Some time ago (probably too long), I was asked some questions about the tax treatment of such associations and why some of them were submitted for tax and not others.

I'll try to clarify this area by supporting me and pulling the quintessence of the Official Bulletin of Tax Tax Office No. 4-H 5-06 No. 208 of 18 December 2006.

For cons, I will not go into detail as summarily assumptions of partial exemption and assumptions of conducting business profit and non profit taking sectorization and spin-generating activities. The introduction addresses these issues. First, sufficient in my opinion because I think these are secondary issues facing the current development of various mediation associations animal.

It will take me several tickets before arriving at the end of this question and ask you to apologize in advance if I'm late to publish them.

I also immediately clear that the introduction you will find hardly differs from that of the official bulletin. I just tried to make it clearer ... to translate ...

Last point, the current reform of business tax may disrupt the device and make it even more obscure. The text establishing the business tax was three pages. The new device 115!! I confess that I probably would not have the courage to lean on me ... no time for that matter.

Happy reading ... hoping it will not be off-putting to excess.

The tax treatment of nonprofit organizations such as associations governed by the law of 1 July 1901 was amended by the 1998 instruction No. 4 H-5-98 and by Article 6 of the Finance Act 2002 No. 2001-1275 of 28 December 2001 and its implementing Decree No. 2004-76 of January 20, 2004 ¹ .

INTRODUCTION

Corporations under the 1901 Act ² are in principle not subject to sales taxes: corporate income tax of law, business tax and value added tax. Only the exercise of gainful employment may question the benefit of such exemptions.

The lucrative nature of an organism is determined by a three-step process for each activity carried out by the organization:

Step 1: Review of the character or not interested in the management of the organization.

If interested in the character of management has proved, the agency is subject to trade taxes. Otherwise, it should proceed to the second step.

Step 2: Review of the status of the organism under competition.

The body has there on business in competition with companies in the lucrative sector?

There are two assumptions:

- The activity of the body does no business competition: in this case, the activity of the organism is not profitable and it is therefore not subject to trade taxes.

- The activity of the body is exercised in competition with a company (profit sector): in this case, the activity is not provided consistently profitable.

It is indeed necessary to examine whether the activity is conducted under conditions similar to those of companies in the lucrative sector.

Step 3: Review of the conduct of the activity.

The comparison of the conduct of the activity is performed using a set of indices. This method is an analysis of four criteria, listed in order of decreasing importance:

1. "Product" proposed by the agency,
2. the "Public" endorsed by the agency,
3. the "Prize" practiced
4. and communication operations performed ("Advertising").

After this third step, only those organizations which operate under conditions similar to those of commercial enterprises they compete, are subject to trade taxes.

We will return to these notions that may seem clear or obvious at first. They actually hide some nuances that any officer of association should know.

Here are a few details of the assumptions of partial exemption and assumptions of conducting business profit and non profit taking "and spin sectorisation 'lucrative activities. In other words under what assumptions, some or all activities may be subject to trade taxes.

The assumptions of liability to tax commercial activities of a nonprofit organization are:

1 ^st case: Organizations that operate in favor of companies are, therefore, taxable sales taxes.

^2nd hypothesis: When a lucrative activity is recognized, it may nevertheless benefit from the exemptions specific to each of the three commercial taxes if it meets the conditions ie:

1. Examination of the profit orientation of the activities of an organization is driven by business activity. Thus, an organization may be in non competition - and thus non-profit status - for some of its activities, and in competition for others.
2. If all activities are performed by a non-profit organization is not subject to trade taxes and whatever the amount of its budget or its turnover. But, it will be subject to corporation tax at a reduced rate on income property.
3. If the organization performs one or more lucrative activities in addition to its non-profit activities, it is in principle subject to corporate tax and VAT for the entire business. But if the non-profit activities are paramount liability to these two taxes will more than its lucrative activities.
4. In terms of corporate tax, the liability of the few profitable activities is subject to their sectorization.
5. In all cases, the business tax applies only to income-generating activities of the association.

However, if the non-profit activities are dominant, devices limiting the scope of taxation were introduced:

1. The franchise tax business: the non-profit organizations, whatever their overall turnover, do not have to submit their activities to non-profit trade taxes if the following conditions are met:

- Non-profit activities remain significantly predominant;
- The organization concerned has incidentally lucrative activities;
- The annual operating revenues related to profit-making activities are less than or equal to 60 000 €.
- Revenues from six charity events organized or supported in year ³ are not taken into account in assessing this threshold.

2. Sectorization lucrative businesses: if its activities are not predominant lucrative, an agency may, under certain conditions, constitute, with regard to the corporate tax, a sector known as "lucrative". Imposing the corporate tax when ordinary door on this sector alone.
3. In terms of business tax, the establishment of a lucrative law is whatever the respective shares of profit and nonprofit activities.

The table below summarizes the different possible cases of tax:

Nicolas

1. respectively codified in Article 261-7-1 ° of the General Tax Code and Article 242 C of Annex II to the code above in the definition of disinterested management of these organizations, and by section 20 of the Finance Act 2005 concerning the exemption of corporate tax revenues heritage foundations of public benefit [ ↩ ]
2. and religious congregations, associations governed by local law continued in force in the departments of the Moselle and Bas-Rhin Haut-Rhin, of public benefit foundations and corporate foundations (referred to as "non- profit "or" agencies "in this instruction) [ ↩ ]
3. Exempt pursuant to Article 261-7-1 ° of the c-tax code [ ↩ ]

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