Study reveals how EU member states use tax benefits to stimulate philanthropy

The European Center for Not-for-Profit Law Stichting (ECNL) has published comparative research reviewing tax benefit mechanisms across a range of European countries and how they stimulate philanthropy.

The countries studied – Bulgaria, Croatia, Czechia (Czech Republic), Germany, Hungary, Netherlands and Poland – represent a variety of approaches taken across the EU member states on tax benefits for donors and what they entail for both individuals and corporations. The analysis also looks at criteria and procedures to obtain tax benefits, and whether there are any special reporting requirements related to donations.

The report also aims to support the current discussion around the development of an appropriate regulatory framework for tax benefits for donations that is taking place in the Ukraine.

The analysis of the tax treatment of donations and donors in the countries included in the research shows several key trends. These include:

– Almost all studied countries provide tax incentives for both individual and corporate donors;

– Organisations eligible for tax deductible donations typically have a public benefit status, or support public benefit causes;

– In addition to the tax benefits for donors, all of the countries reviewed also provide special benefits for legacies donated to civil society organisations (CSOs);

– Some countries also ensure that donations to CSOs are not subject to VAT, especially donations in-kind or in the form of services (including charitable SMS);

– In terms of reporting, no country requires donors to provide any additional information about the donations made (other than including the information in their tax declarations).

Berna Keskindemir, legal advisor at ECNL commented:

“There are several ways in which governments can actively foster an enabling environment for philanthropy. Providing tax benefits for donations to CSOs is one of them. Tax incentives for donations to CSOs convey an important message – governments recognise the role of CSOs in addressing societal needs. Research has shown that even though the existence of tax benefits is not the main incentive for donors to give, it may still influence the decision to donate and the amount given.”

ECNL concludes the paper by providing a checklist that can help to assess and plan the types of tax incentives that a state can provide to donors in support of philanthropy.