Deduction of gifts and contributions
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Deduction of gifts and contributions and other tax incentives in the PIT and CIT for non-profit entities or activities. Personal expenditure.

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Personal expenditure

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Personal expenditure

Deduction of gifts and contributions and other tax incentives in the PIT and CIT for non-profit entities or activities

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Personal expenditure

The examined national tax systems are similar in that gifts and contributions, even those offered to non-profit entities, are regarded as personal/private expenditure and their deductibility is therefore seen as a kind of privilege

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

From a constitutional point of view, there is no need to grant, for example, a tax relief or a tax deduction because gifts and contributions for non-profit entities are not affected by the principle of ability to pay.

No constitutional need

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

The question of how and to what extent gifts and contributions for non-profit entities or activities should be tax deductible must be answered with regard to the predominating political and socio-cultural ideas in each state or society.

Political question

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Balance needed

  • Supporting non-profit activities

  • Protecting state revenues

  • Fair and equal treatment of all taxpayers.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Limiting deductibility by

  • scope of non-profit activities

  • kind of donation

  • amount of donation (min/max)

  • status of the non-profit entity

  • seat of the beneficiary.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Scope of non-profit activities

  • Research, education, libraries

  • Museums, theatre, cultural purposes

  • Children and youth care, old age

  • Protection of environment

  • Religious and ideological organisations

  • Sports.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Kind of donation

  • Donation in cash or

  • in kind (rules for measuring the value needed!)

    • in many countries: book value

    • France: 66% of the faire value.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Amount of donation

  • maximum threshold (e.g. 10 – 20% annual gross income)

  • fix maximum wide spread (Norway: approx. 1.600 – Italy 70.000 Euros)

  • minimum amount(e.g. Netherlands 60 Euros).

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Status of the non-profit entity

  • Legal form and organisation

  • Seat and place of activities

  • Seize and formal requirements.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Legal form

  • E.g. in Portugal, the specific amount that can be deducted varies with respect to the nature of the donor.

  • Corporation: may deduct an even disproportional amount, e.g., 140% of the amount if the donation is attributed to social purposes

  • Individual taxpayer: is not granted a deduction in the tax base but a tax credit.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Organisation

  • Denmark

    • the board of the association cannot be self-supplementary

    • the association is not allowed to be a member of an approved main association unless the applicant association is a nationwide organisation.

  • France

    • a so called “disinterested management” is required, which implies that the managers, legal or factual, do not derive a benefit, directly or indirectly, from the results of the entity

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Seat and place of activities

  • Following the ECJ decisions of Stauffer and Persche, most European member states amended their rules concerning

    • foreign non-profit entities

    • beneficiaries abroad.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Seize

  • In Denmark, for example, the funds of the association with public benefit purposes, etc., must benefit a group of persons who are not geographically or in any other way limited to a population size of less than 40,000. The number of membership-paying members in the EU/EEA must exceed 300.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Formal requirements

  • Payments have to be due and carried out

  • Receiving association checks and follows up on missing payments

  • The tax return must provide details as to the total amount received in donations during the year.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Special rules and incentives

State aid ?

  • Deduction versus tax relief

  • Disproportional amounts/multipliers

  • Periodic gifts and long term subsidies

  • Promoting trust funds and looked-up basic capital.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Deduction versus tax relief

  • Most countries provide a (limited) deduction of the donated amount against the tax base. Some countries, such as Greece, grant a tax relief instead of a deduction.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Disproportional amounts and multipliers

  • In Portugal, a corporation is entitled to deduct an even disproportional amount e.g. 140% of the amount if the donation is attributed to social purposes.

  • From 2012 to 2016, the Netherlands introduced a temporal multiplier to help cultural public benefit entities.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Periodic gifts and long term subsidies

  • In Denmark, a special tax relief is granted if the taxpayer obligates himself with a written statement to make continuous payments indefinitely or for a period of at least 10 years.

  • Dutch PIT distinguishes between periodic gifts and other gifts, too. Periodic gifts are gifts which the donor is, by notarial gift deed, obliged to pay annually for at least five years while he is alive.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Promoting trust funds and looked-up basic capital

  • In Denmark, a foundation is exempt from taxation in cases in which gifts and donations are allotted to the trust fund or to the locked-up basic capital of the foundation.

  • According to the German PIT, donations for the into the asset stock of a foundation are deductible, on request, by an amount of up to 1 million euros within the assessment period in which the donation takes place and within the following nine-year period.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


Personal expenditure

Conclusion

  • All countries follow the idea of granting a limited tax benefit.

  • Benefit may be designed in the shape of a deduction, a tax relief or a credit.

  • Limitation is in line with constitutional law because gifts and contributions for non-profit entities are unaffected by the principle of ability to pay.

  • Limiting tax benefits can therefore be used to create tax incentives in order to promote special issues.

Unv.-Prof. Dr. Heike Jochum, Mag. rer. publ.


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