A nonprofit association has four areas: the nonprofit sphere, asset management, special-purpose operations, and commercial operations. Each area has its own tax rules. That is why we keep income and expenses separate from the start.
Membership fees, donations, and grants usually belong to the nonprofit sphere, interest and rent to asset management. Admission to sports events or course fees can be part of a special-purpose operation. Club parties, the clubhouse, and advertising are often commercial operations; the tax advisor assesses the allocation.
We record donations by donor, with date, amount, and type of donation. Donation receipts go through the tax advisor, who prepares them using this information. Only an association with a valid notice from the tax office confirming its nonprofit status may issue them.
Coaches, instructors, and group leaders are often paid under the coach allowance, known in German as Übungsleiterpauschale. Other volunteers can receive the volunteer allowance, board members only if the articles of association allow it. Both are free of tax and social security contributions up to an annual amount, even alongside a mini-job.
We process these allowances and track the annual limit for each person. Each person confirms in writing to the association that they are not already using the allowance elsewhere. The tax advisor assesses whether an activity qualifies.
We keep the books of associations without nonprofit status like those of any other business, reconciled every month. We keep membership fees and income from services to members separate. The tax advisor assesses how they are taxed.
