Tax exemption for organisations
Institutions, organisations, societies, associations, foundations, etc. that do not have a commercial purpose are exempt from income and wealth tax. Others may also fall under this tax exemption.
When is an organisation tax-exempt?
The condition for exemption from tax liability is that the organisation “does not have a commercial purpose”. The question of whether or not an organisation or institution has a commercial purpose will be determined following a specific overall assessment of factors such as the nature of the activity, the purpose of the activity as set out in the articles of association, the provisions in the articles of association concerning the appropriation of profits and the use of profits in the event of dissolution, the structure of the organisation and the actual activity. A key consideration is whether the organisation is aiming to accrue financial benefits for itself or others. If the organisation has subsidiaries, the activities of the subsidiaries will also be taken into account in the assessment. If the organisation has a number of purposes, the main purpose will be decisive.
An otherwise tax-exempt organisation will still be tax liable for its commercial activities that do not realise its non-commercial purposes. Read more about this under the section “Commercial activity”.
If the organisation’s income is primarily membership fees, donations, collections and/or voluntary efforts, this will count in favour of the organisation being considered tax-exempt. If individuals or enterprises are entitled to receive a proportion of the surplus or to take over assets if the organisation is wound up, it's more likely that the organisation will be considered to have a commercial purpose and thus be liable to tax.
A generally accepted “benevolent” purpose is not necessary in order to be considered a tax-exempt organisation. An organisation with a controversial purpose may also come under the provision on condition that the organisation does not have a commercial purpose.
For benevolent and charitable institutions or organisations some beneficial special rules may apply, which will be described later.
The tax office decides whether or not an organisation is considered tax-exempt. Contact the tax office for an assessment if you're in any doubt.
The following types of income are tax-free for tax-exempt organisations
- Membership fees
- Entry fees
- Gym membership fees
- Ticket revenue from events
- State subsidies
- Outright donations and grants
- Income from members’ meetings (club evenings, meetings, functions)
- Income from individual, temporary activities and arrangements, such as garage sales
- Sales of supporters’ clothing and equipment