The Tax Amendment Act 2025 came into force on 1. January 2026. Among other things, it affects foundations and the regulations governing charitable status.
The Act promises broader scope for action and tax benefits for charitable organizations such as foundations. It introduces a new charitable purpose into the German Fiscal Code and doubles the tax-free allowance for the timely use of funds.
Individuals whose organizations also pursue philanthropic activities should familiarize themselves with the changes in order to fully benefit from them.
What is the purpose of the Tax Amendment Act?
The Tax Amendment Act essentially pursues two guiding principles. On the one hand, the legislator aims to guarantee tax relief for non-profit organizations. On the other hand, tax procedures are to be modernized and standardized.
This is accompanied by the legislator's goal of reducing bureaucratic burdens and the associated costs. Non-profit organizations such as foundations should be able to operate more flexibly without losing their non-profit status.
Dr. Christiane Schenderlein, State Minister for Sport and Volunteering (CDU), stated that the goal of the new measure is to make volunteering even more attractive. Volunteering is meaningful and brings people together. It is a "precious treasure.“
What changes does the Tax Amendment Act bring?
The changes introduced by the Tax Amendment Act primarily affect key provisions of income tax law, non-profit law, and tax law.
In these areas, the legislature has created new regulations or amended existing ones to provide tax relief for taxpayers and foundations. The Act also includes simplifying and clarifying provisions, particularly with regard to tax law.
DFB President Bernd Neuendorf expressed his support for these changes during a public hearing of the Finance Committee. He specifically mentioned "significant improvements" in the area of tax bureaucracy, which primarily burdens smaller organizations.
Significant changes also result in non-profit law. Of particular importance for non-profit status are the increase in the threshold for the requirement of timely use of funds to 100.000 € and the introduction of e-sports as a new charitable purpose.
The German government's draft legislation on the new non-profit law states: "This will create incentives for greater civic engagement, and some measures will bring simplifications, particularly for taxpayers and administrators.“
These changes also affect foundations, as they grant charitable foundations greater flexibility and financial resources.
Timely Use of Funds by Charitable Foundations
Specifically, the threshold for the timely use of funds for charitable organizations such as foundations has been more than doubled (§ 55 (1) number 5 sentence 4 of the German Fiscal Code; AO).
The provision in §55 (1) number 5 AO stipulates a legal obligation for tax-privileged organizations such as foundations to use funds "timely for their tax-privileged statutory purposes." "Timely" means that the funds must be used no later than the end of the second year following the respective calendar or fiscal year.
These funds include, for example, donations or income from commercial business operations or asset management (more on financial income for foundations).
Previously, an exception to this obligation applied up to a threshold of 45.000 € per year. Due to the new law, this obligation for the timely use of funds no longer applies to charitable organizations such as foundations if their annual income does not exceed 100.000 €.
This regulation will likely eliminate the requirement for timely use of funds for approximately 90% of tax-exempt organizations.
Since the income may remain in the foundation's assets, the new regulation allows non-profit organizations more flexibility in their use of funds.
Foundations thus gain the opportunity to build up reserves. They can plan for the long term and prepare multi-year investments more efficiently. For example, foundations can invest funds in digital infrastructure, staff expansion, or construction projects. The new regulation also ensures liquidity.
Another advantage is that the new regulation reduces the bureaucratic burden for non-profit organizations. Non-profit organizations such as foundations must currently document the timely use of funds in a statement of expenditures as part of their accounting. This documentation requirement is waived if the foundation's income is below the tax-free threshold.
It should be noted that the organization is not entirely exempt from the obligation to use the funds received for the tax-privileged purposes stipulated in its statutes. Only the timeframe for the use of funds is affected.
Introduction of a New Charitable Purpose for e-sports
Another amendment to the Tax Amendment Act concerns the recognition of charitable status for tax-exempt organizations such as foundations.
Organizations that pursue a charitable purpose "directly, exclusively, and selflessly" through their activities can benefit from tax advantages (§§52 et seq. AO). §52 AO specifies which purposes are to be recognized as "promoting the public good."
