A common question regarding non-profit associations is whether they are subject to any kind of tax liability.
The most common thought is that they are not, however, this thought is wrong because non-profit entities are subject to taxation.
The current tax regime assimilates them fiscally, to a large extent, to any other legal person,although a framework of benefits is established for associations by means of exemptions, especially when they prove to have purposes of general interest.
Although, many of them are found exempt from the taxes of non-profit associations,the varied nature of activities that this type of entities can carry out throughout the year, makes it not possible to give the same answer for all cases and types of entities.
What do we mean by a Non-Profit Association?
They are those that guide their activity and are constituted to achieve a higher objective than simple economic gain, which also has an impact on a benefit for the Company, whatever the type of this.
In this sense, the benefits obtained from the development of the activities of the association will be destined to the entity itself, so that it can continue to develop its activities so that the community obtains in a better way the objectives that the association pursues.
Law 49/2002, of 23 December, lists the entities that are likely to be considered non-profit entities.
- The Foundations
- Associations declared to be of public utility
- Non-governmental development organizations
- Delegations of foreign foundations
- Spanish sports federations
- The federations and associations of the non-profit-making entities referred to in the preceding paragraphs.
How do non-profit associations pay taxes?
The tax regime for non-profit-making associations is taxed more advantageously.
Thus it should be noted that, the taxes of non-profit-making associations come mainly from the fees of those who associate themselves (and which will later receive a consideration), and from the income generated from the real estate or furniture of the non-profit associations.
If the association is not exempt from VAT,will have obligation to present tax returns quarterly, as well as the annual summary. The purposes pursued (social protection, humanitarian causes, etc.) are not relevant because whenever a consideration is received for these goods and services, the associations will be subject to VAT.
An association can carry out exempt economic activities and others that are not, so it is necessary to keep a separate accounting of income and expenses (Law 27/2014 IS). On the one hand those of non-profit activity, and on the other those of economic activity.
As for the Corporation Tax of a Non-Profit Association of Lubro,they must declare all their income exempt and not exempt, however, in the tax base only income derived from non-exempt economic holdings will be included in the tax base.
However, they are not obliged to declare undeclared associations of public utility, if their income does not exceed € 75,000, if their non-exempt income is not greater than € 2,000 and all non-exempt income, are subject to withholding.
Exemptions for Non-Profit Entities
As for the Corporation Tax of Non-Profit Associations, it has already been explained that there is a possibility of non-subjection, when the total income does not exceed € 75,000 per year,of which, € 2,000 will correspond to the incomes that are not exempt that, in turn, must have been subject to withholding.
Another exemption from the tax obligations of non-profit associations refers to the income that comes from the activities that are part of their purpose or corporate purpose.
In turn, other incomeswill have an exemption from tax obligations, which are those that are identified in the onerous transfer as being subject to that specific corporate purpose.
On the other hand, we also want to emphasise that the donations made can be deducted in the Treasury,since these can count on a deduction of 35% (if in the two previous years it has not been donated to the same entity), or 40% (if in the two previous years it has been donated to that same entity).
Today, the tax obligations of non-profit associations are more similar to those of any other legal entity.
However, it is still taken into consideration that this type of entity is intended to fulfil a purpose or a corporate object, as well as a purpose of general interest; and therefore, there are still advantages in terms of their tax obligations.
To conclude, the taxation of non-profit-making associations has many nuances relating to each type of tax to which, in principle, a legal person would be subject.