Update: Articles of association for foreign NPOs

02.02.2023 | FGS Blog

Under certain conditions, non-profit organizations (NPOs) resident in the EU or the EEA (i.e., not having their registered office or management in Germany) can benefit from the German tax privileges for NPOs. This applies in particular to NPOs that generate income in Germany. In addition, fundraising in Germany is much easier for recognized NPOs. But to be recognized, an NPO must meet the requirements under German charity law and reflect them clearly in its articles of association. That sounds simple, but in practice it presents some challenges, as confirmed by Germany’s Federal Tax Court in a recent judgment (18 August 2022 – V R 15/20).

Articles of association – a hurdle for foreign NPOs

Articles of association play a pivotal role in the German charity law. Under the law, a corporate entity may have charity status only if its articles of association state both the charitable purposes of the NPO (the same applies to benevolent and religious objectives) and the activities it undertakes to achieve this purpose in enough detail for the competent tax office to verify the non-profit status on the basis of the articles of association alone. Solely the requirements under the German charity law are decisive. This applies not only to German NPOs but to foreign ones too, as the Federal Tax Court recently confirmed (judgment of 18 August 2022 – V R 14/20, cf. previous Federal Tax Court judgment of 25 October 2016 – I R 54/14). Unfortunately, there are no reliefs or exceptions for NPOs recognized abroad, even though the criteria for tax privileges are similar in many countries (third-party benefit, earmarking of funds, prohibition of profit distribution, etc.). To make matters trickier, Germany demands in principle that the articles of association contain the provisions set out in the model articles of association (Annex 1 to Sec. 60 of the German General Tax Code (Abgabenordnung – AO)). In particular, the articles of association must ensure that the NPO’s funds are permanently dedicated to the pursuit of charitable purposes.

In its recently published judgment of 18 August 2022 (V R 15/20), the Federal Tax Court made clear that the German legislature is not obliged to recognize non-profit status under foreign law, including EU law. The legal requirements could not be relaxed in light of the EU’s fundamental freedoms.

The Federal Tax Court’s strict perspective

The case dealt with by the Federal Tax Court centered on the recognition of an Austrian foundation. According to its articles of association, it pursues charitable purposes by supporting artists who “demonstrably need financial support in order to practice their art”. The articles of association referred to the statutory definition of a benevolent purpose in Sec. 37 of Austrian General Tax Code (Bundesabgabenordnung). Charitable status was denied because the articles of association did not define the beneficiaries’ need for support in a way comparable to German law. Although the articles of association stated when an artist was considered to be needing support, this standard did not correspond to the definition of “persons in need of economic assistance” set out in Sec. 53 no. 2 AO. This regulation measures a person’s needs against the “means intended or suitable for the provision of subsistence” and is linked to the German social law limits.  It also sets out requirements for the furnishing of proof. 

The Federal Tax Court does not explain how, in its view, the benevolent purpose of a foreign NPO could in practice be sufficiently presented in its articles of association. It does not consider it sufficient to state that only beneficiaries in demonstrable need of support will receive funding. German NPOs regularly refer to Sec. 53 AO in their articles of association. A corresponding reference will generally not be possible in the articles of association of a foreign NPO, and therefore cannot be required. Nor does it make sense to include the provisions of Sec. 53 no. 2 AO in the articles of association, because they refer to limits and benefits received under German social law. The requirements must not be overdone. Otherwise, NPOs would not be able to meet German requirements. Therefore, in our opinion, it should be considered sufficient if the articles of association refer to a person’s necessary subsistence as the measure of his or her need for financial support.   


It remains difficult for foreign NPOs to meet German requirements regarding the articles of association. The recent decision of the Federal Tax Court demonstrates once again the narrow national thinking that still abounds in German case law. A current initiative is aiming to harmonize the law of NPOs at the European level. However, nobody expects the mutual recognition of non-profit status to become reality any time soon.

NPOs from the EU/EEA with domestic income that wish to receive charitable status and be exempted from income tax in Germany, or that would like to receive donations in Germany, should carefully examine their articles of association. The fact that different legal systems use the same terminology is not sufficient for recognition.

Unlike German NPOs, foreign NPOs cannot simply refer to the law and its interpretation in their own country (a reference to the law in the NPO’s country of residence is usually not sufficient, and a reference to German law will in many cases not be enforceable). They will therefore have to define the measure for their beneficiaries’ need for support more precisely in their articles of associations, in a manner comparable to German law. What’s more, the regulation will have to comply with the legal systems of both countries. In some cases, it may be advantageous to establish a new entity in Germany (e.g. a subsidiary), which can then pass on funds to the entity abroad.

Please also read our posts on tax privileges for foreign NPOs in Germany, direct donations to foreign NPOs and the cross-border transfer of funds to foreign NPOs.