TDF Budgeting How-To
version 20250708-01
Introduction
Thanks a lot for reading!
Honest disclosure: Budgetting is neither a particularly exciting topic nor a very rewarding one. However, it is one of the key tasks, and apart from the legal requirement, one of the main instruments to define the strategy for the next 12 months to come.
While we publish this document to the general public, it is explicitly NOT intended to give any legal or tax advise. It may contain mistakes and may be incomplete. Reports of such issues are welcome.
What this document does (not) cover
This document does cover the technique of our budgetting. How things are structured, how to read the spreadsheet etc.
Due to the amount of content to discuss already, this document does not (at least not extensively) cover several legal aspects, like what TDF can pay for or what the constraints are on projects. We will discuss this separately.
Base parameters for TDF as not-for-profit
- TDF is a registered not-for-profit (“charity”). It operates within four “booking circuits”:
- not-for-profit part (“ideller Bereich”): All our not-for-profit activities. No exchange of services. Pays no income tax, but has to pay VAT (see below). By far the largest field of activity. Income in 2024: Approximately 1,4 million €.
- business part fitting the nonprofit mission (“Zweckbetrieb”): We don’t have activities there yet. One thing we theoretically could do there is e.g. paid conferences. Pays reduced taxes and reduced VAT.
- business part (“Wirtschaftsbetrieb”): A regular business entity inside TDF. Exchange of services. We currently handle app store sales, advisory board fees and t-shirt sales there. Pays regular taxes and regular VAT. Business part cannot be cross-financed by not-for-profit part. Very small in comparison. Income in 2024: Approximately 37.000 €.
- capital investment: We invest money and gain an interest. Currently invested are 750.000 €. This investment can be dissolved on short notice, but then we might incur losses. Interest gains in 2024: Approximately 24.000 €
- capital stock: Not to be confused with the capital investment. As a foundation (“Stiftung”), TDF has a capital stock of 50.000 €. This money cannot be used, but a nominal retaining of the value (in comparison to a real value retaining) is fine. It cannot be planned in budget spending. The capital stock collected in a fundraising challenge in just eight days from donors around the globe.
- value added tax (VAT), net vs. gross: For the not-for-profit part, TDF has to pay VAT, but can’t claim/deduct it. For offers and invoices, we always have to factor in the gross sum for our budget, not the net sum. For most of the services we render, 19% VAT apply currently.
Example: Tender offer is 10.000 €. We have to factor in 11.900 €. - TDF does monthly VAT filings. The deadline is always the 10th of the month after the next (e.g. the January VAT filing is due by March 10). This extended deadline (“Dauerfristverlängerung”) is granted only if you are a reliable taxpayer, otherwise it is shortened by one month, i.e. the 10th of the following month.
- We have to also file an annual VAT declaration. That deadline is several months after the respective fiscal year. Example: The declaration for the year 2022 had to be filed by the end of August 2024. Currently filed is the VAT declaration for up to 2023.
- We had regular (every three years) tax declarations for corporate tax to file. Due to the size of our business entity hitting a threshold, we now have to file annually from now on. Also for the corporate tax declaration, there are several months after the fiscal year for filing. Example: The declaration for the year 2022 had to be filed by the end of May 2025. Currently filed is the corporate tax declaration for up to 2023.
- We have regular (every four years) social security audits. The last social security audit was finished in September 2024 and covered the period 2020-2023.
- In the past, with a fixed deadline of the 7th of the following month, a filing with the German federal bank (“Bundesbank”) had to be done for any payment sent or received above 12.500 € out of Germany, due to the foreign trade law (“Außenwirtschaftsgesetz”). This sum just lately has been increased to 50.000 €.
- By February 16 of the following year, the filing of all salaries has to be made to the professional association (“Berufsgenossenschaft”). This is handled by the payroll provider.
- For any contracted work from individuals or freelancers that qualifies as “art”, by the end of March of the following year, the filing for the artists social security (“Künstlersozialkasse”) has to be made. This is regularly audited during the social security audit (see above). It requires checking invoices paid and identifying the kind of recipient/company to determine if a payment is due, as not for all setups a payment is necessary.
- These filings are no different than what any other company has to do.
- For all the filings, even if the activities took place during the term of the previous boards, the new board has to sign and approve if the filing is due during their term. This means they need to know all the details, in order to make proper statements as they are ultimately responsible.
Accounting
- Accounting is prepared by two members of the team.
- The actual accounting/bookkeeping is done by our accountant on a monthly basis.
- We voluntarily publish condensed/anonymized ledgers.
- For the curious: the accounting framework used (“Sachkontenrahmen”) is SKR 49 and the software used is DATEV.
Reserve planning and timely spending
TDF’s budget works with various reserves (“Rücklagen”):
- recurring costs (“Betriebsmittelrücklage”): Expenses we spend, on a recurring basis, within a year. Salaries and compensations, rents, membership fees, accounting and legal costs, server housing, domains, insurances etc.
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project costs (“Projektrücklage”): Expenses for projects that may take longer than a year.
- timely spending (“zeitnahe Mittelverwendung”): As a tax-exempt not-for-profit, TDF is not allowed to pile up money. We are subject to a timely spending. Money received as donation has to be spent within two years from the end of the year we received it.
- Example: Donations received in 2025 have to be spent by the end of 2027
- Spending wrong is worse than spending late, so spending for the sake of timely spending is not advisable.
- There is, however, an exception – projects can be dissolved and money re-purposed, e.g. if a tender doesn’t come to life or a plannet project can’t be done. Obviously, it depends on how many projects we dissolve or re-purpose whether that still is acceptable or not.
- If there’s a rationale, projects can also be planned for a longer period of time.
- Fictional example: TDF wants to build an office building, but it will take four years until we will have enough reserves for that project.
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free reserve (“freie Rücklage”): As a “safety belt”, TDF is allowed to create a free reserve which it can, but does not have to spend. Slightly simplified: 10% of the annual income. So to speak, the free reserve is “budget-neutral”, as we don’t plan it in.
- For 2025, the planned free reserve is expected to be approximately 1,2 million €. In other words, TDF has reserves to react to issues in the donation flow. Parts of this money is currently invested (see above).
Timeline, annual report and filings
The annual report consists of the activity report and the financial report (closing ledgers and reserve building).
- The activity report needs to outline how the foundation fulfilled its objectives and must give a full overview of its activities. The activity report will be sent to the foundation authorities and to the tax office, and will be made public on our website. The legally binding version we have to file is in German. An English version based on the German one will be published as a brochure with additional graphics. The team will write the English version for approval by the board and then translate it into German.
- The financial report must accurately report all accounting-relevant items and numbers, list profits and losses, and contains our closing ledger and the reserve building. It will be sent to the foundation authorities and the tax office. It will be made public on our website, alongside an English translated version. The financial report will be prepared and verified by our tax advisor based on their accounting.