“Who or What is Actually a Non-Profit?”
In everyday life, we constantly encounter terms with stretchy or squishy meanings. Non-profit is one of them. Which organizations are non-profit? And which ones just claim they are? Are there criteria for non-profit status? Or, to put it another way, what does “non-profit” actually mean?
Non-Profit Status as a Concept
Non-profit status is not a protected term. In contrast to certain labels or certifications (such as Zewo), any organization can call itself a non-profit organization. In addition, there is no universal definition – everyone understands it a little differently. However, two criteria seem to be common to most definitions: “altruism” and “not profit-oriented”.
Altruism means that a person’s activity does not benefit him or herself but others and thus usually a large group of people. Whether this is the general public or only a specific target group – e.g., children with cancer – is irrelevant.
In a not profit-oriented activity, “making money” is not the focus of the activity. Rather, the aim is to achieve a social, cultural or even ecological benefit. Possible revenues – from the sale of products or donations and grants – are primarily intended to cover costs. Frequently, no money is earned at all. Offers or activities are made available to the target groups free of charge.
Non-profit therefore means altruistic and not profit-oriented. Another possible definition is to equate non-profit status with tax exemption.
Non-Profit and Tax Exempt
The only objective criterion in Switzerland is tax exemption. Once an organization is tax-exempt, it is recognized as a non-profit. This puts the custody of what we as a society consider charitable in the hands of the tax offices, so to speak.
Tax exemption is a matter for the cantons and so we are dealing with more or less 26 different definitions of non-profit status. This is because the guidelines, requirements or documents needed vary from canton to canton.
Example: in certain cantons, an organization must have been conducting its activities for at least three years before it can apply for a tax exemption. In other cantons, the documents of the last one or two years are sufficient. So there are big differences in how long an organization must have been operating to qualify for the tax exemption.
Another difference is found in the transparency of the tax offices. Cantons such as Nidwalden, Geneva or Appenzell Innerrhoden do not maintain a list of tax-exempt organizations in their canton. Inquiring is just as futile as an internet search. The cantons of Zurich, Aargau and Bern, on the other hand, publish lists of their canton’s tax-exempt organizations on their websites. And cantons such as Grisons, Basel-Stadt or Uri publish lists that include organizations from their canton as well as from other cantons – sometimes even from cantons that do not publish this info at all.
Even if tax exemption is an “objective” criterion for non-profit status – what exactly lies behind it is often very different.
Non-Profit Status at StiftungSchweiz
In order to find a way out of this jungle of inconsistencies, we at StiftungSchweiz have defined exactly what understanding of non-profit we have and apply. One thing is clear: we define this term more broadly than mere tax exemption. For example, organizations that are not tax-exempt but are non-profit organizations are also admitted to stiftungschweiz.ch . Three examples of this:
- Many sports and cultural clubs, for example Theater and dance groups or or a rugby club are not tax exempt because the taxing authorities do not consider them to be “altruistic”. However, we find that it is precisely these associations that usually do a lot for the children, young people and adults of a region and therefore fulfill our definition of non-profit. In addition, many sports clubs depend on financial support from foundations or companies to promote young talent. And since we want to offer a platform to all players in the non-profit sector, these associations are also part of it for us.
- Many smaller associations cannot or do not want to deal with the administrative burden of a tax exemption. Their revenues are also so low in some cases that the effort would not be worthwhile. Nevertheless, these also perform charitable work and should thus have access to our platform.
- Another example is profit-oriented companies that are looking for financing partners or even implementation partners for a non-profit project – for example, a research project. They should also be able to use our platform for networking.
Only for the direct reception of donations via stiftungschweiz.ch is a tax exemption necessary – from a money laundering law perspective.
Non-profit status is and remains an elastic concept. This is because the non-profit, philanthropic sector is a heterogeneous, diverse and colorful sector made up of a wide variety of organizations, activities and operations. And that’s a good thing.
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