Tax tip: Be careful with foreign donations

The need to support charitable work through a donation transcends borders. After all, so are crises such as climate change, famine or war. However, donations abroad harbour tax pitfalls.

In Germany, donations to charitable organisations up to a certain amount are generally deductible as special expenses in the income tax return. Since 2010, this also applies to foreign donations to charitable organisations from EU and EEA member states, but not from third countries.

However, foreign donations are only deductible in Germany for residents if the charitable donation recipient based abroad fulfils the requirements of German charitable law and donors can prove this to the German tax office.

These requirements include, for example, the legal form of the organisation and the specific articles of association drawn up for the particular purpose.

According to ECJ case law, the recognition of an organisation as a non-profit organisation in a member state does not automatically result in recognition in Germany. Foreign organisations typically follow the law of their country of residence. Furthermore, the German tax authorities often hold restrictive views, some of which are questionable under European law, on what is required to fulfil German non-profit law.

In order not to jeopardise the deductibility of donations, donations made abroad should be checked in advance with regard to tax law, together with the corresponding obligations to provide evidence. As an alternative, donations to organisations that are recognised as charitable in Germany are recommended. In accordance with charitable law, these organisations can either be active abroad themselves or finance foreign charitable organisations. Accordingly, it can be advantageous to pass on donations via such intermediaries to organisations recognised as charitable abroad.