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Articles 51-68 of the German Tax Code on Tax-privileged purposes (Regulation on
Taxes)

AO 1977 § 51 General
If the law guarantees a tax reduc tion because a corporate body carries out exclusively and directly
performs activities that are for the common welfare, charitable, or church-related (tax-advantaged
activities), the following regulations apply: “Corporate bodie s” are understood to include
corporations, organizations of pers ons, and estates in the sense of the corporate tax law. Functional
sub-groups (departments) of corpor ate bodies are not considered to be independently subject to
taxation.

AO 1977 § 52 Goals for the Public Welfare
A corporate body pursues goals for the Public Welfare if its activity is directed to furthering public
welfare in the material, intellectual, or moral s pheres without personal profit. Furthering the public
welfare does not occur if the circle of persons who benefit from the activity is a completely closed
circle, as, for example, by belonging to a family or to the workforce of a company, or, as the result
of its defined limitation according to geographical or occupational markers, it can permanently
remain only small. Furthering the public welfar e does not automatically result if a corporate body
supplies its resources to a co rporation under public law.
(2) In particular the following are to be recogn ized as furthering public welfare under the conditions
of Paragraph 1:
1. the furthering of science and research; edu cation and training; art and culture; religion;
understanding among peoples; development aid; protection of the environment, landscape, and
monuments; honoring of one’s country;
2. the furthering of aid for youth, aid for the elderly, public health, general welfare, and sport. Chess
qualifies as a sport.
3. the general furthering of democra tic political life in the applicable area of this law. This does not
include attempts to pursue only specif ic political interests of specific citizens or attempts relating to
the local political arena only.
4. the furthering of animal husbandry, developm ent of plant life, home gardening, traditional
customs including Carnival, Fastnacht, and Fasching, the care of soldiers and reservists, amateur
broadcasting, model airplane flying, and canine sports.

AO 1977 § 53 Charitable Purposes
A corporate body pursues the general good if its activ ity is directed toward aiding persons without
personal profit, who
1. as a result of their physical, mental, or spir itual condition require th e aid of others or
2. whose income does not exceed four times the standard rate for social welf are in the sense of § 22
of the national law on social welfare; in the case of those living alone or of heads of household the
rate is five times the standard rate rather than four times. This does not apply to persons whose
wealth suffices for sustained improvement of thei r maintenance and about whom it may be assumed
that they will use that wealth for this purpose. The income or the wealth may exceed the limits

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named here for persons whose economic situation for special reasons has become a case of need.
Income in the sense of this regulation includes
a) Income in the sense of § 2 Paragraph 1 of the income tax law and
b) other income designated for or appropriate to the financing of one’s maintenance that is
possessed by those living alone or as heads of household and the other household members. Not to
be counted as income are services from a Public Welfare Agency and, up to the amount of services
from a Public Welfare Agency, maintenance serv ices to persons, who without the maintenance
services would be eligible for social welfare aid. Claims for ma intenance are to be considered.

AO 1977 § 54 Church Purposes
(1) A corporate body pursues church purposes if it s activity is directed to furthering without
personal profit a religious group that is rec ognized as a corporation under public law.
(2) These goals include in particular the erec tion, beautification, and maintenance of houses of
worship and church community buildings; the holding of religious services; th e training of spiritual
leaders; the providing of religi ous instruction; the burial of the dead and care of funerary
monuments; the administration of church property; remuneration to spiritual leaders, church
officials and church employees; and the care of elderly and handicapped among these people and the
care of their widows and orphans.
AO 1977 § 55 Non-Profit Activity
(1) Furthering or support are defined as not for pers onal profit if personal economic goals are not the
principal goal – for example, occupational goals or other income-producing goals – and if the
following conditions are met:
1. The resources of the corpora tion may be used only for the goals set out in the bylaws of the
group. Members or participants in the society (members in the sense of these regulations) may
receive no profits and in their role s as members may receive no other sums from the resources of the
corporation. The corporation may not use its resources either for direct or indirect aid to or
furthering of political parties.
2. Upon resignation from the corporation or upo n dissolution or abolition of the organization,
members may not receive more than their paid-in capital shares and the market value of their
contributions of objects.
3. The corporation may not reimbur se any person for expenses not related to the goals of the
corporation or with dispropor tionately high reimbursements.
4. Upon dissolution or abolition of the corporat ion or upon the discontinuation of its hitherto
pertinent goals, the resources of the corporation, insofar as they ex ceed the paid-in capital shares of
the members and the market value of their cont ributions of objects, may be used only for tax-
advantaged goals (basic rule of the accumulation of resources). This condition is also met if the
resources of another tax-advantaged corporati on or a corporation under public law should be
transferred for tax-advantaged purposes.
5. The corporation must use its re sources in a timely manner for its tax-advantaged goals as defined

