Fundraising in a legal context
Term and general definition
The term Fundraising refers to the systematic procurement of financial and/or material resources to achieve the objectives of organizations, particularly in the fields of charity, social work, culture, and education. Legally, fundraising means the solicitation of donations in money or goods, membership fees, or sponsorship funds, with particular attention to civil, tax, and data protection law. The legal framework varies significantly depending on the legal form of the organization, its purposes, and the type of use of the funds.
Civil law fundamentals of fundraising
Contractual aspects
Fundraising activities are often based on civil-law obligations, in particular the law of gifts according to Sections 516 et seq. BGB. A donation is, from a civil law perspective, a gift , i.e., a transfer by which someone enriches another from their assets without compensation. If the transfer is made subject to conditions (e.g., the use of funds for a specific purpose), it results in a so-called donation for a particular purpose. The reclaiming of donations is generally excluded, unless a revocable gift has been agreed upon or it is demonstrably proven that the purpose has not been fulfilled.
Liability issues
Organizations and those responsible therein are subject to the general principles of civil law when using received funds, in particular the proper management (§ 27 (3) BGB for associations). The improper use of donated funds can lead to liability claims by donors.
Tax law framework
Charitable status and donation deductibility
The decisive factor for tax privileges is charitable status in accordance with Sections 51 et seq. of the Fiscal Code (AO). Charitable organizations may issue donation receipts (confirmation of donation) so that donors can deduct their contributions for tax purposes under § 10b EStG. Donations, membership dues, and to some extent sponsorships are tax-privileged if used for the statutory purpose of the organization.
Requirements for donation confirmations
Issuing donation confirmations is subject to strict formal requirements imposed by the tax authorities (see BMF Letter dated 6.2.2012). Incorrect or abusive issuance can have serious liability and tax consequences for the organization and its authorized representatives.
Corporate income tax, VAT, and trade tax
Income from fundraising activities is treated differently for tax purposes:
- Donations and membership fees are generally tax-free within the scope of non-profit activities.
- Income from business activities (e.g., sale of promotional items, benefit events) is subject to corporate income tax, VAT, and possibly trade tax, depending on the amount and if the exemption limits are exceeded and no classification as a special-purpose enterprise under § 65 AO applies.
Data protection requirements
Processing of personal data
The acquisition and management of donor data regularly involves the collection and processing of personal data within the meaning of the General Data Protection Regulation (GDPR) . Processing requires a legal basis, usually consent or the initiation of a contract. Organizations must ensure transparency, data minimization, and compliance with data subject rights (information, deletion, etc.).
Handling donor address data
The use of address databases and targeting of potential supporters (e.g., via email, online marketing) are explicitly regulated by § 7 UWG and the GDPR. The use of address data for advertising purposes generally requires prior explicit consent.
Competition law regulations
Requirements of fair trading law
Fundraising campaigns are subject to the Act Against Unfair Competition (UWG). Misleading or aggressive donation advertising (e.g., false statements regarding need or use of funds) may be prohibited. For example, transparency and clarity about the purpose of use and the function of the donation are required by law; otherwise, cease-and-desist and compensation claims may arise.
Donation seals and quality marks
The awarding and advertisement of donation seals (such as the DZI seal) are subject to special requirements regarding diligence, transparency, and demonstration of proper use of funds. Unauthorized use or misleading information about the existence of such seals may be classified as anti-competitive.
Fundraising in the online sector and through crowdfunding
Legal specifics of online fundraising
For online fundraising, such as through one’s own websites or dedicated platforms, additional obligations apply, for example under the Telemedia Act (TMG) and the Electronic Commerce Act (EGG). The information requirements under § 5 TMG include the imprint obligation, transparency in the use of revenues, and data protection notices.
Crowdfunding and crowd donations
With crowdfunding projects, particularly when returns or participation models are offered, additional regulatory requirements may apply, such as the Investment Act (VermAnlG), the Banking Act (KWG), or the Payment Services Supervision Act (ZAG). The distinction between pure donation campaigns, pre-sales campaigns, or (quasi-)capital market-like participations is legally significant since different licensing, permit, and prospectus obligations may arise.
International aspects of fundraising
Cross-border fundraising
Fundraising that extends beyond national borders raises issues concerning international tax law, in particular VAT regulations with regard to the receipt and forwarding of donations from abroad. Here, double taxation agreements, recognition of charitable status abroad, and anti-money laundering regulations (e.g., the Anti-Money Laundering Act – GwG) must be observed.
Anti-money laundering regulations
Organizations accepting donations from abroad or from unknown sources are subject to enhanced due diligence obligations under the GwG, such as identifying the donor and reporting suspicious transactions.
Special provisions for certain organizations
Church and public law entities
Special fundraising regulations apply in part to churches, religious communities, and public law corporations, particularly regarding charitable status, data protection (Church Data Protection Act DSG-EKD, KDG), and donation confirmations.
Political parties
Fundraising by political parties is specifically regulated in Sections 18 et seq. of the Parties Act (PartG). In particular, there are detailed publication requirements, transparency rules, and donation limits.
