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Any association that is running as a nonprofit organization means that the purely lucrative association does not legally exist. This means that the goal is not to create a huge profit.
However, this does not prevent associations from performing lucrative activities, which can have very significant fiscal consequences.
But then, what are the tax consequences of creating a non-profit organization?
Under what conditions is an association subject to commercial taxes (corporate tax, VAT and territorial economic contribution)?
We answer in this article all your questions about how to file taxes for a nonprofit organization.
How to determine if an association is subject to taxes?
If an association performs profit-generating activities, it is subject to commercial taxes, that is, it must pay corporate tax, VAT and CET (local or international).
To determine the profitability of an association, a three-step analysis must be followed:
Selfless management of the association.
The situation of the association in relation to the competition.
The conditions for exercising the association’s activity.
However, under certain conditions, however, it is possible to escape the application of commercial taxes if the activities are only incidental (franchise regime) or “sectorize” (only sectorized activities will be taxed).
The tax exemption of the association: how does it work?
If the association is expected to carry out certain profitable activities, the taxation of the associations, however, makes it possible to benefit from a tax exemption when these activities remain “accessory” in relation to the main activity.
This deductible allows the association to be exempt from commercial taxes, that is, the SI, VAT and CET.
The tax-deduction is automatically applied if the following conditions are met: Association management is disinterested; non-profit activities remain “significantly preponderant” (without the tax administration providing more details on the application of this criterion).
The amount of the operating income of the lucrative activities received during the calendar year does not exceed a reasonable amount of money, since it is specified that the calculation of (i) the income of the property is not taken into account. (ii) the results of financial activities for profit and financial interests subject to customary law CT, (iii) real estate transactions not exempt from VAT, and (iv) income from six associative or support events that benefit from an exemption specific accumulated with the franchise.
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