Volunteering and Taxes in Germany – Everything You Need to Know

Many German citizens engage in voluntary work. People are actively involved in fire departments, sports clubs, churches, or cultural and social institutions. They do this primarily out of passion and joy in their work – because without volunteers, many things would not function as well. To reward citizens’ engagement and encourage others to participate voluntarily, the federal government has initiated a series of tax changes. (These include the volunteer allowance, the reduction of bureaucracy for non-profit organizations, or the expansion of charitable purposes. In today’s article, we provide an overview of the most important information on the topic of volunteering and taxes in Germany. 

Deduct volunteer work from taxes – how much is it?

Every German citizen who volunteers or participates in a charitable organizationis entitled to a tax-free volunteer allowance of 840 euros per year. This rate will be increased starting in 2021 (tax-free allowance 2021) – at that time (since 2013), the volunteer allowance was 720 euros per year. Neither social security contributions nor taxes had to be paid for this.

Volunteering and taxes – what requirements must be met?

To receive a tax-free flat-rate for volunteer activities, several conditions must be met. These relate among other things to:

• the exclusive exercise of a part-time activity in the idealistic sector of the organization,
• Promotion of charitable, philanthropic, or church goals,
• Affiliation with the volunteer sector of a charitable, benevolent, or church organization.

Tax declaration volunteer work – the amount of the volunteer allowance

In 2013, the federal government in Germany decided to honor the social contribution of volunteers and further promote it with a volunteer allowance. This is a kind of expense allowance for the association. The amount of the volunteer allowance is tax-free and exempt from social security contributions. This means that non-profit organizations can pay compensation for volunteers and organization members without having to pay taxes in Germany. The tax-free volunteer allowance enables non-profit associations to financially reward their volunteer staff without the association or the beneficiary having to pay taxes.

Deduct volunteering from taxes – reduce unnecessary bureaucracy

Smaller non-profit associations and other tax-privileged organizations receive more time to use their funds. For corporations with an annual turnover of less than 45,000 euros strict standards and deadlines for the use of funds no longer apply. (This makes it possible to use the received funds for statutory purposes beyond the two-year period that still applies to larger organizations. This gives significantly more freedom and greatly relieves associations, organizations, and corporations.

Voluntary work and taxes – exemption limit for economic activities

The exemption limit for economic activities has been raised from 35,000 EUR to 45,000 EUR per year. This change particularly frees smaller clubs whose economic activities are not subject to corporation and trade tax (for income up to a certain level) from tax liability (volunteer tax exemption).

Tax-free volunteering – cooperative collaboration

Non-profit corporations can cooperate within the framework of a collaboration and thus cooperate much better and more effectively to promote their tax-privileged purposes. This type of collaboration has so far failed due to the principle of so-called immediacy, according to which the organization had to pursue its goals itself. The planned change will enable tax-privileged corporations to outsource activities, for example, to subsidiariesDie geplante Änderung wird es steuerbegünstigten Körperschaften ermöglichen, Tätigkeiten z.B. an Tochtergesellschaften auszulagern, without risking losing their non-profit status.

Tax-free volunteer allowance – expansion of charitable purposes

With the Annual Tax Act 2020, the number of charitable purposes in the Tax Code is expanded. What does this mean for you? Associations and corporations are considered – tax-wise – as charitable if they pursue goals including:

• Climate protection
• the promotion of free broadcasting,
• help for people who are discriminated against due to their gender identity or sexual orientation,

• the care and maintenance of cemeteries,
• beautification of the city.

It is also planned to expand the catalog of so-called special-purpose enterprises, which are eligible for tax relief (volunteer tax benefits). These include, for example:

• Facilities for refugee assistance,

• Facilities for supporting people with mental illnesses,
• Facilities for supporting people with disabilities.

Voluntary work tax-free – digitalization equals transparency

The central beneficiary registry located at the Federal Central Tax Office finally provides transparency in the charitable sector and public access to information about who is involved where and for what purpose. Citizens, but also companies, can inform themselves reliably and in a structured manner in advance of donations.

Tax-free allowances for volunteer activities – Summary

The German state strives to care for its citizens and assist them in every way. This statement does not only refer to the tax on volunteer activities but also to the topic of taxes more broadly. The taxation process in this country is simplified to such an extent that every resident can seamlessly submit all relevant documents and sign applications to receive their income tax refund for the year. If you have trouble calculating the final amount of your refund, it is a good idea to use a special tool, such as the free tax software Taxando for Germany. Taxando is an intuitive, easy-to-use, and secure application that keeps your tax return confidential.