wilhelm Herrmann
Dear Mr. Herrmann,
Thank you for your inquiry regarding the tax-exempt status of your association, which is dedicated to promoting art and culture. It is good that you are considering the tax regulations to ensure that your association maintains its tax-exempt status.
In order to maintain tax-exempt status, associations must meet certain requirements. Firstly, the purpose of the association must be exclusively and directly charitable. This means that your activities must serve the promotion of art and culture without generating profits or favoring individual persons.
Furthermore, as an association, you must fulfill certain record-keeping obligations. This includes proper bookkeeping and the preparation of an annual financial statement. It is important that you accurately document all income and expenses to be able to demonstrate at any time to the tax office that you are acting in a charitable manner.
Another important point is the use of funds. As a charitable association, you may only use your income for charitable purposes. It is important to ensure that all donations and income are actually used for the promotion of art and culture and not diverted for other purposes.
One of the pitfalls you need to watch out for is the threshold for business operations. If your association operates business activities, meaning regularly generates income exceeding a certain threshold, this can have implications for the tax-exempt status. Therefore, you should ensure that this income is not too high and that you comply with the tax regulations for business operations.
To ensure that you meet all tax requirements, I recommend that you regularly seek advice from a tax advisor. A tax advisor can inform you about current legal changes, assist you in preparing financial statements, and provide guidance on tax-exempt status-related questions.
I hope this information is helpful to you and I am available to answer any further questions you may have.
Sincerely,
Dora Krause
Tax advisor specializing in association taxation
