The German tax authorities have clarified the administrative guidelines for assessing the charitable status of childcare facilities. For operators of company daycare centers and company kindergartens, the BMF letter dated January 29, 2026, provides clear guidelines for the first time on when the tax authorities consider a “closed group of individuals” to exist that does not benefit the general public – and how this can be avoided. This provides tangible certainty for nonprofit operators of company-run childcare facilities.
We explain what the new 25 percent quota means and why articles of association and occupancy models should be reviewed now.
Charitable status and service to the public
The new administrative directive was prompted by the Federal Fiscal Court (BFH) ruling of February 1, 2022 (V R 1/20). The Federal Fiscal Court ruled that a daycare provider that reserves care slots primarily for employees of specific companies no longer serves a segment of the general public and is therefore not operating as a nonprofit organization within the meaning of Section 52 of the German Fiscal Code (AO). The group of beneficiaries is “fixed and closed,” and the particular interests of the employers take precedence over the common good.
New: 25 percent quota for company-run daycare centers
The ruling led to significant legal uncertainty for nonprofit operators of company-run daycare centers and kindergartens in Germany, as there were no binding specifications regarding the minimum quota for spots open to the general public or the maximum quota for company-sponsored enrollment. The Federal Ministry of Finance (BMF) has now incorporated this case law into the AEAO (Application Guidelines for the German Fiscal Code) regarding Section 52 AO. A new and welcome development is the explicit stipulation of a minimum quota: “A benefit to the general public may be assumed if the articles of association […] stipulate that 25 percent of the childcare spots are not allocated to children of employees of contractual partners.” (BMF letter, AEAO regarding § 52 No. 5).
In doing so, the tax administration is aligning itself with the administrative instructions regarding the charitable status of so-called alternative schools (private schools that are not recognized by the competent state authority). For this scenario, Section 5 of the AEAO regarding § 52 AO already stipulated that a benefit to the general public may be assumed “if the corporation’s articles of association stipulate that, for at least 25 percent of the students, no distinction may be made based on the parents’ financial circumstances within the meaning of Art. 7(4), Sentence 3 of the German Constitution […].”
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The question of whether the 25 percent threshold constitutes an objectively appropriate criterion for assessing charitable status is open to technical debate. In its 2022 ruling, the BFH did not address the question of whether the operation of company-run daycare centers can qualify for tax benefits if the entity’s articles of association provide for the promotion of charitable purposes, since the entity in question did not, in any case, promote such a purpose under its articles of association. Furthermore, according to the legal opinion expressed here (similar to the administrative directive for alternative schools, where official recognition implies the promotion of the public interest in the view of the tax authorities), the inclusion of the company daycare center or company kindergarten in the needs assessment of the local public youth welfare agency could also have been considered as a basis for determining the promotion of the public interest.
25 percent threshold provides clarity for German nonprofit organizations
The 25 percent threshold for company-run daycare centers and kindergartens operated by nonprofit organizations is certainly welcome, as it provides clarity for the first time regarding the actual management and the drafting of articles of association for nonprofit organizations and ensures consistent enforcement by the tax authorities. Although the AEAO is binding only on the tax authorities – and not on the tax courts – in practice this means that those who adhere to the administrative guidelines can significantly reduce inquiries and risks during tax audits.
We recommend not only stipulating the quota in the articles of association but also securing it contractually with employers or cooperation partners. Of course, what matters here is not just the paperwork but the actual management. A company-run kindergarten that, while open to the public in accordance with its articles of association and contractual arrangements, in practice has almost all its spots tied to one or more employers, continues to jeopardize its charitable status.
Further AEAO adjustments
As part of the AEAO update, the notification of tax assessment letters has also been reorganized. Going forward, the rule is: Those who file electronically should receive notifications electronically – including a clear presumption of delivery. The other amendments to the AEAO primarily concern detailed issues in tax procedure law. The full letter can be found on the BMF website under Publications / BMF Letters.
Reviewing articles of association and cooperation agreements for company daycare centers
For nonprofit operators of company daycare centers, the new 25 percent quota provides clear guidance. Even though courts are not bound by this administrative rule, in practice it establishes a solid foundation for day-to-day management, the drafting of articles of association, and the structuring of agreements with employers.
We recommend reviewing existing articles of association and cooperation agreements as soon as possible. Taking action now can effectively reduce the risk of objections during tax audits.
Have you already checked whether your company-run daycare center meets the requirements of the tax authorities in Germany? Our NPO team is happy to assist you with drafting articles of association, reviewing contracts, and ensuring the legally compliant implementation of company-run daycare models.