Summary
Fundraising is a legally complex term that encompasses numerous regulations from the areas of civil law, tax law, data protection law, competition law and, depending on its structure, supervisory law. Every well-founded fundraising activity therefore requires a comprehensive understanding of the law and meticulous compliance with all relevant norms to prevent civil liability, tax risks, and supervisory sanctions. Special care must be taken regarding transparency, use of funds, and compliance with data protection requirements—especially in digital contexts and with international fundraising.
Frequently Asked Questions
What legal requirements must be met for conducting fundraising campaigns?
Fundraising campaigns are subject to various legal frameworks that can vary depending on the legal form of the organizer (such as association, foundation, non-profit limited company) and the type and scope of the campaign. As a general rule, the recipient of funds must be recognized as a charitable entity, as only then may tax benefits such as the issuance of donation receipts be granted. In addition, the articles of association must clearly specify fundraising as an organizational purpose. Fundraising activities must not violate existing laws, such as competition law, data protection law (GDPR), trademark, or copyright law. For events in public spaces, an official permit under assembly law or special use law may be required. If collectors are deployed, the Act on the Collection of Monies or Items (SammlG) must be observed, which in particular imposes transparency and reporting obligations. Finally, all collected funds must be properly recorded and assigned to the donation purpose to exclude criminal and tax consequences such as fraud or embezzlement.
What are the obligations regarding documentation and transparency in fundraising?
Fundraising organizations are required to document all income and expenses accurately and transparently. This includes complete bookkeeping of the origin and use of donated funds, with the inflow, purpose, and expenditures being documented by means of records. The transparency obligation arises in particular from the law on non-profits (§ 59 AO) as well as from commercial, tax, and civil law regulations. Donations exceeding 300 euros must be supported by a formal donation receipt; for smaller amounts, a bank statement is often sufficient. Larger campaigns require annual accountability reports, sometimes with a review by an auditor. If these obligations are neglected, the organization risks losing its charitable status as well as facing civil and criminal sanctions.
What regulations must be observed regarding data protection and the processing of personal donor data?
Fundraising campaigns regularly record personal data of donors (name, contact details, payment information). The processing of these data is subject to the strict requirements of the General Data Protection Regulation (GDPR). Specifically, any collection of data must be based on a legal ground, generally the donor’s consent or the legitimate interest of the organization. The nature, purpose, and scope of data processing must be communicated transparently and the donor given the option to revoke consent. The data may be used solely for the stated purpose (e.g., donation receipt) and must be deleted after the statutory retention period has expired. In particular, a separate consent is required for passing on data to third parties, for example for advertising or cooperation. Violations of data protection regulations can result in significant fines.
What tax aspects must be taken into account in fundraising?
Non-profit organizations benefit from tax exemptions for collected donations (Section 5 (1) No. 9 KStG, Section 3 No. 6 GewStG). Donations must, however, be clearly identified as such, distinguished from membership fees and sponsorship income, and used for the charitable purpose. The use of funds is subject to audit; disbursements outside the statutory objective can result in subsequent taxation and loss of charitable status. Organizations are obliged to issue proper donation receipts, which must specify the donor’s name, amount and date of the contribution, and the purpose of use. Issuing incorrect or false donation receipts is a criminal offense. Moreover, VAT aspects of the sale of goods within the framework of fundraising campaigns must be checked.
What legal considerations apply to collecting donations in public spaces?
Collecting donations in public spaces requires a permit in most federal states. The respective state laws on the collection of money and items (e.g., SammlG NRW) regulate notification, permit, and verification obligations. Usually, a collection permit must be applied for in advance from the competent authority, which, for example, verifies whether the purpose is genuinely non-profit and the organizer reliable. In addition, there may occasionally be regulatory requirements such as carrying identification, disclosing use of funds, and compliance with quiet periods. Violations of these requirements can result in fines or even a ban on the collection.
What legal provisions apply to online fundraising platforms?
Anyone conducting online fundraising campaigns through fundraising platforms must not only observe civil law fundamentals (e.g., general terms and conditions, right of withdrawal) but especially data protection and youth protection regulations. Platform operators are often obliged to check, already during registration, whether the recipient is charitable, commercial, or private, and to document payment flows accordingly. Further relevant regulations concern the obligation to provide an imprint (according to § 5 TMG), consumer information, and possibly the implementation of the Anti-Money Laundering Act, especially for large donation amounts. The legal requirements for the issuance of donation receipts and the proper forwarding of funds must also be observed.
What liability risks exist for organizers of fundraising campaigns?
Responsible organizers of fundraising campaigns may be held both civilly and criminally liable under certain circumstances. Main risks arise in particular in cases of misuse or misappropriation of raised funds (embezzlement, fraud), as well as violations of tax, data protection, or competition law. If an organization is managed as a legal entity, personal liability of board or management members may also arise if they violate their supervision or oversight duties or in cases of gross negligence. To minimize liability risks, it is advisable to introduce internal control systems, binding guidelines, and comprehensive documentation of all transactions. Furthermore, taking out D&O insurance (pecuniary loss liability insurance for organs) may be worthwhile.
