Companies and individuals donate money or assets to organizations and institutions more often. The donation usually serves a charitable, charitable or church purpose. In addition, donations can be tax deducted. Because these are deductible as special expenses up to 20% of the total income. Usually a donation certificate is required for this, but only from a certain amount limit. In addition, a distinction is made between donations in foundations, political parties or other organizations.

First of all, it should be emphasized that a donation must always be a voluntary contribution in different forms. The donor must not receive anything in return for his contribution.

Thus, participation in a draw, even if it is for a good cause, is not considered a donation. Because the person receives a lot in exchange, which gives the chance of winning a lot. In addition, for example, a court order to compensate for a crime of donating money for a charitable purpose is not considered a donation under the tax law. Because the voluntariness is definitely missing.

In civil law, a donation constitutes a donation in the sense of § 516 ff. Thus, this is considered a free grant, whereby the free of charge here defines an inflow of assets without consideration. In addition, donations to the recipient are tax-free income regardless of the amount.

Now donations can be made in the form of monetary donations or as donations in kind. Various regulations and limits apply.

Here, a certain amount is simply donated to an institution. In addition, the donor can easily deduct the amount effectively in the tax return. To this he adds the sum under the item special expenses. For several years, it has been possible that the donor already transmits the proof of the monetary donation directly to the tax office in accordance with § 93c AO, so this step is even omitted for the donor. However, in the case of donations in kind, a storage obligation applies for receipts and receipts of one year after tax fixing in accordance with § 50 para. 8 ESTV. This also applies to membership contributions to political parties as well as donations in the event of a disaster to a corporate tax-exempt corporation, association of persons or wealth.

On the other hand, a donation in kind is also tax deductible. For example, one must also have a donation certificate issued by the recipient for the donation of food and clothing. The less common synonymous term for a donation certificate is the donation confirmation. In addition, as already mentioned, the receipt or receipt for the tax office should be kept. If already used objects are donated, a value for these goods must be estimated and noted on the donation certificate.

In the case of donations in kind, particular attention must be paid to the purpose behind them. Only the use of the donated tangible assets for certain statutory purposes is permitted. This is only the case if the donations in kind are used for tax-advantaged purposes of an association or the so-called special purpose operation. This includes, for example, an organized tombola if it has been approved by the responsible authority and the net income is used directly and exclusively for the stated purposes. On the other hand, a donation for the economic business operation of an association is not deductible. This includes, for example, club parties and flea markets.

An exciting aspect is the evaluation of donations in kind. Because these must be evaluated with the market value. This value is determined on the basis of the amount obtainable in the general course of trade, the nature and nature of the goods being determined. In the case of a used article, this value can be determined in some cases very complicated. In addition, the demand for the property is important, because this only determines the price for it. For new items, it is much easier, because the purchase price, which can be proven by the proof of purchase, is simply considered as an evaluation measure.

According to § 10b EStG, donations are tax-advantageous grants and thus partially tax-deductible for private individuals. In addition, corporate donations are subject to corporate regulations (see § 9 para.) 1 no. 2 KStG and § 9 no. 5 GewStG as well a tax deduction. The activities covered by this tax advantage are precisely defined in Sections 52 – 54 AO. This includes in particular charitable, charitable and church purposes.

Organizations eligible for donation are, for example, churches, supporting associations of a school, foundations universities, state museums, registered associations, non-profit GmbHs as well as aid organizations and also political parties and voter associations. However, the organization must be based in Germany. It is not relevant in which country the payments are invested.

In particular, the tax limitation of the deductibility of donations must be emphasized. Because donations are taxed as special expenses. Thus, annually up to 20 % of the total income is tax deductible as special expenses. In principle, it is of course possible to make donations in unlimited amounts.

Special expenses include any private expenses that cannot be classified as advertising costs or operating expenses. Examples are church tax, insurance contributions, maintenance payments, donations and membership contributions.

Similarly, special regulations are anchored for corporate donations. According to § 9 Abs. 1 no. 2 KStG donations also to 20% of the income of corporations under the Corporate Tax Act are considered deductible expenses. After these are added again in accordance with § 8 No. 9 GewStG, according to § 9 No. 5 GewStG, 20% of the donations made can also be excluded for the calculation of trade tax.

3.2.1. Donations presented

The tax office issues a donation advance if the limit for the recognition of donations is exceeded. The wish for a presentation must be stated in the tax return in order to achieve automatic consideration in the following years.

3.3.1. Political parties and electoral associations

For political parties and independent electoral agreements, donations and membership fees of up to 3,300 euros for couples and 1,650 euros for singles are directly deductible from taxes. But only 50% of it. If the donation or the membership fee is higher, these are fully regarded as special expenses up to the abovementioned amount. However, a presentation of these contributions in future years is not possible.

3.3.2. Foundation donations tax deductible

In addition, donations to tax-deferred foundation institutions up to an amount of 2 million euros for couples and 1 million euros for singles are feasible. Because the maximum amount for special expenses of 20 percent of the total amount of income is not applicable to foundations. It is also possible to use this deduction every ten years. The room for manoeuvre is particularly interesting here, because there is even a distribution of the amounts under 2 million or more. 1 million euros allowed over the whole ten years. As a result, the tax burden of the foundation donation can be reduced in particularly profitable years.

If you have any questions about the tax treatment of foundations, you can contact us. We also create other designs within the framework of foundation assets. In particular, the differences between foundations in Germany and foundations in Liechtenstein should be highlighted here. In addition, we are particularly familiar with the topics of asset management of banking assets and corporate investments in a family foundation in Liechtenstein.

In order to observe the general rules for donations, it is relevant to know the exceptions to deductibility. This includes special donations that are directed directly to needy persons or donations that are made under certain conditions. This includes, among other things, a donation that is made to a beneficiary organization with the request of disclosure to already specified persons. Nevertheless, a use proposal or a donation account can be specified for a specific purpose. This allows the targeted promotion of a measure to take place.

Although a company or a private individual needs proof for each donation, i.e. a so-called donation certificate, there are special exceptions. Because a donation must only be proven by certificate if these amounts exceed the amount of 300 euros (from 2021, before 200 euros). First of all, a more unbureaucratic procedure applies. The tax office is satisfied with the simplified proof. A proof of payment or a copy of the account statement is sufficient.

However, if the amount limit is reached or exceeded, the recipient must issue a donation certificate to the donor. The official requirements must be met. The following information shall be provided: