Donations to charitable organisations abroad may generally be taken into account for tax purposes. However, it is not sufficient for the foreign organisation to be recognised as charitable under the law of the country in which it is established. Rather, the requirements of German charity law must also be met. This was reaffirmed by the Bundesfinanzhof (BFH, Federal Fiscal Court) in its judgment of 1 October 2025 (X R 20/22).
The decision is particularly significant for donations to foundations established in a third country, especially Switzerland. The BFH makes it clear that the domestic donor bears a comprehensive burden of proof regarding the tax requirements for deducting donations. Recognition of charitable status by the foreign tax authorities alone is not sufficient.
Donation to a Swiss foundation
The proceedings concerned a substantial donation to a foundation established in Switzerland. In the 2017 assessment period, the donor, who has since died, transferred a large sum to a Swiss foundation. The foundation’s purpose was to support children and young adults.
The foundation was recognised as charitable under Swiss law and was exempt from Swiss tax due to its activities. Confirmation to that effect had been issued by the competent cantonal tax office.
The claimant, who was the donor’s sole heir, sought to have the contribution recognised as a special expense pursuant to § 10b EStG (German Income Tax Act).
Finanzamt refuses donation deduction
The Finanzamt (German tax office) refused the donation deduction. Instead, it required proof that the Swiss foundation also met the requirements of German charity law.
For this purpose, the tax authorities requested the following documents in particular:
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The articles of association or foundation deed;
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Activity reports;
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Statements of income and expenditure;
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Cash reports;
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Statements of assets, including the accumulation of reserves;
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Evidence of the receipt and use of donations in accordance with their designated purpose;
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Minutes of meetings of the management board.
Among other documents, the claimant submitted the deed of establishment, an extract from the commercial register, the Swiss tax exemption certificate and the annual report for 2017.
According to his own account, he was unable to obtain the additional documents because the foundation was unwilling or unable to provide them to him. He therefore suggested that the Finanzamt request the missing documents directly from the Swiss tax authorities through the exchange of information procedure.
The Finanzamt refused to do so.
Action before Finanzgericht München unsuccessful
The subsequent action before the Finanzgericht München (Munich Fiscal Court) was also unsuccessful (judgment of 31 March 2022 – 10 K 1766/20).
The claimant then continued to pursue his claim on appeal on points of law.
The principal issue was now whether the refusal of the donation deduction was compatible with the free movement of capital under Art. 63 AEUV (Treaty on the Functioning of the European Union).
BFH dismisses appeal
The BFH dismissed the appeal on points of law as unfounded.
In the view of the Tenth Senate, the claimant had not demonstrated that the Swiss foundation met the requirements necessary for tax exemption under German law.
The relevant provisions in this respect were § 10b(1) EStG in conjunction with § 50(1) EStDV (German Income Tax Implementing Regulation) and the charity-law provisions of §§ 51 et seq. AO (German Fiscal Code).
In this regard, the BFH formulated three key headnotes:
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The free movement of capital under Art. 63 AEUV is not infringed where the tax treatment of a donation to a foundation established in Switzerland is made subject to the national requirements applicable in the donor’s Member State.
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Where contributions are made to a foreign entity, the domestic donor bears the burden of proving that the conditions arising from those requirements have been met.
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The national legislature is not required to recognise charitable status granted under foreign law.
The BFH thus confirms that the recognition of a foreign foundation for tax purposes does not depend solely on its tax treatment in the country in which it is established. Rather, the decisive question is whether the foundation meets the German requirements for charitable status.
Formal and substantive charitable status must be demonstrated
In its judgment, the BFH clarified that the requirements for deducting donations concern both the articles of association or foundation deed and the entity’s actual management.
Formal requirements for the articles of association
The articles of association or the act establishing the foundation are of particular importance.
Under § 59 AO, the relevant formation documents must state the tax-privileged purpose pursued by the entity and confirm that this purpose is pursued exclusively and directly.
In addition, § 60(1) AO requires the purposes set out in the articles of association and the manner in which they are to be pursued to be defined with sufficient precision to permit an assessment, based on the articles, of whether the requirements for tax privileges are met.
In the case at issue, the BFH identified considerable difficulties in relation to the foundation deed itself.
Although the promotion of youth welfare and vocational training could generally be classified as charitable purposes within the meaning of § 52(2) AO, there were doubts regarding the additionally stipulated benevolent purposes. In particular, there was no sufficiently specific definition of the group of persons in need of personal or financial assistance or of the criteria governing the provision of support.
Furthermore, in the BFH’s view, the foundation deed did not make it sufficiently clear that the stated purposes were to be pursued exclusively and directly.
Supplementary regulations provided for in the foundation deed, which might have been used to define these matters in greater detail, were not submitted by the claimant. Consequently, sufficient evidence of formal compliance of the governing documents was already lacking.
In this context, the BFH emphasises that any ambiguity in the articles of association must be borne by the party relying on the tax privilege.
Requirements concerning actual management
Irrespective of the deficiencies in the foundation deed, the donation deduction also failed because there was no evidence of the foundation’s actual management.
Under § 63(1) AO, actual management must be directed towards the exclusive and direct fulfilment of the tax-privileged purposes. Pursuant to § 63(3) AO, this must be demonstrated by proper records of income and expenditure.
Despite a corresponding request from the Finanzamt, the claimant had not submitted sufficient documents in this regard. In particular, there was no evidence allowing the actual use of the foundation’s financial resources to be verified.
