Charitable Associations in Germany: Formation and Taxation

Charitable Associations in Germany: Formation and Taxation

Holistic consultation for nonprofit associations

In Germany, the charitable association is regarded as a model for all nonprofit organizations. Charitable associations are firmly anchored in social life and have always enjoyed a good reputation.

Anyone planning to set up a charitable association in Germany should find out about the legal requirements at an early stage. This includes not only the usual legal requirements for associations, but also in particular those of German nonprofit law. We will be happy to advise you on all legal and tax requirements for a charitable association.

Charitable Associations in Germany | Law Firm

Requirements for the articles of association of charitable associations

In order to benefit from tax concessions, the articles of association of a nonprofit association must meet the requirements of nonprofit law. First of all, this presupposes that the association pursues tax-privileged purposes. The tax-privileged purposes can be divided into charitable, ecclesiastical and benevolent purposes. In addition, the articles of association must specify how the association intends to achieve its purposes.

Other essential contents of the articles of association and requirements for the recognition of charitable status are

  • the requirement of selflessness,
  • the requirement of exclusivity,
  • the requirement of immediacy.

Selflessness is generally given if the association does not primarily pursue its own economic purposes and does not provide its members with any economic benefits.

The requirement of exclusivity means that the association may only pursue the tax-privileged purposes listed in the articles of association. Economic or political activities, for example, are only permitted to a subordinate extent, i.e. they may not actually constitute a purpose of the association.

The requirement of immediacy demands that the association realizes its statutory purposes itself or is organized in a permissible manner as a supporting association.

Loss of nonprofit status - avoidable but with serious consequences

Errors in the articles of association as well as breaches of the provisions of the articles of association in the context of actual management can result in the loss of nonprofit status. As a rule, a breach of the requirements of charitable law leads to the withdrawal of charitable status for the entire year in which the breach occurred. In the case of violations of the principle of asset retention, there is even a threat of retroactive revocation for a period of 10(!) years. And even this is usually not the end of the story: in such cases, the persons who caused the withdrawal of nonprofit status are often exposed to considerable claims for damages from the association.

This demonstrates the serious consequences that careless actions in nonprofit law can have for German associations. Forward-looking planning and continuous legal support from experts in nonprofit law help to avoid the withdrawal of nonprofit status and unnecessary liability risks.

Restructuring or reorganization of the nonprofit association

Restructuring is sometimes necessary in order to maintain the nonprofit status of an association. Examples of such structural measures are, for example

  • the spin-off of commercial business operations and special-purpose operations to subsidiary (g)GmbHs
  • the change of legal form of a charitable association to a gGmbH or a charitable cooperative
  • the spin-off of an association from an existing association or club

There are many different options and, depending on the legal approach, there may also be employment law and corporate law aspects as well as intellectual property issues to consider.

We will be happy to advise your charitable association on planned reorganization and restructuring measures of all kinds and implement these together with those responsible for the association.

Your attorney for charitable associations in Germany

You can easily reach our experts for charitable associations and for all questions relating to German association law via e-mail (info@winheller.com) or by phone (+49 69 76 75 77 85 24).

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