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What are donation receipts?
Donated funds do not need to be taxed by either the donor or the club, which makes them attractive for both sides. Donations are defined as special expenses, allowing the donor to benefit from tax deductibility. To claim the amount, the donor needs a proper donation certificate, which can only be issued by non-profit organizations. Depending on the type of donation, there are templates for donation receipts provided by the Federal Ministry of Finance, which can be downloaded free of charge. These receipts are therefore official documents.
The different types of donations
Unlike sponsorships, donations are voluntary contributions with no return services involved. Since they are classified as special expenses, donations to non-profit clubs are tax-deductible.
This means: The donation amount is 100% deductible from taxable income, provided the donor gives no more than 20% of their total income. Non-profit sports clubs may issue donation receipts – so-called contribution certificates – which are necessary for tax deductibility. Donation law distinguishes between four types of donations:
1) Monetary donations
Monetary donations are transfers or cash payments that a donor voluntarily gives without compensation. The amount received must be correctly stated on the donation receipt. The donor’s first name, last name, and address must also be correctly listed on the certificate.
2) In-kind donations
In-kind donations are goods such as clothing or sports equipment. The donation receipt must include the donation’s value and information on how the value was determined. For new items, an invoice can serve as proof. Used goods must be valued by the club itself, possibly using depreciation tables for guidance.
3) Expense donations
Expense donations occur when a club member voluntarily waives reimbursement of expenses. In this case, the donor can receive a contribution certificate. To issue an expense donation, certain requirements must be met:
a) The club must have promised the donor financial reimbursement
b) The waiver must be voluntary and in writing
c) The club must be financially able to provide the reimbursement
Note: Reimbursement entitlements must be stated in the club’s bylaws. In addition, the donation receipt must clearly show that it refers to the reimbursement of claims.
4) Compensation donations
In this case, the donor gives the club their working time and waives the agreed payment. This too can be documented with a donation receipt and later declared as a special expense in the tax return. Condition: Before carrying out the work, the person must have agreed on compensation with the club, which they then voluntarily waive without any return service.
Requirements for Issuing Donation Receipts
The following requirements apply to issuing contribution certificates:
- The club must have non-profit status, proven by an exemption notice from the tax authorities.
- Donations must directly support the tax-advantaged charitable purpose.
- Monetary or in-kind donations must be given without any return benefits.
- The donation must be voluntary.
Non-profit status
The club’s non-profit status must be confirmed through an exemption notice. This notice is issued by the responsible tax authorities and is valid for five years. After that period, the exemption must be reapplied for and reviewed by the tax office.
Charitable purpose
The club must always be able to demonstrate that the donation serves the charitable purpose. In principle, donations may not be used to build up the club’s assets. Exception: if the donor explicitly requests asset accumulation and documents this intention in writing.
Voluntary nature of the donation
A donation receipt may only be issued if the donation is made voluntarily and without any return benefits. Benefits in return, such as tickets for a fundraising event, are not tax-deductible. Such typical sponsorship measures are not considered tax-deductible for either party.
