In light of the current developments in Ukraine, many people want to support those affected through donations. In order for these donations to be tax-deductible, a number of requirements must be met. Below, we provide an overview of the most important tax aspects of donations.
Donations are generally qualified as private expenses for tax purposes and are therefore not tax-deductible. An exemption applies for donations to so-called donation-beneficiary institutions (“spendenbegünstigte Institutionen”). These institutions are either listed directly in the Austrian Income Tax Act (eg Austrian National Library, Federal Museums, Federal Monuments Office or universities) or they are included in the list of beneficiaries of donations maintained by the Federal Ministry of Finance. Most of the larger charitable organizations and aid organizations in Austria are included in this list.
If an organization is neither stated in the Austrian Income Tax Act nor included in the list, donations to such organization cannot be deducted for tax purposes.
The tax relief for donations should not be confused with the Austrian Donation Certificate (“Spendengütesiegel”). The Austrian Donation Certificate is a voluntary seal of quality for the appropriate, efficient, and transparent use of the donations, but has no influence on the tax deductibility of the donations. Many organizations are both, included in the list of organizations that are eligible for tax deductible donations as well as bearers of the Austrian Donation Certificate. For the tax deductibility of the donations, however, only the qualification as a donation-beneficiary institutions is decisive.
Donations from business assets can be considered in the form of monetary donations as well as in the form of donations in kind. In case of donations in kind, the fair value (market value) of the goods is to be recognized as a business expense. The granting of the right to use certain assets for free (eg a company provides the usage of a truck to a donation-beneficiary institutions for free) also represents a tax-deductible business expense to the extent of the expenses actually incurred by the company.
The amount of tax-deductible donations is limited to 10 % of the tax profit of the corresponding fiscal year. Donations in excess of the threshold are of course possible, but are no tax deductible. For the tax deductibility of donations, a detailed documentation is recommended (confirmation of the receiving organization, proof of market value for donations in kind, etc).
In addition to donations, companies also have the option of claiming assistance in the form of monetary or material assets made in connection with acute disasters (both in Austria and abroad) as advertising expenses. Such an acute disaster can be in the form of natural disasters as well as warlike events or humanitarian disasters (such as e.g. refugee disasters). A prerequisite for the tax deductibility is the existence of an advertising effect (however, the Austrian tax authorities generally do not overstress this requirement). Such an advertising effect exists, for example, if the assistance is part of a media coverage, in the case of references on posters, in displays or on the homepage of the company or in the case of a corresponding notice in the context of self-promotion for the company. In contrast to deductible donations, such assistance is not limited in amount.
For VAT purposes, it is possible (under certain conditions) to qualify the supply of relief goods by companies in the context of national and international aid programmes in emergencies as non-taxable transactions. This could apply both to the supply of relief goods against payment as well as a supply performed free of charge.
Donations by private individuals to donation-beneficiary institutions can be claimed as special expenses. Here, too, a limit on deductible donations of 10 % of the total amount of taxable income for the respective calendar year applies. Donations to charitable institutions or aid organizations are only tax-deductible in the form of monetary donations (but not in the form of donations in kind).
In the case of donations from private individuals, the receiving organization is generally obliged to report the donation electronically to the tax authorities so that they are automatically taken into account in the income tax return of the donor. The donors must provide the receiving organization with their first and last name as well as their date of birth so that a correct allocation of the donations is possible. If the data is not disclosed, there will be no automatic donation notification and, thus, the donation will not be considered in the tax return.
Due to the automatic donation notification, the issuance of a separate donation confirmation is no longer necessary. In practice, however, many organizations continue to (voluntarily) issue such confirmations.
In the case of tax-exempt non-profit associations, the question of the tax deductibility of donations usually does not arise. In view of the non-profit status of the donating association for tax purposes, however, it must be ensured that the possibility of passing on donations is included in the respective legal basis (statutes or bylaws) of the association. In addition, the receiving organization must be a donation-beneficiary institution and there has to be an (at least partial) overlap of the respective charitable purposes of the donating association and the receiving organization. Therefore, an adjustment of the statutes or bylaws may be necessary before the donation is made.
Donations can be deducted for tax purposes by both companies and private individuals, however, certain conditions have to be meet. Our experts are happy to answer any questions that may arise in this context. For companies, there is also the possibility of claiming assistance in the event of a disaster as advertising expenses for tax purposes, provided that there is an advertising effect.
Christoph Hofer ist Director in der Steuerberatung bei Deloitte in Salzburg. Als Steuerberater liegen seine Schwerpunkte im Bereich Steuer-Compliance von Kapitalgesellschaften. Weitere Tätigkeitsschwerpunkte liegen im Bereich des steuerlichen Gemeinnützigkeitsrechts und der Vereinsbesteuerung. Er verfügt über Erfahrung in der Beratung von Familienunternehmen und Vereinen.