When Charity Helps Your Tax Bill

When it comes to charitable giving, it is well known that taxes matter; making a charitable donation is not only a great way to support a good cause, it can also help offset your annual tax bill – if you are feeling more generous with the approach of the Christmas holidays, here is how you can claim back on your charitable and tax-deductible donations.

According to Article 109 and Article 112 of the Luxembourg Income Tax Law, you can deduct as special expenses donations made to charities from your taxable base, provided that you fulfill some conditions. You must be a tax resident in Luxembourg, or a non-resident taxpayer who submits his/her tax return to the Luxembourg tax administration and opts to be considered a tax resident. Your donation must generally be made in cash directly to the charity. Donations in kind are possible, but only to national cultural funds and to cultural institutions or organisations. The charity must be a public utility organisation, a non-profit association or a foundation recognised by the Ministry of Justice or a non-governmental development organisation recognised by the Ministry of Foreign Affairs.

The complete list of recognised charities, continuously updated, is available on the website of the Luxembourg tax administration (www.impotsdirects.public.lu/fr/az/l/libera_dons.html). You can also deduct as special expenses your donations to similar non-governmental entities and organisations in another member state of the European Union or in a member state of the European Free Trade Association.

Even if you fulfill the conditions mentioned above, not all the charitable donations are tax-deductible. The total amount must be at least €120 and must not exceed 20% of your total net income or €1 million. Amounts in excess of these limits can be carried forward for the next two years, subject to the same conditions and limits. Contributions such as membership or subscription fees are excluded and cannot be deducted for tax purposes.

Since 2009, the Luxembourg tax authority no longer requires the submission of a tax certificate by establishments which benefit from donations in order to validate the corresponding deduction for tax purposes. This has simplified the management and administration of deductions of donations for tax purposes by the associations and foundations on the one hand and donors on the other. Nowadays, you only have to notify the donation(s) on your tax return to which you must attach the statement(s) clearly showing the transfer(s).

Of course, you can do more than just giving money. You can also give some of your time to aid a worthy cause. There are a lot of volunteer opportunities in the Grand-Duchy and many non-profit organisations are English-friendly. If you think that many people doing small things can make a big difference, here are two websites that you can use to search for volunteer activities: www.benevolat.public.lu (only available in French and German) from the Volunteering Agency (Agence du Bénévolat), supported by the Ministry of Family Affairs, Integration and Greater Region, and www.servethecity.lu (available in many languages including English), a movement of volunteers serving Luxembourg.