Extension of tax donation incentive planned

In early July 2023, changes planned in a ministerial council presentation were presented in connection with expanding the tax donation incentive. These changes are intended to significantly simplify and expand the tax donation incentives. The following is a summary of the key points of the planned changes.

Expansion of the list of eligible donations

It is intended that in the future the tax-deductibility of donations will be linked to the non-profit purposes under § 34 BAO, and that consequently the following areas should also be included in the scope of the tax-deductibility of donations. In the education sector, the extension of the tax-deductibility of donations is intended to meet a long-standing demand in the field of elementary education and moral education, as well as e.g. in adult education. Public kindergartens and schools are therefore to be considered as eligible institutions ex lege. However, school fees and course fees are not to be tax-deductible as donations.

In the field of sports, with the exception of disability sports associations, there has so far been no grant funding. In the future, sports will also be considered a grant-eligible purpose – the data transmission should at best be possible centrally through the umbrella and specialist associations.

In the field of art and culture, recognition as a beneficiary of donations has previously been linked to conditions such as the need to be affiliated with federal or state funding. This requirement will no longer be necessary in the future.

With the general linking to charitable purposes under § 34 of the BAO, further eligible purposes such as child, youth and family care, human rights and women’s empowerment, as well as consumer protection, are now to be included in the donation eligibility.

Despite the intended beneficial benefits, it should not be forgotten that organizations serving the public interest are only allowed to receive donations; the organization’s objective must also be consistent with the Austrian legal system. Finally, particular attention must also be paid to the proportionality and effectiveness of the intended purpose.

Procedural simplifications, simplifications and protection against abuse in the grant of donations

Until now, entry into the donor list had generally required three years of activity in the eligible field; in the future, one year of activity will suffice. In addition, instead of the confirmation by an accountant (which is required to audit the financial statements or annual report), a simplified reporting procedure via a tax advisor is being considered, which is intended to provide financial relief, in particular for small associations. Furthermore, the previously required application for renewal will now be automatically carried out through notification by a financial trustee.

Simplifications are also envisaged with regard to the requirements for donation collecting associations and funding bodies, with the aim of achieving uniformity.

To improve the abuse protection related to donation benefits, legal consequences and liability provisions are provided for abusive practices – specifically in cases of incorrect donation data and donation confirmations.

Reform of tax-exempt grants to non-profit foundations

The so-called "Sunset Clause" (which refers to the limitation of statutory provisions with the aim of improving state regulation) currently in place for the deductibility of contributions to the assets of non-profit foundations that pursue charitable purposes is to become permanent. Furthermore, the maximum limit of €500,000 is to be raised and a possibility to deliver lectures is to be created (and the use of funds is to be made more flexible), so that the establishment of non-profit foundations becomes more attractive.

Modernization of nonprofit law and legal certainty

The income tax-free amounts already provided for in the association guidelines for payments to association officials and members should be enshrined as a large and small "voluntary allowance" in the Income Tax Act.

The modernization also provides that minor statutory defects that are present in the actual nonprofit management should be remediable retroactively. In the future, exceptions to permits for economically harmful businesses and commercial enterprises may also be granted with retroactive effect.

Cooperations between non-profit and non-profit organizations are to be considered harmless under certain conditions.

It is also planned to increase the turnover limit for the automatic exemption for enterprises harmful to the environment from €40,000 to €100,000.

In addition to technical simplifications regarding umbrella associations and holdings, it is also planned that in the event of dissolution or the elimination of the intended purpose, up to 10 years of additional taxation may occur if the funds were not allocated to non-beneficiary purposes. We will keep you informed about the further legal process.

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