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in its bylaws. “Use” in this sense includes the use of resources for the acquisition or creation of
objects of wealth that serve the purposes defined in the bylaws.
A timely use of resources occurs if the resources are used at the latest in the calendar or fiscal year
following their receipt and if they are used for the tax-advantaged purposes as defined in the bylaws.
(2) Establishing market value (Section 1 no. 2 and 4) refers to conditions at the time in which the
contributed objects are delivered.
(3) Regulations that relate to the members of the corporation (Section 1 no. 1, 2, and 4) are valid for
foundations and refer to the founders and their heirs, and in professional bodies of corporations
under public law according to the type of professional body, but with the stipulation that in relation
to economic goods from the resources of a company accepted under § 6 Section 1 no. 4 items 4 and
5 of the income tax law at book value, upon removal from the corporation book value is to be used
in place of market value.

AO 1977 § 56 Exclusivity
Exclusivity occurs if a corporation follows solely its tax-advantaged goals as defined in its bylaws.
AO 1977 § 57 Direct Activity
(1) A corporation directly pursues its tax-advantaged goals as defined in its bylaws when it realizes
these goals on its own. This can also occur th rough additional persons, if, depending on the
individual circumstances, especially regarding the legal and actual relationships that exist between
the corporation and the additional persons, the work of the additional persons can be viewed as the
work of the corporation itself.
(2) A corporation which encompasses tax-advantaged corporations is equivalent to a corporation
that directly pursues tax-advantaged goals.
AO 1977 § 58 Activities That Do Not Affect Tax Status
The condition of being tax-a dvantaged is not lost if
1. a corporation obtains resources for the realiza tion of its tax-advantaged goals through another
corporation or through a corpora tion under public law; the obtaini ng of resources for an fully
taxable corporation assumes that the la tter is itself tax-advantaged;
2. a corporation turns over its resources partly to another corporation, also tax- advantaged, or to a
corporation under public law for tax-exempt purposes;
3. a corporation makes available its workforce to other persons, firms or organizations for tax-
advantaged purposes;
4. a corporation turns over physical space that it ow ns to another tax-advantaged corporation for use
for tax-advantaged purposes;
5. a foundation uses a portion, not to exceed one-third, of its income to maintain moderately the
founder and his close relatives, to care fo r their graves and to honor their memory;
6. a corporation uses all or part of its resources to establish a reserve, insofar as this is desirable, to
be able to fulfill on a permanent basis its tax-advantaged purposes as defined in its bylaws.
7. a) a corporation turns over at most one third of the excess of in come over expenses for a reserve
fund; the excess turned over may not exceed 10% of its currently remaining available resources as

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defined in § 55 Section 1 no. 5;
b) a corporation accumulates or uses in the year of acquisition resources to acquire corporate rights
for the maintenance of a percentage ownership of business corporations; these amounts are to be
recognized according to Letter a in the same year or as permissible future reserves
8. a corporation arranges social gatherings, which are of seconda ry importance to its socially
advantaged activity;
9. a sports organization sponsors remunerate d sport as well as unremunerated sport;
10. a foundation set up by a particular corporatio n in fulfilling its tax-advantaged goals makes
contributions to a profit-making business;
11. A corporation adds to its re sources by the following means:
a) Donation after death, if the person leaving the estate has not allocated any donation for the
ongoing expenses of the corporation;
b) Donations for which the donor expressly declar es that they are intended for supplying the
corporation with wealth for increasing its wealth ;
c) Expenditures for an appeal for donations by the co rporation if it is apparent from the appeal for
donations that contributions are being requested for building up the wealth of the corporation;
d) Expenditures for items, which by their nature belong to the wealth of the corporation;
12. A foundation in the year of its founding and in the two following calendar years may wholly or
in part add to its wealth with surpluses from administration of its wealth and from profits from for-
profit economic enterprises (§ 14).

