As a rule, a foundation under private law is set up to set the founder a "monument" and to do something good. Of course, the status of charitable status raises the reputation of a foundation. It is also easier to tap public subsidies. So what needs to be done to set up not just a foundation, but a charitable foundation?
The funds collected must be used promptly. In a timely manner, the funds are used up to the end of the following financial year. Deviating from this, reserves can also be created to save more capital expenditure. However, this must be documented.
Charity and taxation
If the foundation is charitable, the tax exemption would be exempt from corporation tax, commercial and land tax. The tax-specific features are discussed in a separate article.
In addition, the donations to the Foundation can be deducted as donations. In addition, non-profit activities in the non-profit sector can be remunerated with a tax-exempt amount of up to 2.100 € per year (§3 No. 26 ESTG).
How to found a charitable foundation
In the statutes, the pursuit of charitable purposes must be clearly defined and secured by the ongoing business operation. In doing so, the public must be selflessly promoted in material, intellectual or moral matters. In the 52 section of the Tax Code, the recognized purposes are listed.
These include, for example:
- the promotion of science and research
- the promotion of religion
- the promotion of youth and elderly aid
- the promotion of art and culture
- the promotion of animal welfare
- the promotion of animal breeding, carnival, model flights and dog sports
- and many other areas.
Purpose and administration
It is therefore compulsory that the subsidized purposes must be open to all and not only to a closed group of people. The management must be directed to pursue these purposes directly, exclusively and selflessly. For example, it is not enough, for example, to promote dog sport, and to consider family members as well.
Administrative expenditure must not be exorbitant in order to jeopardize the status of charity. An administrative cost ratio of 30 per cent would therefore lead to the revocation of charity.
How is the founding procedure going?
A provisional certificate of non-profit-making is issued by the financial administration when the statutes are drawn up. This provisional certificate shall be valid for 18 months. The financial statements are then checked regularly (in the 3 annual cycle).
In the run-up to the founding, a draft statutes should also be sent to the financial administration with the request for confirmation that the statutory requirements are fulfilled. If deficiencies are still present, these can be eliminated at the start-up stage.
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