Not only non-profit corporations but also non-profit associations are eligible for what are called “hidden dividends”. These are excessive payments in the form of benefits granted by the company to shareholders or to persons who have a close relationship with the association. From a tax point of view, these are treated as open distributions. At the level of corporations, this means that the increased expense may not be deducted as an operating expense in this respect. At the level of the shareholder, the excessive distribution is to be regarded as income from the investment and therefore allocated to income from capital assets. In this case , the corporation paying out is obliged to deduct capital gains tax pursuant to § 93 ( 1) EStG [Income Tax Act] and can also be held liable for this.
With reference to the case law of the Administrative Court, the Federal Finance Court clarifies that the assessment at the level of the company must also be the same for associations based on § 8 KStG [Corporation Tax Act]. Here, too, there is an expense that is not deductible. At the level of the beneficiary (e. g. association official), however, there is no explicit income condition to which these excessive contributions could be attributed. In particular, there can at all events be no income on capital assets, which also means that the association offering the benefit is not obliged to deduct capital gains tax. There is no liability in this regard.