Basics of donation law and types of donations
1. Meaning of a donation and related distinctions
Donations are voluntary contributions made without legal or economic consideration in return.
They may take the form of money or property.
For tax deduction, the following distinctions matter:
- Providing free use of property or unpaid services does not itself constitute a deductible contribution under § 10b(3) EStG.
- Membership contributions must be distinguished from voluntary donations, but may also be deductible under § 10b EStG.
- Statutory exclusions apply to certain membership contributions, for example those paid to sports clubs (§ 10b(1), sentence 8 EStG).
A payment obligation under an organisation’s constitution does not generally exclude deduction of a membership contribution. The conditions and exclusions of the applicable tax provision are decisive.
2. Donations in the tax context (§ 10b EStG)
A contribution is not tax-deductible merely because it is called a donation. In particular, the recipient, purpose and evidence must meet the statutory requirements.
Eligible recipients may include:
- tax-privileged bodies pursuing public-benefit, benevolent or religious purposes,
- public-law bodies,
- political parties within the meaning of the Political Parties Act, subject to the separate conditions and limits in §§ 10b(2), 34g EStG.
These notes focus on donations to tax-privileged charitable bodies within the meaning of §§ 51 et seq. AO.
3. Classification under civil law (§§ 516 et seq. BGB)
Under civil law, a donation is a gift within the meaning of §§ 516 et seq. BGB.
Its characteristics are:
- an asset benefit is conferred,
- no consideration is given in return,
- the donor permanently parts with the asset.
4. Types of donations
4.1 Monetary donation
A monetary donation transfers an amount of money to the recipient without consideration, for example by bank transfer or cash payment. Proper evidence is required for tax deduction.
4.2 In-kind donation
An in-kind donation transfers ownership of a particular item, such as sports equipment, IT hardware or office supplies, without consideration.
Ownership must pass to the recipient.
4.3 Donation of used items
In-kind donations are subject to the valuation rules in § 10b(3) EStG. For privately held items, fair market value applies if a sale at the time of the donation would not trigger taxation. Otherwise, the statutory restrictions based on adjusted acquisition or production costs apply.
Where fair market value is applicable, relevant factors include:
- the original purchase price when new,
- age and condition,
- remaining useful life.
4.4 In-kind donation from business assets
For property donated from business assets, the VAT incurred on withdrawal may, under the statutory conditions, be taken into account alongside the withdrawal value.
4.5 Donation of services for tax purposes
Services alone are generally not deductible donations.
However, if a service is provided with an entitlement to payment that is subsequently waived, a monetary donation may exist for tax purposes if the relevant conditions are met.
5. Donation by waiving expense reimbursement
Such a donation may arise when a person waives a previously validly granted claim for reimbursement of expenses, such as travel costs, against a recipient entitled to receive tax-deductible contributions. Simply forgoing reimbursement to which no entitlement ever existed is insufficient.
Requirements for tax recognition:
Existing legal entitlement
The reimbursement claim must have been validly granted by contract or the organisation’s constitution before the activity giving rise to the expense begins. It must not be granted on condition of a later waiver (§ 10b(3) EStG).
Voluntary waiver
The claim must be waived voluntarily and unambiguously, generally in writing.
Genuine and economically payable claim
The claim must genuinely exist and be economically payable. The recipient’s ability to pay, the proximity of the waiver to the due date and proper documentation are important for recognition.
A receipt for a tax-deductible contribution may be issued only if all requirements are met.
Notice
This overview provides general information and does not replace individual tax or legal advice.
For specific questions, consult a tax adviser or the competent tax office.
