Non-profit corporations are not subject to unlimited corporation tax liability in their privileged area (essential and non-essential auxiliary businesses) in accordance with § 1 para. 2 in conjunction with § 5 point 6 KStG. In that regard, only a limited tax liability in relation to investment income and income from the sale of real estate in accordance with § 1 para. 3 point 3 KStG comes under consideration. With commercial business operations in the sense of § 45 para. 1 BAO [Federal Fiscal Code], however, non-profit corporations are also fully liable for tax.
The allowance for privileged purposes pursuant to § 23 para. 1 KStG was introduced in accordance with the Administrative Court in order to mitigate the economic consequences resulting from the classification of commercial business operations as an area of unlimited tax liability. This was justified by the fact that the income of a non-profit legal entity from its commercial business operations ultimately also only represented a means to achieve the non-profit, benevolent or ecclesiastical purpose.
On the one hand, the Administrative Court concludes that the tax-free profit allowance pursuant to § 23 para. 1 KStG can only relate to the income with unlimited tax liability of a non-profit corporation. It excluded applicability to income with limited tax liability (here: income from real estate sales). On the other hand, it clarified that the exercise of an investment option in the sale of private real estate, which is also open to non-profit corporations, merely serves to take into account previously unclaimed income-related expenses. However, the exercise of the investment option does not result in the transfer of income from the area of limited tax liability to that of unlimited tax liability, and thus to the income area covered by the tax exemption. No offset between the unlimited and the limited taxable sphere of a non-profit corporation is provided for.