Scientology not exempt from taxation in Germany

Only the 10% license fees that go to the USA are not taxed

Which goes to show that Scientology is a worldwide franchising operation

Its commercial practices are consistent with those of a world enterprise minimizing its tax obligations

This page adapted from http://www.Ingo-Heinemann.de/steuer1.htm of 6 Feb 2003, a critique of Scientology by Ingo Heinemann

Contents of this page

Since 1976 it has been suspected in Germany that Scientology "describes itself as a 'church' primarily for tax reason." ABI-Info 54 aus 1976 .
Nothing has occurred to change that since then.
After decades of battle, Scientology was recognized as charitable in the USA, see Scientology in the USA: charitable but not recognized as religion
Scientology has continually tried to attain similar status in Germany.
So far it has done this in vain; Scientology was and is subject to taxes in Germany.

Now Scientology has attained a "win" that has little to do with Scientology, but is concerned mainly with the wording of a German-American double-taxation agreement. Once again, Scientology's first resort is to misrepresent itself to the public by creating the impression that the context is tax exemption in the sense of a charities law:
The German Scientology Freiheit paper ran the headline "Steuerbefreiung für Scientology" ["Tax exemption for Scientology"] in December 2002. And it further asserted that "Scientology anerkannt" ["Scientology is recognized"]. Regarding these assertions:

Worthy of note: in Scientology's "Freiheit aktuell" (see picture), it says on the title page "Scientology anerkannt" ["Scientology is recognized"].
In the press release that goes with the headline, it is asserted (see below): "Scientology is officially recognized as a religious community in the major nations of the western world including the USA ...". Germany is not included, but this assertion does not go for the USA either. Scientology is not "officially recognized as a religious community" there, see:

Scientology is now being somewhat more cautious in its assertions about the purported recognition by the court in Germany (see below): "Worldwide hundreds of administration decisions and court decisions - including the latter in Germany - have concluded that Scientology is a bona fide religious community." What is that supposed to mean, a "bona fide religious community"? In Germany this formulation has no meaning at all, and especially not in the legal sense.

Why criticism of Scientology?

As far as the rest of it goes, a license fee in the amount of 10% of its "income" may be perfectly all right from the standpoint of a business.
At least this is the viewpoint of the Finance Court.
The management of the business is not the subject of the current criticism.

Criticism of the Scientology applies much more to:

Criticism of the Scientology organization is used for a business which

More in the German language can be found on the topic at http://www.Ingo-Heinemann.de/index.htm

On January 27, 2003, the German Federal Office for Finances (BfF) (http://www.bff-online.de) exempted the American Scientology organization from paying tax on the notorious 10% license fees that the Scientology branches have been paying to the Scientology headquarters since the days of Hubbard.
That exemption was not, however, based on the organization's operations.
It was based exclusively on the double-taxation agreement between Germany and the USA, which applies equally to companies and to natural persons.

The hearings on the interpretation of this agreement went on for years. The court finally decided that this double-taxation agreement was also applicable to Scientology. According to the agreement, to avoid double taxation, the receiver of license fees [such as CSI] has to declare this income on its tax statements. This includes various Scientology organizations in the USA. If this income is then considered by the US courts to be tax-exempt, then that is their business. There are various points of view about the question of the "Binding force of the determination on tax exemption with the resident country". The court examined the German and the American interpretations, which vary from each other only minimally, and came to the conclusion that the American interpretation is binding.

Viewing the matter in this way, the court did not recognize a charitable status of Scientology/USA, rather it recognized the US version of the double taxation agreement.

Prior to this the German revenue offices deducted lump-sum taxes from these license fees. This is no longer permitted. For this reason the Federal Finance office issued the exemption decision which the Scientology branches can now submit to their local revenue offices (see below).

On February 3, 2003, Scientology announced in a press release (see below), that the federal finance office had granted tax exemption to an American Scientology organization. Scientology claimed that the German Federal Finance Office was "the German counterpart of the American IRS" (see below). That is false. The IRS is the US federal tax office. There is no equivalent agency in Germany. The Federal Office for Finances is responsible solely for the taxation of Germans who do business outside the country and for foreign tax business, see www.bff-online.de. Scientology intends to use tax exemption for a small portion of its income as an opportunity to present itself as tax-exempt in general based on charitable activity.

Nevertheless, this is about the notorious 10% that German Scientology organizations and private persons have been paying since the beginning to Hubbard or to American Scientology.

The 10% figure affirms a suspicion Ingo Heinemann documented in 1982 called:
The Scientology "Church" is a worldwide business which markets the copyright of its founder
He first announced this in 1975 in ABI-Info 53.
In ABI-Info Nbr. 54 of 1976 he reported that these license fees were characterized as "donations to the mother church."

"Anyone who wants to found a Scientology branch must forward 10% of gross income to the founder, namely Ron L. Hubbard or the Scientology headquarters in California, USA.
The fact that it is done this way in Germany, too, is shown in several Scientology association charters. They include the obligation to transfer funds amounting to 10% of gross income. Such an obligation, however, can hardly be said to be compatible with charitableness. Perhaps for this reason do several of the newer charters only mention donations to the "mother church", according to our information."

