What are the consequences if a club loses its non-profit status?
May 21, 2022 | 40,00 EUR | answered by Dora Krause
Dear tax advisor for association taxation and charitable status,
I am reaching out to you as a board member of an association, as I am confronted with the issue of charitable status and have some uncertainties. Our association has been dedicated to social projects for many years and has so far benefited from the tax advantages of charitable status. However, we have heard that there can be consequences if an association loses its charitable status.
We are aware that charitable status is granted under certain conditions and that the association must regularly review and comply with these conditions. This includes the proper use of funds as stated in the statutes, transparency in the association's work, and the obligation to maintain proper accounting records. We are unsure if we meet all the requirements and if there may be weaknesses in our association's work that could lead to a loss of charitable status.
Therefore, we have the following questions: What specific consequences would it have for our association if we were to lose charitable status? How would this affect our tax situation and what financial implications could we expect? Are there ways to maintain or regain charitable status if problems have already arisen?
We are concerned about the potential consequences of losing charitable status and would like to take timely action to avoid any problems. Therefore, we ask for your expert assessment and specific guidance on how our association should proceed.
Thank you in advance for your support.
Sincerely,
Christine Weise
Dear Mrs. Weise,
Thank you for your inquiry regarding the charitable status of your organization. It is understandable that as a board member, you have concerns and are thinking about the possible consequences of losing charitable status.
An organization that loses its charitable status may face various consequences. Firstly, the organization loses the tax benefits associated with charitable status. This means that donations are no longer tax-deductible and the organization no longer enjoys tax advantages. Additionally, donations and grants already received may be required to be returned. The organization may also become subject to corporate tax, leading to additional financial burdens.
To maintain or regain charitable status, it is important to consistently meet the requirements for charitable status. This includes the proper use of funds according to the organization's statutes, transparency in the organization's activities, and proper bookkeeping. If you are unsure whether your organization meets these requirements, I recommend having an experienced tax advisor specializing in non-profit taxation and charity review your situation.
If problems have already arisen or weaknesses in the organization have been identified, it is advisable to take action early. One possible solution could be to take the necessary steps to meet the requirements for charitable status and potentially make a voluntary disclosure to the tax authorities.
I strongly urge you to seek professional support from a tax advisor specializing in non-profit taxation and charity to analyze your situation and take appropriate measures. This will help you identify and avoid potential problems early on.
I hope that this information has been helpful to you. If you have any further questions, please feel free to contact me.
Sincerely,
Dora Krause
