The European Foundation Centre and the Transnational Giving Europe network have issued a report calling for less red-tape and non-discriminatory tax treatment for donors and philanthropic organisations throughout the Member States.
The report, “Taxation of cross-border philanthropy in Europe after Persche and Stauffer - From landlock to free movement?” identifies a series of barriers that can complicate cross-border philanthropy.
“Cross-border philanthropy should be straightforward, but it can in practice be both complex and costly,” says Gerry Salole, Chief Executive Officer of the European Foundation Centre (EFC). “With this study we aim to raise awareness of the difficulties donors and foundations face when carrying out their invaluable work outside of their home country and to push for effective solutions to facilitate cross-border philanthropy in Europe.”
Almost all the Member States of the European Union offer favourable tax treatment for charities and their donors. And yet, the report identifies the complications of donating to a charity based abroad or when a charitable foundation generates income, through investments or fundraising for example, in a country other than the one in which it is registered.
A series of rulings by the European Court of Justice set out a “non-discrimination principle”, which determines that Member States must award equal tax concessions to charities based in other Member States where the foreign charities can be shown to be “comparable” to domestic organisations holding charitable tax status.
The study examines the different ways that Member States approach the question of comparability of foreign and domestic charitable organisations and the administrative procedures that charities and donors must follow in order to receive the tax incentives due to them.
Solutions are proposed to improve the way that the non-discrimination principle is implemented. These include the use of model statutes, the conclusion of multi- or bilateral tax treaties, and the establishment of a set of common core principles as the basis for determining comparability.
“Philanthropy is a growing force in Europe,” says Ludwig Forrest, Coordinator of the Transnational Giving Europe network and Chair of EFC’s Legal Committee. “Internationally mobile donors and organisations seeking to tackle problems that do not stop at national borders need a tax and administrative framework that recognises the contribution they make to European society and the lives of citizens. Using this study as a roadmap, the EFC and Transnational Giving Europe will continue to work with the European institutions and the national authorities towards tax effective cross-border philanthropy in Europe.”
The forthcoming establishment of the European Foundation Statute, which comprises a legal form for public benefit organisations that would be recognisable across the EU, is a welcome step forward. The statute was approved by the European Parliament last summer, but is yet to be enacted.