AO 1977 § 59 Conditions for Tax-Advantaged Status
The tax-advantaged situation is assured if there follows from the bylaws, the organization of the
foundation, or other founding document (bylaws in the sense of these regul ations) what goal the
corporation pursues, if this goal fits under the requirements of §§ 52 to 55, and if the actual running
of the corporation exclusively and directly is in accord with these stipulations of the bylaws.
AO 1977 § 60 Requirements for the Bylaws
(1) The goals of the bylaws and the manner of their realization must be so exactly defined that one
may test on the basis of the bylaws if the regulati ons for tax-advantaged status are present in the
bylaws.
(2) The bylaws must be in accordance with the pr escribed requirements of corporate and business
taxes during the entire period of assessment or time of assessment and in accordance with other
taxes at the time of the institution of such taxes.
AO 1977 § 61 Restrictions on Wealth According to Bylaws
(1) A sufficient restriction on wea lth (§ 55 Section 1 no. 4) is present when the goal for which the
wealth is to be used upon dissolution or abolition of the corporation or upon discontinuation of its
previous goal is so exactly defi ned in the bylaws that on the basis of the bylaws it can be tested if
the goal for use is tax-advantaged purposes.
(2) If for compelling reasons the future goal for use of the wealth upon drawing up of the bylaws
under Section 1 cannot yet be exactly given, it is su fficient if it is set out in the bylaws that upon
dissolution or abolition of the corpor ation or upon discontinuation of its previous goal the wealth is
to be used for its tax-advantaged goals and that any future decision of the corporation about its use

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may be carried out only with permission of the Treasury Department. The Finance Office has the
power to determine if the intended goal for use is a tax-advantaged goal.
(3) If the determination regarding restrictions on w ealth is subsequently so altered that it no longer
fits under the requirements of § 55 Section 1 no. 4, then it does not meet tax requirements from its
inception. § 175 Section 1 Part 1 no. 2 is to be a pplied with the proviso that tax regulations can be
applicable, can be repealed, or can be changed in regard to taxes in so far as these have been
implemented in the ten calendar years prior to th e change in the determination on restrictions on
wealth.

AO 1977 § 62 Exceptions to the Restrictions on Wealth in the Bylaws
Restrictions on wealth do not have to be set out in the bylaws of economic enterprises or of
corporations under public law, of state supe rvised foundations, of independent foundations
administered by a corporation under public law, and of religious communities (orders,
congregations).

AO 1977 § 63 Requirements for Actual Business Activity
(1) The actual running of a business must be intended for the exclusive and direct fulfilling of the
tax-advantaged goals and must fit in with the conditions laid out by the bylaws regarding the
conditions for tax advantages.
(2) § 60 Section 2 is valid for the actual running of a business; § 61 Section 3 pertains to the
breaking of a rule regardi ng restrictions on wealth.
(3) The corporation is required to maintain proof through or derly recording of its income and
expenditures that its actual business activities conform to the requirements of Section 1.
(4) If the corporation accumulates resources without following the regulations of § 58 no. 6 and 7,
the Finance Office may impose a time limit for the use of the resources. The actual running of the
business will be considered to be in accordance with the sense of Section 1 if the corporation uses
the funds for tax-advantaged purposes within the time limit.

AO § 64 Taxable Economic Enterprises
(1) If the law repeals the tax-a dvantaged status while an economi c enterprise (§ 14) is being
maintained, then the corporation loses the tax-advant aged status for the taxable bases (income, sales,
wealth) attributable to the econom ic enterprise, insofar as the economic enterprise is not an
enterprise following the goals of the corporation (§§ 65 to 68).
(2) If the corporation maintains several economic enterprises that are not enterprises following its
goals (§§ 65 to 68), then these are to be tr eated as a for-profit economic enterprise.

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(3) If the income, including sales tax, from the economic enterprises that do not follow its goals
does not exceed 30,678 Euro per year, then the ta xable bases attributable to these business
enterprises are not subject to the corporate tax or the business tax.
(4) Breaking up a corporation into several independent corporations with multiple claims to being
tax-advantaged under Section 3 is to be considered a misuse of the legal formation possibilities in
the sense of § 42.
(5) Surpluses resulting from the use of material acquired in an ineligible manner outside a
permanently maintained sales location intended for th at purpose and that are subject to the corporate
tax and the business tax may be appraised at the level of the net profit prevailing in that economic
sector.
(6) A profit of 15% can be assumed as a basis for taxation on the following taxable business
enterprises:
1. Advertising for firms that occu rs in conjunction with the tax-advantaged activity that includes the
goals of the company,
2. Totalizator companies,
3. Second level of fractionation of the blood donation service.

