The recent rulings of the German Federal Fiscal Court (BFH) of November 20, 2025, set clear guidelines for associations, foundations, nonprofit limited liability companies (gGmbH), and other nonprofit organizations in Germany. The focus is on the requirements for precise drafting of articles of association – particularly regarding the restriction of assets and the definition of charitable purposes. Both decisions demonstrate that unclear wording can result in the loss of charitable status.
The BFH had to rule on two cases that exemplify how strictly the requirements for formal compliance with the articles of association under Sections 59, 60, and 60a of the German Fiscal Code (AO) are interpreted today.
Restriction on the use of assets must be clearly defined in the articles of association
In the first ruling (V R 10/24), a gGmbH applied for a specific determination of its charitable status. The tax office rejected the request, arguing that the restriction on the use of assets under § 61 AO was too vaguely worded. The BFH confirmed this: The articles of association did not specify which tax-privileged purposes were to be supported in the event of dissolution, nor which specific entity was entitled to receive the assets. Consequently, it was not possible to verify in this specific case whether the assets would remain restricted for tax-privileged purposes in the event of dissolution.
The BFH emphasized that a statutory restriction on the use of assets exists only if the future purpose of use is clearly and specifically defined. Merely repeating the terms “charitable” or “benevolent” is not sufficient. The articles of association must either specify a very concrete purpose under § 52 AO or clearly name a specific tax-privileged entity. The rationale behind this is the function of the articles of association as an official record: The tax authorities must be able to verify, without further investigation, whether the assets will continue to be used for charitable purposes in the future.
Assessment notice does not guarantee perpetual formal compliance with the articles of association
In the second case (V R 23/23), an existing assessment decision was revoked. In its articles of association, the organization described only in general terms that it pursued tax-exempt purposes “within the meaning of the German Fiscal Code (AO)” and provided IT services to support its members. The BFH did not consider this to be a sufficient definition of purpose or a direct pursuit of purpose within the meaning of German nonprofit law.
A practical example illustrates the gravity of the situation: A gGmbH whose articles of association merely state that its assets are to be used “for charitable purposes” now risks having its charitable status revoked as of the following calendar year (Section 60a(5) AO) – even if it has in fact been operating as a charitable organization for years.
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In its ruling, the Federal Fiscal Court further tightens the formal requirements for articles of association. An organization does not meet the formal requirements for its articles of association if they do not specifically define its own charitable purposes and if the manner in which those purposes are to be achieved is not immediately apparent. The BFH makes it very clear: It is not sufficient to provide organizational support to other tax-privileged entities if this does not directly promote the organization’s own statutory purpose. Even legal entities under public law operating in the exercise of sovereign functions cannot be recipients of a planned cooperation under § 57(3) AO, and thus there is no direct realization of the purpose in the case at hand.
The BFH thus makes it clear that actual management cannot remedy deficiencies in the articles of association. What is not stated in the articles of association does not exist under nonprofit law.
Wording of the model articles of association must be strictly adhered to
These rulings once again highlight the importance of clearly worded articles of association in the context of nonprofit, association, and foundation law. The requirements of the tax authorities and the Federal Fiscal Court are becoming increasingly strict – and the practices commonly observed are becoming increasingly risky. Every German nonprofit organization should therefore verify whether its articles of association sufficiently specify both the restriction on the use of assets and the tax-exempt purposes, as well as the direct manner in which those purposes are achieved.
Tip: Pay attention to the specific wording of the articles of association
Our practical tip: Ensure that the stated purposes are specific, that the restriction on the use of assets is clear, and that the model articles of association are adopted verbatim.
Are the purposes stated in your articles of association and the restriction on the use of assets sufficiently specific? Do your articles of association fully cover the actual management of the organization, or are there any unidentified formal risks?
Do you need assistance with the legally compliant revision of your articles of association regarding charitable status, donation law, or corporate governance? Our NPO team is happy to assist you in drafting your articles of association in a legally compliant manner and in securing your charitbale status for the long term. Please fell free to contact us!
