Can I as a non-profit organization be exempt from corporate tax?
July 14, 2023 | 50,00 EUR | answered by Ulrike Voigt
Dear Tax Advisor,
I work as the CEO of a non-profit organization and I am unsure if we can be exempt from corporate tax. Our organization is dedicated to social projects and is mainly funded through donations and grants. Currently, we are paying corporate tax at a rate of 15%, which consumes a significant portion of our financial resources.
My concern is that the corporate tax burden may reduce the amount of money we have available for our charitable projects. Therefore, I would like to know if there is a possibility for non-profit organizations like ours to be exempt from corporate tax. If so, what requirements must be met and what steps would we need to take to obtain this exemption?
It is important to me that we are able to efficiently utilize our financial resources to support our social projects to the best of our ability. I would greatly appreciate it if you could assist me in this matter and suggest possible solutions.
Sincerely,
Dirk Buchner
Dear Mr. Buchner,
Thank you for your inquiry regarding the corporation tax exemption for nonprofit organizations. It is understandable that you are concerned about the financial burden of corporation tax and would like to focus on efficiently using your financial resources for your social projects.
In principle, there is the possibility for nonprofit organizations to be exempt from corporation tax. The requirements for this are regulated in § 5 para. 1 No. 9 of the Corporation Tax Act (KStG). Nonprofit organizations must meet certain requirements in order to be exempt from corporation tax. These include:
1. The organization must serve exclusively and directly tax-privileged nonprofit, charitable, or religious purposes.
2. The funds of the organization must not be used for impermissible, especially personal, economic, or political purposes.
3. The articles of association of the organization must clearly define the tax-privileged purposes.
4. The organization must be able to demonstrate proper accounting and financial reporting.
To obtain the corporation tax exemption, you would therefore need to ensure that your organization meets the mentioned requirements. This includes reviewing and possibly updating your articles of association to ensure that the tax-privileged purposes are clearly defined. Additionally, transparent and proper financial management is important to make the use of funds traceable.
In this case, it would be advisable to consult with an experienced tax advisor who can support you in reviewing your organization and assist you in applying for the corporation tax exemption. A tax advisor can also provide you with further tips and advice on how to optimize your organization's tax situation.
I hope this information is helpful to you and wish you success in applying for the corporation tax exemption for your nonprofit organization.
Best regards,
Ulrike Voigt