The annual report for 2017 that was submitted contained only a pie chart with percentage figures concerning the use of funds. The BFH held that this was insufficient.
Accordingly, there was also no evidence that the substantive requirements for charitable status had been met.
Domestic donor bears the burden of proof
The BFH’s findings concerning the allocation of the burden of proof are particularly relevant in practice.
In the case of a domestic charitable entity, the relevant documents are generally held by the organisation itself. The tax authorities can directly examine its tax affairs.
The situation is different in the case of a foreign entity. Because the foreign organisation is not subject to German tax reporting obligations in the same way, the domestic donor bears the burden of proving how the organisation is actually managed.
The donor must therefore ensure that the necessary information and documents are available to them. The BFH also considers this allocation of the burden of proof permissible under EU law.
Accordingly, it is generally reasonable to expect a donor to obtain documents from the beneficiary organisation showing, in particular, the organisation’s objectives and the proper handling of donated funds.
In the BFH’s view, the German tax authorities are under no obligation to obtain missing documents from the foreign tax authorities on their own initiative.
No automatic recognition of foreign charitable status
The claimant had relied in particular on Art. 63 AEUV. This provision guarantees the free movement of capital between Member States and between Member States and third countries. According to the case law of the EuGH (Court of Justice of the European Union), donations may also fall within the scope of this fundamental freedom.
The claimant therefore argued that the German provisions governing donation deductions must not result in contributions to foreign organisations being placed at a disadvantage compared with donations to domestic organisations.
Ultimately, the BFH did not accept this argument. It made clear that, in principle, Member States are free to determine the conditions for granting tax privileges to charitable purposes. A foreign organisation does not therefore have to be recognised for tax purposes solely because it is considered charitable in the country in which it is established.
Rather, Germany may make the tax deductibility of a donation conditional upon compliance with the requirements of German charity law.
Important limitation
However, an important limitation must be noted: in the specific proceedings, the BFH was not required to issue a final ruling on whether the additional requirements of § 10b(1), sentences 3 to 6, EStG, in particular the requirements concerning mutual administrative assistance and assistance with recovery in relation to foreign recipients of contributions, are compatible with Art. 63 AEUV.
The donation deduction had already failed because the foundation’s compliance with German charity-law requirements had not been sufficiently demonstrated.
The judgment therefore does not provide a definitive clarification under EU law of these additional requirements.
It should be noted that the Zuwendungsempfängerregister (Register of Recipients of Contributions) has been decisive since 2025: if the foreign recipient is not entered in this register, a donation deduction is no longer available. For current contributions to organisations abroad, this formal hurdle therefore applies in addition to the BFH’s documentation requirements concerning formal and substantive compliance with the rules governing charitable status.
Legal consequences for advisory practice
The decision has considerable practical significance for tax advice provided to donors, heirs and charitable organisations with cross-border connections.
Foreign certificates of charitable status are insufficient
Although a foreign tax exemption certificate is an important indication, it does not create an automatic entitlement to a German donation deduction.
A foundation recognised under foreign law must also meet the German requirements of §§ 51 et seq. AO.
When providing advice, it is therefore necessary to examine before the donation is made whether the articles of association or the act establishing the foundation satisfy the requirements of German charity law.
Ensure documentation is available before making the donation
The decision shows that obtaining the necessary documents after a donation has been made can involve considerable difficulties.
Before making a contribution, donors should therefore clarify with the foreign organisation whether it is willing and able to provide the necessary evidence. This includes, in particular:
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Formation documents and articles of association;
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Evidence of the tax-privileged purposes;
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Activity reports;
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Statements of income and expenditure;
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Statements of assets;
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Evidence of the specific use of donated funds;
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Documentation of actual management.
Especially in the case of larger donations, it is advisable to conduct a prior tax-law review of the recipient organisation.
Review the governing documents of foreign foundations
Foreign foundations that regularly receive donations from Germany have a specific need to take action.
Their governing documents should be structured in such a way that compliance with the requirements of §§ 51 to 68 AO can be clearly established.
In particular, the tax-privileged purposes must be described with sufficient precision.
In the case of benevolent purposes, care must be taken to ensure that the group of beneficiaries and the conditions determining their need for assistance are defined with sufficient precision.
The formation documents must also state unequivocally that the purposes are pursued exclusively and directly.
Particular risks of donations to third countries
The decision concerns a foundation established in Switzerland. It is therefore particularly relevant to contributions made to organisations outside the EU and the EEA.
In addition to the general charity-law requirements, the special conditions under § 10b(1), sentences 3 to 6, EStG must also be observed in such cases.
In particular, the statutory requirements concerning mutual administrative assistance and assistance with recovery must be examined.
However, it must be borne in mind that, in the present proceedings, the BFH did not definitively examine whether these additional requirements are compatible with Art. 63 AEUV.
The decision should therefore not be misunderstood as having definitively resolved all questions under EU law concerning donation deductions for contributions made to third countries.
Foreign donations require careful tax planning
With its judgment of 1 October 2025 (X R 20/22), the BFH confirms the strict requirements governing the tax deduction of donations to foreign foundations.
Anyone intending to donate larger sums to foreign foundations should not wait until their income tax assessment to have the organisation’s eligibility for tax recognition reviewed.
Rather, the governing documents, actual management and documentation concerning the use of funds must be carefully reviewed before the donation is made.
Otherwise, despite the organisation’s genuinely charitable activities and corresponding recognition abroad, the donor risks losing the donation deduction in its entirety.
MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on tax-law matters. Further information is available at Tax Law Advice.
