Tax and law

The state recognises the proclamation mandate of the churches as an expression of religious freedom and cooperates with them in many ways in social and other areas. As a fiscal body and as a member state bound by competition law, it confronts the churches and their written and unwritten subdivisions with an analogous application of the taxation regime for the public sector. In this context, the churches in Germany are also increasingly affected by the paradigm shift in tax enforcement and are coming under the scrutiny of the (German) tax authorities. In view of the exposed position of church institutions in the public eye, reliable fulfilment of tax obligations is necessary. The new regulation on the corporate property of the public sector in § 2b UStG leads to a significant expansion of the tax obligations and to new delimitation issues. Church legal entities should take the aforementioned new regulation as an opportunity to review their range of activities in a timely manner, also with a view to possible errors in income taxes, which may also be affected here. The transition period of the new regulation of § 2b UStG offers a unique opportunity to take stock of and weigh existing and future tax risks and opportunities within the framework of the so-called “tax compliance” but also for tax optimisation, i.e. use of tax design margins, tax reductions and exemptions in the sense of economic efficiency. In addition to the creation of a tax compliance management system, this includes other special tax issues, such as:

• the assessment of ecumenical cooperations in private legal form under company law or the law of obligations,
• the restructuring of church facilities and assets,
• the establishment of foundations,
• the taxation of welfare facilities or
• the optimisation of land transactions.

Cooperations of the organised church from the perspective of tax law - possibilities, risks and opportunities

Neighbourhood assistance, community centres, railway station missions, women's shelters... - more and more church communities are considering cooperation in order to support each other in the fulfilment of their diverse religious tasks and fields of activity. Such co-operations can take various forms - on a public or private law basis - as well as in different corporate structures or merely on a contractual basis. Different tax risks and opportunities must be taken into account. For example, our tax experts Philipp Haaf and Christian Bischoff advise against choosing a civil-law partnership as the company form. It is much more advisable to establish an independent corporation under public law or co-operations based on public law contracts, as these continue to enjoy tax privileges. Further information and recommendations from our tax experts can be found in the 68th volume of the Zeitschrift für evangelisches Kirchenrecht published by Mohr Siebeck Verlag. (68th volume / issue 1, p. 69-101).

VAT, property tax and payroll tax - when exactly is which tax due, what do you need to pay attention to and what do you need to do? Many church administrations also face this challenge.

And they are also increasingly affected by regulatory changes and increasing requirements. In the video, our tax expert Philipp Haaf explains the relevant challenges, how to overcome them and how to claim possible tax exemptions.