AO 1977 § 65 Company with a Goal
A “Company with a Goal” is recognized when
1. the economic enterprise in its general direction se rves to realize the tax-advantaged goals of the
corporation as set ou t in its bylaws;
2. the goals may be achieved only with such a business; and
3. the business does not compete with non-tax-advantaged enterprises of the same or similar type to
an extent greater than is unavoidable for the fulfillment of its tax-advantaged purposes.

AO 1977 § 66 Social Welfare Care
(1) A social welfare organization is a company with a goal if it primarily serves the people
enumerated in § 53.
(2) Social welfare care is the regularly provided care for suffering or endangered people for the
benefit of the genera l public and not for gain. The care may ex tend to health, moral, educational, or
economic well-being and may have as its goal prevention or remedies.
(3) An organization for welfare care primarily serves persons enumerated in § 53 if they benefit
from at least two thirds of the proffe red services. § 67 deals with hospitals.
AO 1977 § 67 Hospitals

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(1) A hospital falling under the aegis of the National Welfare Regulations is a Company with a Goal
if at least 40 percent of the a nnual days of care are given to patients for whom only payments for
general hospital services (§§ 11, 13, and 26 of the National Welf are Regulations) may be calculated.
(2) A hospital falling under the aegis of the National Welfare Regulations is a Company with a Goal
if at least 40 percent of the a nnual days of care are given to patients for whom payments for hospital
services may be calculated at no level higher than under Section 1.
AO 1977 § 67a Sporting Events

(1) Sporting events of a sports organization are a Company with a Goal if the revenues including
sales tax do not exceed 30,678 Euro in a year. The sale of food and drink and advertising are not
part of sporting events.
(2) The sports organization may explain to the Fi nance Office up until the non-appealable decision
on corporate taxation that it dispenses with the ap plication of Section 1 Part 1. The explanation
binds the sports organization for at least five assessment periods.
(3) If the application of Section 1 Part 1 is dispensed with, s porting events of a sports organization
are a Company with a Goal if
1. no participating athlete of the organization pa rticipates in a way that he receives for his
participation in the sport or for the use of his person, his name, his picture, or his sporting activity
for advertising purposes from the organization or from a third party any compensation beyond
reimbursement for expenses or other benefits and
2. no other participating athlete r eceives for participation in the event from the organization or from
a third party in cooperation with the organiza tion any compensation beyond reimbursement for
expenses or other benefits.
Other sporting events are a taxable economic ente rprise. This does not exclude their being tax-
advantaged if the compensation or other benefits are given exclusively by businesses that are not
Companies with a Goal or by a third party.
AO 1977 § 68 Individual Companies with a Goal

The following are also Companies with a Goal:
1. a) Old age homes, old age and nursing homes, convalescent homes, meal services if they
primarily serve persons enumerated in § 53 (§ 66 Section 3),
b) Kindergartens, homes for children, youth, and st udents, school vacation homes and youth hostels,
2. a) Agricultural enterprises a nd nurseries, which serve the intern al needs of corporations and
assure the appropriate food and sufficient care for residents of the institutions,
b) Other institutions necessary for self-maintenan ce of corporations, such as carpentry shops and
lock shops, if the products delivered and other se rvices of these institutions to outsiders do not
exceed 20 percent of the total products and other serv ices of the enterprise, including that provided

7

to the corporations themselves;
3. Workshops for the handicapped which are not eligible under the Third Book of the Social Law
Book and which provide work places for persons who on account of their handicaps cannot be
active on the general labor market, and institutions for recreation and work therapy, which serve to
bring the handicapped into society,
4. Institutions which are maintained for taking care of the blind and for taking care of the physically
handicapped;
5. Institutions for training for care and for voluntary help for training;
6. Lotteries and games of chance approved by the res ponsible authorities if the profit is directly and
exclusively used for the furthering of char itable, church, or public welfare purposes;
7. Cultural institutions like museums and theaters, and cultural events like concerts and art shows;
this does not include the sale of food and drink;
8. Adult evening schools and other institutions insofar as they themselves provide course and other
events of a scientific or pedagogical nature; this also applies if the institutions a ssure the participants
in these events room and board;
9. Scientific and research institutions whose pr oviders are primarily financed by public or third-
party grants or by administrative funds of the institutions. Searching for commissioned projects also
qualifies as science and research. Activities that do not quality as Company with a Goal include
those that are limited to the appl ication of well-established scientific knowledge, taking over the
support of provider sponsorship, and economic activities with no research relevance.

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