Changes in donations and non-profit law 2021

The biggest reform in the tax law on donations and non-profit organizations brings improvements for taxpayers and non-profit organizations almost across the board.

Since 2013, the allowance for exercise leaders and the honorary flat rate have remained unchanged. The Annual Tax Act 2020 not only adjusts these, but also changes many other details in the tax law on donations and charitable activities. Not only is this the most comprehensive reform in this area since 2013, the changes are also almost entirely in the interests of associations and non-profit organizations.

• Volunteer: The honorary allowance will rise from 720 to 840 euros from 2021. So far, however, there has only been one change in tax law. The liability privilege for honorary association members currently continues to apply only to remuneration of no more than 720 euros per year. If the legislator also adjusts this limit in the course of the year, there is nothing to prevent the higher honorary flat rate from being used now.

• Practice Manager: The exercise leader allowance will also be raised, from 2,400 to 3,000 euros.

• Non-credit limit: The limit up to which expense allowances that fall under the two lump sums are not counted towards unemployment benefits and certain other social benefits will rise from 200 euros to 250 euros per month in 2021.

• Donations: The possibility of a simplified proof of donation by means of a cash deposit slip or booking confirmation from the bank now exists up to an amount of 300 euros instead of the previous 200 euros. This change already applies retroactively for donations in 2020.

• Foreign donations: From 2025, foreign recipients of donations will also be able to issue donation receipts in accordance with the official model. The Federal Central Tax Office will then assume responsibility for checking the requirements for the deduction of donations.

• Recipient Registry: By 2024, the tax authorities want to establish a beneficiary register. This register will then be publicly accessible and make it transparent for both tax offices and taxpayers which organizations are allowed to issue donation confirmations.

• Purpose catalog: Several points have been added to or newly included in the catalog of charitable purposes. Organizations are now also recognized as charitable if they work for climate protection, local beautification, free wireless, help for people discriminated against on the basis of their gender identity, or the maintenance and upkeep of cemeteries.

• Use of Funds: From 2020, the obligation to use funds promptly within the two calendar or financial years following the inflow will only apply to non-profit organizations with annual income of more than 45,000 euros. There are already open questions about the regulation that the tax authorities still have to answer, for example whether exceeding the limit also triggers the obligation to use funds promptly for income from other years, and whether there are restrictions on the distribution of income among several subsidiaries or sister organizations.

• Passing of funds: The regulations on passing on funds to other tax-privileged organizations will be standardized and simplified. In particular, there is no longer a requirement for a complete transfer of funds that the statutory purpose of the recipient organization corresponds to its own statutory purpose. In addition, the transfer of funds only has to be explicitly mentioned in the articles of association as a way of realizing the purpose if this is to be the exclusive way of realizing the purpose. In addition, a new trust protection provision was created, according to which the tax concession of the donor organization is not endangered if the recipient organization uses the funds for purposes other than those for which they were intended, provided that the donor has convinced itself of the tax concession of the recipient.

• Turnover exemption limit: There have long been calls for an increase in the exemption limit for corporate income tax and trade tax for business operations of tax-privileged organizations. From 2020, this has been raised from 35,000 to 45,000 euros.

• Sports events: From 2021, the organizational services of a non-profit umbrella sports association for sports events of its member clubs will be eligible for tax relief if amateurs participate in the events predominantly, i.e. more than 50 %. For sports with league operations, all events of a season are treated as a uniform sporting event.