NPO

Direct donations to foreign NPOs

In our new blog series, we are looking at how foreign and internationally active non-profit organizations (NPOs) can benefit from the tax privileges NPOs in Germany. This is part two, and explains the opportunity foreign NPOs can have in receiving deductible donations.

Within certain limits, individuals and companies can claim tax deductions for direct donations to German NPOs. The deduction for direct donations to foreign NPOs depends on where the foreign NPO has its registered office and place of management, and whether it is subject to limited tax liability in Germany. Thanks to reforms on non-profit organizations, the ‘beneficiary register’ (“Zuwendungsempfängerregister”) is to be introduced  from 2024 and will facilitate this in some cases.

Donation deduction to foreign NPOs

The deduction of donations for direct donations to an NPO with its registered office and place of management in another EU or EEA state („European NPO“) is possible. To do this, the European NPO needs to be either recognized as a charitable organization in Germany; alternatively, the donor must be able prove that it operates as a charitable organization according to German concepts on such matters.

Currently, only those European NPOs subject to limited tax liability in Germany due to domestic income can be recognized as charitable (see part one of our blog series for more).

European NPOs collecting donations but not generating income in Germany are not subject to limited tax liability. Therefore, they do not have the possibility to have their statutory charitable status determined separately. In these cases, donors must provide proof to their competent tax office that the European NPO is a charitable organization according to German standards. Otherwise, they cannot deduct the donation as a special expense. Additionally, there is also no protection of legitimate expectations in favor of the donor, which otherwise results from the donation confirmation. If the European NPO does not use the donation funds in a charitable manner according to German understanding, the donation deduction can be subsequently denied. This makes it difficult for European NPOs to collect direct donations in Germany.

Beneficiary register as of 2025

As previously mentioned, German charity law is now setting up a ‘beneficiary register’ for the purpose of deducting donations. The Federal Tax Office will maintain the register (as of 2025). In addition to German accredited NPOs, all European NPOs will also be able to be entered into this register. This applies regardless of whether the European NPOs are subject to limited tax liability in Germany or not. However, as a prerequisite it is necessary for them to receive donations from Germany, and they also have to operate on a charitable basis according to German standards. European NPOs entered in the register may issue donation statements in accordance with the official form for donations they receive from 2025 onwards. A donation to registered European NPOs will then be deductible in the same way as it is to German NPOs. The register will be open to public inspection.

No deduction for direct donations to foreign NPOs

In contrast, individuals and companies cannot claim direct donations to NPOs from third countries for tax purposes. This is true even if the NPO is a charitable organization according to German concepts.

Therefore, German entities are often used as intermediaries. Larger international NPOs typically maintain their own charitable NPOs in Germany (such as  “Amnesty International Deutschland e.V.”, “Deutsches Komitee für UNICEF e.V.”, “CARE Deutschland e. V.”, and “Ärzte ohne Grenzen e.V.”). These are accredited in Germany and can issue ‘donation receipts’. A German NPO can pass on the collected donations to the NPO based abroad to finance the charitable activity (see part three of our blog series).

There are also German NPOs that direct donations to the desired foreign NPO (such as the Maecenata Foundation). These NPOs usually keep a small part of the donation for themselves to cover their administrative expenses. In this way, donations can be made abroad without losing the donation deduction.

Recommendations

European NPOs collecting donations and are subject to limited tax liability in Germany should apply for a special determination of their charitable status at an early stage. European NPOs must meet the same requirements as German NPOs (see part one of our blog series). The articles of association must sufficiently take into account both the German and the charity law requirements of the home country. There is, therefore, no way around consulting expert advisors from both countries. In addition, the articles of association should be coordinated with the tax authorities in Germany.

In practice, due to the increased verification requirements, direct donations to non-recognized European NPOs are usually not made. Starting in 2024, European NPOs meeting the requirements of German charity law will be able to register in the newly created ‘beneficiary register’ (“Zuwendungsempfängerregister”). They will then be able to issue ‘donation receipts’ for donations from 2025 onwards, which will entitle the donors to deduct donations. For European NPOs not subject to limited tax liability in Germany, but want to use the German donations market before 2025, it may make sense to consider establishing a German NPO.

For NPOs from third countries, on the other hand, the establishment of a German corporation is currently the only way to collect direct donations in Germany, which the donor can deduct from German tax.

German version 

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    Eva-Maria Kraus ist Rechtsanwältin, Steuerberaterin und Assoziierte Partnerin am Standort Bonn. Ihre Tätigkeitsschwerpunkte sind die umfassende fortlaufende Beratung von Stiftungen und anderen gemeinnützigen Organisationen.

    T +49 228/95 94-0
    eva-maria.kraus@fgs.de

    Timur Nayin ist Rechtsanwalt am Standort Bonn.

    T +49 228/95 94-0
    timur.nayin@fgs.de