The promotion of e-sports has been added to this list of charitable purposes as a new charitable purpose, listed under number 21.
Specifically, recognition of charitable status for an organization results in tax advantages such as exemption from income taxes (corporate and trade tax), preferential or exemption from value-added tax, and the possibility of financing through tax-deductible donations. However, organizations are not generally prohibited from pursuing their own economic interests concurrently, provided that profits are reinvested for purposes stipulated in their articles of association.
By recognizing esports as an officially charitable purpose, the legislature has legally equated sports and esports. This equivalence became necessary because donors from the digital and education sectors have shown increasing interest in this growing field.
E-sports is defined as "competition between individuals in computer and video games, including mobile and virtual reality platforms, using input devices (controllers, keyboards, mice, touchscreens)."
Due to this new charitable purpose, donors can now dedicate themselves to supporting new projects. For example, they can establish esports clubs, inclusion projects, and tournaments, and initiate training programs.
Donors who wish to pursue the new charitable purpose of esports within their philanthropic endeavors should review their foundation's charter with regard to the intended support and, if necessary, adapt it accordingly (more on amending charters under foundation law).
Increase in the Instructor Allowance
The tax amendment law includes an increase in the instructor allowance from 3.000 € to 3.300 € annually as a further change.
The instructor allowance is a tax-free and social security-exempt expense allowance for certain part-time activities "for the promotion of charitable, benevolent, and religious purposes" (§3 number 26 of the Income Tax Act; EStG).
This allowance can benefit individuals who contribute to a non-profit organization through artistic activities or as instructors, trainers, educators, or trainers at universities and similar institutions. Conversely, this means that the instructor allowance only applies to non-profit organizations.
Increase in the Volunteer Allowance
The volunteer allowance is also being increased from 840 € to 960 € annually by the tax amendment law. The volunteer allowance applies to part-time activities performed for a non-profit organization, such as a foundation, that are not covered by the trainer's allowance.
Specifically, the volunteer allowance can be applied to voluntary work in the form of board membership, administrative tasks, or technical support, for example, within a foundation.
The volunteer allowance remains tax-free and exempt from social security contributions and is granted without jeopardizing the organization's non-profit status.
Both new regulations are therefore advantageous for founders or entrepreneurs pursuing philanthropic goals, as they appropriately recognize voluntary work without triggering additional and burdensome taxes or social security contributions.
The savings and existing foundation assets give foundations greater financial flexibility. For example, founders can reinvest the tax savings in pursuing their charitable purposes.
These improvements to the tax framework and the regulations governing volunteer work also strengthen the legal capacity of foundations. Founders can thus implement social projects more efficiently, hire more dedicated staff, and generate greater visibility for the foundation and greater societal benefit.
Increase in the Tax-Free Allowance for Income from Taxable Commercial Operations
The Tax Amendment Act further increases the annual tax-free allowance for income from taxable commercial operations from 45.000 € to 50.000 € (§64 (3) AO). Profits from commercial operations are those that do not directly serve the promotion of charitable purposes.
This change means that charitable organizations such as foundations will no longer have to pay corporate income tax or trade tax on profits up to 50.000 €.
This, in turn, reduces bureaucratic burdens for foundations, for example, as tax returns and audits will only be required once the tax-free allowance is reached. Furthermore, the regulation increases the effectiveness of the foundation's capital, as the funds can be used tax-free for statutory purposes or strategic foundation projects.
Résumé
The new regulations of the Tax Amendment Act provide tax relief for non-profit organizations and reduce bureaucratic hurdles. At the same time, the foundation sector gains greater flexibility regarding the pursuit of charitable purposes and the appropriate remuneration of volunteer foundation work.
"Thanks to the law, founders can strategically utilize new opportunities and tax benefits while simultaneously increasing the social impact and reputation of their foundation. Targeted adjustments to the foundation's bylaws help to optimally benefit from these new possibilities," says dtb-lawyer Bertold Schmidt-Thomé and expert in foundation law and non-profit organizations.
Status 20.02.2026