Indirect state support for the arts and culture in the form of tax breaks is not laid down in a separate piece of legislation but instead consists of a multitude of regulations contained in various specialised acts. In the case of VAT, some cultural products (such as books) are subject to a lower rate of 7% instead of the standard 19%; under certain conditions, public cultural operations and non-profit activities (e. g. theatre performances) are exempt from VAT and corporate tax altogether.
Since January 1st, 2000, an Act on the Taxation of Foundations is in force, which includes tax incentives for the establishment of and donations to foundations. In recent years, additional tax breaks have been incorporated into the law governing donations, and the tax exempt ceiling for income from voluntary activity (the so-called standard exemption for course instructors) has been raised and extended to apply to other groups.
The reform of the Non-Profit and Donations Act of July 2007 eases the taxation of civic engagement. Among other things, donations remain exempt from income tax up to an upper limit of 20 per cent and the tax-free amount for the establishment of foundations was raised from EUR 300,000 to EUR 1 million. Within the framework of the 2020 Annual Tax Act various changes to the law on non-profit organisations have been introduced. These include the increase of the transition allowance (from 2 400 to 3 000 euros), the increase of the honorary flat rate (from 720 to 840 euros) and further regulations to simplify and reduce bureaucracy.
In July 2014, the German Bundestag decided to tax audio books at a reduced VAT rate of 7 (instead of the previous 19 %) from January 2015, just like printed books. In July 2019, the German government passed the draft Annual Tax Act that e-books would also only be taxed at the reduced rate of 7 per cent (instead of 19 % as before). The implementation into national law took place in 2020.
It is planned to also realise a reduction of the VAT rate in the art trade.
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