§ 10b (1) EStG allows the deduction of grants for the promotion of tax-advantaged purposes. Tax-advantaged purposes are charitable purposes within the meaning of §§ 52-54 AO. In the case of donations to such organisations, a distinction must be made between the membership fee and the donation. We explain when you can deduct paid membership fees and donations.

According to § 10b (1) EStG, paying taxpayers may deduct their grants for the promotion of tax-advantaged purposes within the meaning of §§ 52-54 AO as special expenses. Also corporations may deduct these grants according to § 9 (1) no. 2 KStG from income. Grants in this sense are both a donation and a membership fee. Donations are altruistic motivated, free donations or gifts. Accordingly, an exchange of services excludes the acceptance of a donation. This also applies if the fee significantly exceeds the value of the service. A membership fee, on the other hand, is usually a payment made on the basis of statutory provision. Therefore, they are usually not paid voluntarily. In addition, the payer receives an advantage as a result of membership. This has a counterpart character and therefore excludes the donation status. Therefore, it can only be deducted for tax purposes as a membership contribution.

The taxpayer may deduct the membership fee and donation up to 20% of the total income. However, you can deduct contributions exceeding the maximum limits in accordance with § 1ob (1) sentence 9, 10 EStG in the following assessment periods.

Donation and membership fee are only deductible if they are made to an entity beneficiary according to §§ 52-54 AO within the meaning of § 10b (1) sentence 2 EStG. According to § 10b (1) sentence 1 EStG, these are domestic legal entities, but also EU and EEA corporations with limited taxation, insofar as they fulfil the requirements of § 51 (2) AO. On the other hand, in the case of EU corporations and EEA corporations which are not subject to limited taxation in Germany, the taxpayer must prove that the requirements of German non-profit law are met. This requires proof that the foreign corporation realizes not only the charitable purpose, but also the appropriate use of funds of the German charitable law.

§ 10b (1) sentence 8 EStG specifies various exclusions. Membership contributions shall not be deductible if they intervene. Accordingly, the membership fee to sport and leisure clubs within the meaning of § 52 paragraph 2 no. 21, 22, 23 AO, such as clubs of local history and animal breeding may not be deducted. In addition, membership fees to associations of cultural activity, which primarily serve for leisure activities according to § 1ob (1) sentence 8 EStG are not deductible. This exclusion is based on the idea that, from the point of view of the member, the priority is to obtain a return in the form of leisure activities.

3.2.1. Exclusion of deduction for cultural activities

The problem with these exclusions is the exclusion for cultural activities. According to § 10b (1) sentence 8 no. 2 EStG, the membership fee may not be deducted for cultural activities that primarily serve for leisure activities. Leisure activities should be available in particular if the members themselves actively participate. Accordingly, membership fees in the context of activities in the lay theatre, lay orchestra or lay choir are not deductible. However, the exclusion of membership contributions from the special expenditure deduction does not apply if the corporation pursues different purposes and a purpose which is of a superior nature does not serve the purpose of leisure. This is justified by the “first and foremost”.

3.2.2 On the other hand, no exclusion in the promotion of art and culture

If, on the other hand, the corporation promotes art and culture, § 10b (1) sentence 7 EStG applies. Accordingly, the membership fee that goes to non-profit corporations that promote art and culture within the meaning of § 52 (2) sentence 1 no. 5 AO is in principle deductible. This also applies explicitly if members are granted benefits.

This could actually contradict § 10b (1) sentence 7 and its sentence 8 number 2 EStG. Sentence 7 states, however, that the membership fees are only deductible if they do not meet sentence 8 number 2 EStG. Deductible are therefore membership fees to corporations that promote art and culture within the meaning of § 52 (2) sentence 1 no. 5 AO. This applies expressly even if Members are granted benefits. However, cultural activity must not be primarily for leisure. Thus, corporations that passively promote art or culture constitute such within the meaning of § 10b (1) sentence 7 EStG. These are, for example, support associations. Therefore, its membership fees are deductible.

3.2.3. Problem: Distribution bid or withdrawal ban

Initially, the financial administration stipulated that even the possibility of receiving monetary benefits from individual members means that all members are not allowed to deduct their membership fee.

Nevertheless, it is questionable how the sentence “unless § 10b (1) sentence 8 number 2 EStG exists” is to be understood. This could result in a distribution bid, according to which leisure activities and art and cultural promotion are to be divided and then only the membership fee is deductible in relation to cultural promotion and art promotion. First of all, the word “so far” speaks for this. This also stipulates a division requirement in various other places in the law. However, there is an argument against the division requirement that the norm was changed by the law to further strengthen civic engagement. This law should serve to make public utility law simpler, clearer and more practical by removing bureaucratic obstacles. However, this is prevented if the taxpayer must first state sufficiently substantiatedly in the context of the deductibility, to what percentage the cultural activity serves his leisure time.

3.2.4. Distinction between leisure activities and art promotion difficult

In principle, sentence 7 and sentence 8 number 2 can be divided into passive and active as listed. If the taxable person acts himself, there is an active activity which falls under sentence 8 no. 2. Then he may not deduct the membership fee. If the corporation promotes art and culture, thus participates passively, then sentence 7 is present.

It is unclear, however, when a cultural activity primarily serves leisure activities. In particular, the admission fee for attending a performance that serves as a leisure activity and the hobby musician’s own concert to finance his expenses should be at the same level. The distinction between Förderverein (promoted here by the entrance fee) and own cultural activity is therefore fluid.

3.2.5. Deduct membership fee – these design possibilities are available

The demarcation difficulties open up various design possibilities to allow the members to deduct their membership fees. In particular, support associations can be founded. Membership fees paid to these associations are then tax deductible for the members.

Abuse of design exists at most if a donation is transferred to an umbrella association in the amount of the membership fee actually to be paid, with the condition that the amount is passed on to the corporation. The deduction of such a donation is therefore not possible. The corporation that issues a grant confirmation for such a circumvention payment also endangers its charitable backlog. Also problematic are donations, which are expected by practically all members of the corporation as a result of informal agreements and thus actually do not constitute deductible membership fees.

In order to ensure that the membership fee has actually been provided, proof is required. According to § 50 (1) EStDV, this is done by an officially prescribed form. This is in BStBl. I 2013, 1333.