In 1979 Ingo Heinemann mentioned this 10% fee in his book, "Scientology and its Cover Companies".

-- Heinemann 1979 : "Scientology and its Cover Companies" pages 11 and 12

Hubbard's Finances

For the Scientologists worldwide this is a delicate subject. It is not without reason that Hubbard has styled himself a selfless idealist. Tax issues are constantly lingering in the background. The assumption is also in the background that Scientology is solely a for-profit company for Hubbard.

It has been and is asserted that Hubbard receives 10% of the gross income of his sect. The Scientology sect attacks this assertion angrily, with no regard for legal fees in their defense. The courage for such legal processes could only arise from the threat of having to pay taxes and from a misperception of the facts which had been caused by intended disinformation.

Also, Hubbard owns the copyright for all written products of the Scientology sect, down to the last little invitation card.

COPYRIGHT: that means an internationally recognized license fee of 8-10% of the final sales prices. If 200,000 copies of the "Dianetics" best seller are sold in one year, (a completely realistic number), then 800,000 DM of the sales alone belong to Hubbard. Sure enough, the Scientology sect sells several dozen different Hubbard books: also sound tapes, E-meters and last but not least, courses.

However, Hubbard does not just receive 10% of book sales, but 10% of the entire gross income of all sect organizations.

The sect disputes this and has already complained numerous times on account of this statement. Former Scientologist Kaufman (»Übermenschen unter uns«/"Supermen Among Us") has reported that anybody who wants to found a Scientology branch must transfer 10% of the gross income to Hubbard via the Scientology headquarters.

Nothing has changed since then.

from: http://www.menschenrechtsbuero.de

from: http://www.menschenrechtsbuero.de/pdf/anlage03feb03.pdf

Press release 3 February 2003

First time in Germany:

Tax Exemption for the Church of Scientology International from the Federal Office for Finances

(BONN) The Federal Office for Finances in Bonn, the German counterpart to the American IRS, had now granted exemption to the Church of Scientology International (CSI), the Mother Church of the Scientology religion. In the decision, CSI is given tax exemption for its income in Germany. The decision by the Federal Office for Finances means that the Mother Church of the Scientology religion, which is domicile to Los Angeles, has been recognized for the first time in Germany as tax-exempt.

The exemption affects license fees for training and information films about the Scientology religion which are shown during the training of Scientology clergy, and which are licensed by CSI to the German churches. Until then, all Scientology churches in Germany had to pay 25% of the license fees to the appropriate finance office. CSI now has received tax exemption for the license fees of all nine German Scientology churches in Munich, Hamburg, Stuttgart, Berlin, Frankfurt, Duesseldorf, Hamburg-Eppendorf and the Celebrity Centers in Munich and Duesseldorf. The exemption applies for the period 1994 to 2005.

The decision of the Federal Office for Finances to give CSI tax exemption, follows a precedential decision of the Cologne finance court (Az 2 K 6627/96) of 24 October 2002. The court decided that Scientology Missions International (SMI) and the International Hubbard Ecclesiastical League of Pastors (I-HELP) gives Scientology clergy outside of the organized churches the instruction necessary for the fulfillment of the mission as clergy. Both organizations have their headquarters in Los Angeles, USA, same as CSI.

According to the legally binding court decision of October, the Federal Office for Finances now grants similar exemption to CSI, which is also recognized in the USA as a charitable religious corporation and which is exempt from income taxes there.

Rev. Heber Jentzsch, President of the Church of Scientology International, stressed the special significance of this tax exemption:

"It is the first time that a German agency had to respect the fact of Scientology's recognition in the USA.. This decision is an important step in our efforts to be handled exactly as are other religious communities in Germany, as is required by the German Constitution and by international treaty."

Scientology is officially recognized as a religious community in the major nations of the western world including the USA, Canada, Australia, South Africa, Sweden, Portugal, Hungary, Italy, the Netherlands, Taiwan, New Zealand and other nations. Worldwide hundreds of administration decisions and court decisions - including the latter in Germany - have concluded that Scientology is a bona fide religious community.

Responsible for content and further information: Sabine Weber / Georg Stoffel

Telephone [number given]

A copy of the exemption decision from the Federal Office for Finances and the first two sides of the judgment of the Cologne finance court are attached for your information (or download as pdf here).

Federal Office for Finances
Personnel designations and file numbers blacked out, see below
27 January 2003

M. Wilhelm Bluemel, attorney-at-law
Bayerstr. 13
60135 Munich

as the authorized representative for the creditors of the compensation

EXEMPTION CERTIFICATION in accordance with § 5Dd para. 3 sent. 1 of the Income tax law (EStG)

To the application of 31 Dec. 1998 for exemption of domestic income from tax withholding in accordance with § 50a para. 4 EStG concerning the double taxation agreement (DBA) Federal Republic of Germany - UNITED STATES OF AMERICA the following certification is issued:

Exemption is granted.
The authorized representative is justified in not having tax withheld.

