Which revenues are considered charitable and which are not?
July 6, 2023 | 50,00 EUR | answered by Björn Ley
Dear tax consultant,
My name is Uwe Schreiber and I am the chairman of a non-profit organization. We are dedicated to promoting cultural events in our region and mainly fund our projects through donations, membership fees, and event revenues.
Recently, we have been having increasing difficulties with the tax office as our status as a non-profit organization has been called into question. I am unsure which revenues are considered as non-profit and which are not. The guidelines for the use and taxation of these revenues are also unclear to me.
My concern is that we could lose our non-profit status if we do not handle our revenues correctly. Therefore, it would be helpful if you could explain to me exactly which revenues are considered as non-profit and which are not. Additionally, I would appreciate any tips on how we can better structure our finances to continue to be recognized as a non-profit organization.
Thank you in advance for your assistance.
Sincerely,
Uwe Schreiber
Dear Mr. Schreiber,
Thank you for your inquiry and your trust in my expertise as a tax advisor in the field of association taxation and non-profit status. It is understandable that you are concerned about the recognition of your association as non-profit, and I am happy to assist you in clarifying these questions.
First and foremost, it is important to understand that associations recognized as non-profit enjoy special tax privileges. This includes, among other things, the ability for donations to the association to be tax deductible and the association itself to be exempt from corporate tax. In order for an association to be recognized as non-profit, certain requirements must be met. These include promoting art and culture, contributing to the general public, and pursuing idealistic and non-profit purposes.
Regarding the income of a non-profit association, the following rules generally apply: donations, membership fees, and proceeds from events are usually considered non-profit and are tax-favored. Income from commercial activities, such as selling goods or services, however, can be problematic as they may be classified as non-non-profit. It is therefore important that income is clearly separated and documented in a transparent manner.
To better structure your finances and secure the non-profit status of your association, I recommend conducting regular internal controls to ensure that all income and expenses are properly documented. Additionally, make sure that your statutes clearly define all necessary non-profit purposes and that your association activities align with these goals.
It may also be helpful to seek professional support from a tax advisor to ensure compliance with all tax regulations and to identify and resolve any issues with the tax office early on.
I hope this information is helpful to you and I am available to further clarify any questions and support you in securing the non-profit status of your association.
Best regards,
Björn Ley
