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Prof. dr. Sigrid Hemels. The European Foundation Proposal An effective , efficient and feasible solution for tax issues related to cross border charitable giving and fundraising?. Tax incentives historically only applied to (gifts to) resident charities.

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Prof. dr. Sigrid Hemels

The European Foundation ProposalAneffective, efficient and feasiblesolutionfortax issues related to cross border charitablegiving and fundraising?

problems relating to cross border charitable fundraising
Tax incentives historically only applied to (gifts to) resident charities.

This makes cross border charitable giving and fundraising less attractive  tax barrier

Problems relating to cross border charitable fundraising
a solution should be
A solution should be:
  • Effective: removes the tax barriers for cross border charitable fundraising and giving
  • Efficient: does this at the least costs for charities and governments
  • Feasible: is acceptable to all Member States and can therefore be implemented.
ecj solution host country control
ECJ solution: host country control
  • Foreign charities must meet the local charity requirements.
  • Not efficient: charities must meet requirements and supervision of all Member States  costly and burdensome  barrier.
ec solution european foundation fundatio europaea
EC solution: European Foundation (Fundatio Europaea)
  • Proposal for an FE Regulation 8 february 2012.
  • Seperate legal entity for the public benefit
  • Activities in at least two Member States
  • Registered in one EU Member State
  • Supervised by that Member State only
  • Supervisory authority of other MS may only request an investigation of the registration state: other MS cannot supervise/invistagate.
fe requirements in regulation selecton
FE requirements in Regulation (selecton)
  • Minimum assets € 25.000
  • Trading activities allowed if all profits are used for public benefit, 10% unrelated economic activities allowed.
  • Requirements regarding statutes and documents needed for registration.
  • No further authorisation of MS after registration.
exhaustive list of public benefit
Exhaustive list of public benefit

Something is missing….

provisions on tax equivalency principle
Provisions on tax: equivalency principle
  • FE must be treated the same as resident charities for income and capital gains taxes, gift and inheritance taxes, property and land taxes, transfer taxes, registration taxes, stamp duties and similar taxes.
  • Donors to FE must be treated the same as donors to resident charity income taxes, gift taxes, transfer taxes, registration taxes, stamp duties and similar taxes.
  • Beneficiaries of an FE must be treated as if the grants or other benefits received were given by a resident charity (no limitation regarding taxes).
missing requirements from prevention of abuse perspective
Missing requirements from prevention of abuse perspective
  • No rule on max. assets or min. expenditures.
  • No requirements regarding remuneration.
  • No requirement on proportion of operating costs to charitable spending
  • Not clear whether tax authority of donor state may request investigation.
  • No harmonisation of penalties.

 risk of FEs being set up in small MS without the means/priority to supevise and penalise.

fe home country supervision harmonised requirements
FE: home country supervision, harmonised requirements
  • FE must meet requirements of Regulation, not of 27 MS and is supervised by one MS.
  • Probably not feasible: MS have to grant tax incentives (main problem: gift deduction), cannot supervise or penalise foreign FEs and must trust other MS to do so.
conclusion
Conclusion
  • The FE Proposal does not put an end to the discussion on how to remove tax barriers in an effecitive, efficient and feasible way.