You are a not-for-profit organisation and want to know the tax rules that apply to you.
You are a not-for-profit organisation and are developing a profit-making activity as a secondary activity.
You are a not-for-profit organisation in full transformation and need advice for the transition.
Taxation in France
Entities designated as “not-for-profit organisations” (NPOs) are generally those not liable to business taxes due to their type of organisation and their purpose.
The most common NPOs are:
- Foundations officially recognised as beneficial to the public;
- Corporate foundations;
- Trade unions;
- Endowment funds
Generally, these organisations are not subject to business taxes. However, not-for-profit organisations often develop a profit-making activity in parallel with their main associational activity. The organisation therefore needs to know about the tax impact of such an activity.
In what situations is a not-for-profit organisation subject to business taxes?
A not-for-profit organisation is considered non-profitable if it meets the following three criteria:
- The management is disinterested: the NPO must not be administered by persons having a direct or indirect interest in the operating result;
- If the NPO’s activity competes with that of other companies, the terms of exercising this activity must be different from that of companies;
- The NPO must not exercise an activity that provides a service to companies who would gain a competitive advantage from this service
If the NPO no longer meets the not-for-profit criteria, it will be subject to business taxes.
What taxes would apply to taxpaying not-for-profit organisations (NPO)?
Tax-paying NPOs are subject to the following business taxes:
- Corporation tax which is levied on the profit realised by the NPO during a year;
- The Territorial Economic Contribution (CET) which is composed of the Company Real Estate Contribution (CFE) and the Company Value-Added Contribution (CVAE);
- VAT for delivery operations of assets or services
If a non-for-profit organisation (NPO) develops a profit-making activity, can it benefit from business tax exemption?
Yes, an NPO may develop a profit-making activity as a secondary activity and continue to benefit from business tax exemption.
To benefit from this exemption, the NPO must meet the following conditions:
- Its management must be disinterested;
- Its not-for-profit activities must be substantially predominant;
- The amount of its annual revenue from the profit-making activities must not exceed €63,059.
If the amount of revenue exceeds €63,059 but the not-for-profit activity is still predominant, you could consider “sectorisation” to isolate the profit-making activity from the non-profit-making activity.
If the profit-making activity becomes predominant, you could consider creating an independent structure to isolate the profit-making activity once and for all.
It is quite possible to envisage a development in various stages. Your tax lawyer will be able to answer any tax questions you may have.
Altexis offers you full support in your capacity as a not-for-profit organisation, in particular:
- We can check if one or all of your activities are liable to business taxes;
- We can offer you support during the transition to profitability: isolation of the profit-making activity or switching completely towards profit-making activities.
- We can help you file your tax return relating to these changes