Establishment of the German Foundation: Taxes and Nonprofit


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Non-profit-making foundations are tax-exempt per se. However, this does not apply to all areas of possible activities. A non-profit foundation can be active in various fields.

German-Stiftung reasons-8

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Reinhard Schinkel 58Is Reinhard Schinkel according to Handelsblatt one of Germany's best tax advisors and specialist author for tax law.

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Ideal area

A nonprofit foundation can operate in four areas. First of all, there is the ideal area:

In the ideal area of ​​the foundation, donations (increase in assets) are public grants or donations. These pure inflows of money are of course not subject to taxation. This also applies to turnover tax, since no exchange of services takes place and the foundation is treated as a non-contractor.

Asset management in the ideal area

The assets are, however, only the income for the purpose of the foundation can be used. In order to achieve the highest possible income from the asset portfolio, professional asset management is necessary. Typical returns for the area of ​​asset management are: interest, rents and leases. However, price gains can also be included.

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It would make sense to tax these income in addition to tax. No, they should be one hundred per cent of the endowment. For this reason, there is also an exemption from trade and corporation tax. Turnover tax is somewhat different.

Taxation in the area of ​​ideas

If taxable income (eg from a taxable rental) is applied, a reduced tax rate of 7% is to be applied (nevertheless, instead of the normal tax rate of 19%). If these sales are below 35.000 € per year, an average rate of 7% can be applied for the pretax. On balance, this does not result in a tax burden

An example:

  • A non-profit foundation generates rental income of net 30.000 €
  • these are to be taxed with 7% 2.100 €
  • The average rate of 7% is deducted from revenue
  • is formed and is therefore also. 2.100 €
  • In sum, there is a tax burden of 0 €

dedicated activities

Purpose enterprises of a donation are economically organized business enterprises, which, however, have the following three characteristics: The enterprise must serve directly statutory purposes. The operation must be directly necessary for the realization of the statutory purposes.

The holding must not be placed unfairly on unfavored farms in economic competition.

An example:

A foundation “Against Forgetting” has set itself the task of dealing with the terror of National Socialism and bringing it closer to the young. For this, she has rented a training room and is generating income from lectures and publications on this topic.

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The area is a purpose-built operation with the tax-advantaged consequences. It should be noted, however, that the income of 35.000 € already mentioned should not be exceeded for the tax benefit.

Economical business

Economic business is defined as sustainable and self-employment for the purpose of generating revenue or other economic benefits beyond the scope of pure asset management.

These (contrary to the purpose of operation) do not directly contribute to the achievement of the statutory purposes and are in immense competition with other non-taxed traders.

However, the tax liability in the case of corporate income tax and trade tax also applies here only if the income exceeds 35.000 € per year. However, VAT is subject to the general tax rate of 19%, as long as there is no tax exemption.

Attention tax liability for non-profit making

The foundation itself does not have to operate these establishments directly. It is sufficient already if the foundation is involved. The tax consequences presented are also to be drawn.

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A non-profit foundation is generally taxable. Special exemption or exemption rules do not exist.

What kind of income is there?

It should be noted that the foundation does not, like other entities, constitute a commercial enterprise by virtue of its legal form, but income from various types of income. These types of income include:

  • Commercial income
  • Income from agriculture and forestry
  • Income from capital
  • Income from leasing and lease
  • Other Income

Income from self-employment and self-employment is not possible, because always the person is in the foreground and this is not possible with a foundation.

Corporation tax and solidarity surcharge

The income is taxed with the corporation tax of 15% (and solidarity surcharge 5,5%) and as far as commercial income is available, trade tax is payable, also around 15%.

First of all, this is a very attractive tax rate if, for example, the foundation's assets consist of real estate and thus income from letting and leasing exists.

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Value added tax

There are no special requirements for VAT. Foundations can be normal entrepreneurs in the sense of the sales tax and thus achieve common taxable sales with the rule tax rate of currently 19%.

Again, the usual exemptions of VAT law apply, such as the tax-free rental of housing.

Sales tax and land tax

In addition to the already mentioned transfer tax, which is levied every thirty years, a tax on current business is provided, as far as real estate is concerned, land tax.

Here, too, the normal principles that the unit value forms the basis of assessment of the property tax, and since this is a council tax, this can be different levels, depending on the rate of levy.

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