German Fiscal Concept
Art. 1
Fiscal Advantages
Example: A married person spends 2 million euros in the foundation's basic assets, which can be distributed free from fiscal duty in the course of 10 years. In addition, 20 % of the total amount of income per year are possible as ongoing donation and are immediately relevant for tax purposes. In comparison, stock corporations can only claim taxes for endowments (as special expenses or operating expenses) p.a. as follows: either 20 % of the total earnings (operating profit) or 4 ‰ of the sum of all sales, plus the wages and salaries spent during the calendar year (Section 10b para. 1 s. 1 German Income Tax Act (EStG)).
1 x € 2 mill. = 10 Y. distributable tax-exempt
Ongoing donations = 20 % of private income = 20 % of operating profit
or 4 ‰ of total sales + wages + salaries both 100 % exempt from taxes!
Tax savings after donation by Example Ltd.
State contributes ≈1/3 of the endowment of € 2 mill. Therefore, the entire amount of € 659,500* resulting from these tax savings can be reinvested–asa cash fund bundle at 100 % exempt from taxes! (arbitrary sample calculation 1).
Note: Sample calculation 1 was made based on the trade tax assessment base for corporations of 3.5 %, the tax provision option and the trade tax rate of currently 490 % in Munich, resulting in trade-tax charges of 17.150 %. The taxable income (of corporations) on the other hand are subject to a fixed corporate tax rate of currently 15 %, plus an additional solidarity surcharge of 5.5 % resulting in the corporate tax of 15.825 % used in the sample calculation.
Art. 2
Tax Differentiation
As opposed to corporations, private individuals as well as sole traders an
partnerships (German legal forms GbR, OHG, KG) can spread the contributions to the foundation's assets over 10 years. However, if the donations to basic assets as per Section 10b para. 1a German Income Tax Act (EStG) are not used within these 10 years, they are transferred to the general, unlimited donation carry over as per Section 10b para. 1 German Income Tax Act (EStG) and are therefore not lost.
Note: As opposed to corporations, partnerships under German law are not subject to income tax - only their partners in their capacity as natural persons, who have to pay taxes on their profits or share in profits from the company. Therefore, it is the company and not a sole trader or entrepreneur in a partnership who is liable to corporate tax.
Final remark: As per Section 58 no. 6 German Fiscal Law (AO), FEAT is allowed to use up to 1/3 of its annual earnings to entertain the respective donor and his/her closest relatives in a suitable way.
On behalf of all employees of our foundation, I extend our sincerely gratitude for the honorable endorsement of all our committed supporters.
© LP
