Consequences of the loss of non-profit status

If the corporation pursues purposes other than the tax-privileged purposes or if these are not promoted over a longer period of time, the corporation may lose its non-profit status. A misuse of funds or a breach of the asset commitment can also jeopardize the non-profit status. The consequence is far-reaching retrospective taxation, which can have a retroactive effect of up to 10 years. In the area of asset management, this affects the previously tax-free interest, rental and leasing income, and the area of special-purpose operations is subsequently subject to corporation and trade tax.

Reasons and possibilities for restructuring

The Reorganization Act and the Reorganization Tax Act also open up a great deal of scope for restructuring for non-profit corporations. Organizational reasons, liability law aspects, business optimizations such as cost savings, improvement of the market position or synergy effects make it necessary to break new ground. Tax law aspects, in particular the possible loss of non-profit status, can also be reasons to restructure non-profit corporations. The options of mergers, demergers, in particular spin-offs or changes of legal form require careful consideration of the advantages and disadvantages and an examination of the framework conditions and the legal and tax consequences.