What risks are there for an association in relation to its non-profit status?
September 2, 2023 | 60,00 EUR | answered by Björn Ley
Dear tax consultant,
my name is Erika Schröder and I am a board member of a non-profit organization in my city. In recent years, we have focused on fundraising and carrying out projects for social purposes. However, I am now concerned that we may be taking risks that could jeopardize our non-profit status.
Our current situation is as follows: Our organization has received a significant amount of donations and grants in recent years to implement our projects. We have also organized regular events and activities to raise funds and increase awareness of our work. Everything has been going well so far, but I have heard that there are certain rules and regulations that a non-profit organization must comply with in order to maintain its status.
I am worried that we may have made mistakes or not followed all the regulations. What risks are there for our organization in terms of maintaining our non-profit status? How can we ensure that we comply with all regulations and do not jeopardize our status as a non-profit organization?
I would greatly appreciate it if you could identify potential risks for us and provide us with tips on how we can legally protect our organization. Thank you in advance for your help.
Best regards,
Erika Schröder
Dear Mrs. Schröder,
Thank you for your inquiry regarding the charitable status of your association. As a board member of a charitable organization, it is important to be aware of the applicable rules and regulations in the field of charity to avoid potential risks and maintain the status as a charitable organization.
First and foremost, it is important to understand that charitable organizations must meet certain criteria to be recognized as charitable and enjoy tax benefits. This includes, among other things, that the main activity of the association aims to pursue a charitable purpose, such as promoting education, culture, youth and elderly assistance, environmental protection, or social issues.
One possible risk to the charitable status of an association is that the income of the association is not used exclusively for charitable purposes. It is therefore important that all income and expenses of the association are properly documented and traceable. In addition, donations and grants should only be used for charitable purposes and not for private purposes or the personal needs of the association members.
Another risk is that the association becomes politically active or engages in commercial activities that are not compatible with the charitable purpose. Charitable organizations generally cannot support political parties or political activities and should focus on their charitable projects.
To ensure that your association complies with all regulations and does not jeopardize its status as a charitable organization, I recommend conducting regular inspections and controls of the association's activities. Review the association's statutes and ensure that they comply with the applicable legal requirements. Maintain proper accounting and documentation of all income and expenses of the association.
Furthermore, ensure that donations and grants are used only for charitable purposes and that there are no violations of the applicable regulations. If you are unsure whether certain activities of the association are compatible with the charitable status, I recommend seeking advice from a specialized tax advisor who can assist you with legal matters.
I hope that this information is helpful to you and that you can legally secure your association. If you have any further questions, please do not hesitate to contact me.
Best regards,
Björn Ley