Subject of exemption:
Compensation for the use or the right to use copyrights and/or similar services. The exemption occurs in accordance with Article 28 Para. 1 ltr. f of the DBA-USA.

The exemption applies to compensation paid in the period from 1-1-1994 to 12-31-2005.

Creditor of the compensation:
Church of Scientology International, 6331 Hollywood Blvd. USA - Los Angeles, CA 90028

Debtor of the compensation:
Scientology Church [further details blacked out]

This certification occurs under the provision of revocation (§ 131 of the tax system)

page 2 of the decision of 21 Jan 2003, Az. St II 4 - 084/046108 - 00516 / 99

According to your statement, tax has been held to date for the above period by the finance office, who will not be asked for reimbursement. To receive that, please submit the tax certification of creditors compensation (§ 50a para. 5 sent. 7 EStG, see sample attached). With regard to the reimbursement, a special decision will occur.

Comment:
This also takes care of your application for issue of an exemption certificate on 31 Dec. 2002.

Your business partner has received a copy of this certification.

The exemption applies only so far as the named income to the compensation creditor can be reckoned in accordance with internal state tax law. This provision will be examined by the Federal Office for Finances (BfF) in the scope of application review only as the exception or with tangible indicators [to the contrary]. The determination as to whether income for which tax must be withheld in the sense of § 50a para. 4 EStG exists and which person this is to be ascribed to, is basically incumbent upon the revenue office in the operating area of the compensation creditor. The BfF, in contrast, is responsible only to verify that taxes are not withheld [in this case] because of the double taxation agreement (§ 5 para 1 nbr. 2 finance administration law).

As changes which effect the exemption claim (e.g., the task of residence in the above-named DBA-contract-state by the compensation creditor) become known, these are to be immediately communicated to the BfF. Tax contributions which have been unjustly diverted will be requested back from the finance office by the compensation creditor or the compensation debtor can be held liable.

The tax debt of the service receiver for sales tax (§ 13b sales tax law) will not be affected by this certification.

This certification is to be maintained as documentation; regulations for the maintenance of documents apply in accordance with § 147 A.O. Existing record and reporting procedures of the compensation debtor are not affected (§§ 73 d and § 73 e of the income tax implementation code).

Press report

HANDELSBLATT, Monday, February 3, 2003
As a result of court decision

Scientology receives tax exemption for the first time

The controversial Scientology organization has, for the first time, received tax exemption in Germany for its income. The decision was made by the Federal Office for Finances in Bonn, as the Scientology-Kirch Deutschland e.V. reported on Monday and the Office verified.

HB/dpa BONN. The tax exemption is a result of a German court decision and is based on the double taxation agreement between Germany and the USA, where Scientology is recognized as a charitable religious organization. It is not associated with a direct acknowledgment of Scientology as a religious community in Germany.

The Scientology organization is under surveillance in all German states except for Schleswig-Holstein. Its critics view it as a profit-oriented corporation that uses dubious methods. Scientology operates primarily in real estate and in the psycho-market. Its income is estimated to be in the millions.

It is said to be the first time that the mother church of the Scientology religion, domicile to Los Angeles, USA, has also been regarded in Germany as tax exempt, as Scientology said it. It also said that in Germany there are court decisions, including one from the Federal Administrative Court, according to which Scientology is categorized as religion, stated the Scientology spokeswoman. But, she said, there are "political tendencies" that have put this in doubt. There is, however, no political institution available which could confirm or deny this categorization.

The tax exemption (for the period 1994 to 2005) concerns license fees for so-called training and information films about the Scientology religion. Up to this point Scientology had 25% of the fees withheld by the finance officials. According to the decision, Scientology can now request refund of the money it has paid since 1994.

The decision of the Federal Office follows a similar legally binding decision of the Cologne Finance Court in October 2002, as a government official has verified. The court had decided that Scientology was qualified for tax exemption in accordance with the double taxation agreement between the USA and Germany, because in the USA it is recognized as a charitable religious corporation and is exempt from taxes there.

Scientology welcomed the decision. "This decision is an important step in our efforts to be handled exactly as are other religious communities in Germany, as is required by the German Constitution and by international treaty."

According to a study by Munich social scientists, the Scientology organization in Germany uses methods which contain a high degree of psychic influence. Associated with them is the risk of manipulative guidance. According to the study, every other former Scientologist could be evaluated as psychically dependent.

Scientology was founded in 1954 by American science fiction author Lafayette Ronald Hubbard (1911 - 1986) in the USA. Exact figures on its members are not known. According to statements by the "Lexikon der Sekten, Sondergruppen und Weltanschauungen" (Herder Verlag), there is supposed to be between 8 and 25 million worldwide. It is stated that in Germany, where Scientology had its first establishment in 1970, there are 20 to 70 thousand members.

www.Ingo-Heinemann was opened in September 1998

Germany