Income that may be tax-exempt in a non-profit association
A non-profit association shall pay taxes on rental income, income from sale of goods and services, and income from capital. These incomes may be tax-exempt if the association meets the requirements for being a non-profit. Income such as membership fees, donations, and grants are often tax-exempt, regardless of whether the association satisfies these conditions or not. Non-profit associations shall complete a tax return each year. The same rules apply to registered religious communities.
Examples of tax-exempt income
Below are examples of income that may be tax-exempt in a non-profit association. This applies if the association satisfies a number of conditions that, such as, means that the association has a non-profit purpose, open membership, and activities that contribute to the non-profit purpose of the association.
Rental incomes that may become tax-exempt
The following rental incomes may become tax-exempt if the association satisfies the conditions.
- Income from letting out a real property that you both own and use. You must use more than 50 percent of the space yourselves for non-profit activities.
- Income from letting out a real property where a minimum of 75 percent of the income comes from leasing to a non-profit organisation whose activities are charitable. You do not need to own the real property.
Income from letting out a real property used as residence by, for example, judges, caretakers, or clergymen is not tax-exempt.
Income from sale of goods and services that may become tax-exempt
Income from the sale of goods and services with clear ties to the non-profit purpose of the association may become tax-exempt if the association satisfies the conditions. This includes, for example, income from the following:
- entrance fees to the association’s events and participation fees
- sale of badges, posters, and books sold to increase interest in the association
- sale of sports articles, such as clothes for players
- sale of promotional merchandise such as souvenirs, hats, or other products featuring the association’s logo
- informal food and beverage service such as the sale of sausages, coffee, cake, or drinks in connection with the association’s activities.
The income has a direct line or natural link to the purpose of the association, therefore the income may be tax-exempt.
The following incomes may also become tax-exempt if the association qualifies as a non-profit. These are incomes usually used by non-profit associations to finance the purpose of the association. This includes, for example, income from:
- bingo and other lotteries
- sale of advertising on players’ uniforms, arenas, websites, and programmes
- flea markets, bazaars, and various campaigns for selling clothes, cookies, or similar
- second hand sales, provided that the goods were donated
- staffing during events organised by other non-profit associations.
This is called prescriptive income (Sw. hävdvunna inkomster).
Income from capital that may become tax-exempt
The following income from capital may become tax-exempt if the association qualifies as a non-profit:
- interest
- dividends
- sale of real property or securities.
The association may not make deductions for expenses linked to the tax-exempt incomes.
All income from the sale of goods and services may become tax-exempt
All income from sale of goods and services performed by volunteer workers may become tax-exempt if the association qualifies as a non-profit and a minimum of 75 percent of the total income from sale of goods and services is tax-exempt. Then, income from, for example, staffing for inventory and parking also become tax-exempt.
This is called the principle of ‘unity of the supply’ (Sw. huvudsaklighetsbedömningen).
Example of when all income from sale of goods and services becomes tax-exempt
Income
The athletics association Höjdarna BK has had the following income during the financial year:
Sale of goods and services
Flea market: SEK 15 000
Sales campaigns: SEK 35 000
Informal food and beverage service: SEK 20 000
Bingolotto tickets: SEK 10 000
Store inventory: SEK 10 000
Staffing for parking: SEK 10 000
= Total SEK 100 000 in sale of goods and services.
Income from capital
Share dividends: SEK 7 500
Interest income: SEK 2 500
Other income
Membership fees: SEK 30 000
Donations and grants: SEK 10 000
Calculation
The association has sold goods and services totalling SEK 100 000. Of these, SEK 80 000 is tax-exempt income from flea market, sales campaigns, informal food and beverage service, and Bingolotto tickets. Income from staffing for inventory and parking is SEK 20 000, this is income for which the association shall pay taxes.
To calculate the proportion of tax-exempt income, divide the tax-exempt income from the sale of goods and services by the association’s total income from sale of goods and services.
SEK 80 000 ÷ SEK 100 000 = 0.8 = 80 percent
The tax-exempt income from the sale of goods and services is at least 75 percent of the association’s total income from the sale of goods and services. Therefore, the income from staffing for inventory and parking also becomes tax-exempt.