Tax Recognition of Cross-Border Donations

According to German law, up to now at least, a tax deduction for donations to a non-profit institution has only been possible if the non-profit beneficiary organization had its headquarters in Germany and fulfilled certain - admittedly strict - requirements of German non-profit tax law. The ECJ in its judgment of January 1, 2009 (re C-318/07) made some very interesting and helpful law that will favor donations abroad.


German tax law required that the organization receiving a donation must have its headquarters in Germany in order to be eligible for a tax savings donation. The ECJ considers the necessity of the domestic headquarters of the organization to be impermissible, because this violates the principle of free movement of capital. Accordingly, donations to a German charity or to another European charity are generally to be accepted as a valid donation under non-profit law. It can be somewhat complicated to check up on the eligibility of the donation but the donator has help in determining the eligibility. Your tax office can demand all proof that its deem to be important to show the eligibility of the donation. It does not violate the principle of reasonability to demand from the Member State of the donor that this administration checks if the recipient of the donation meets the requirements for domestic charities whenever a taxpayer claims a donation to an organization sited in another Member State.

Please note:

The judgment relates exclusively to donations made within the EU. The legal situation in the relationship of EU Member States to non-EU states has not changed. In these cases, the donor must continue to use special "auxiliary means" in order to be able to claim his donation as tax deductible in his native country. In general, this can be achieved in a roundabout way via a promotion association or so-called "friends of" organization, which is headquartered in the donor's native country and then transfers the donations abroad taking into account the national tax specifications.

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