The European Foundation Proposal: An Effective, Efficient and Feasible Solution for Tax Issues Related to Cross Border Charitable Giving and Fundraising?

Abstract

This paper which was written for the 2012 EATLP conference ‘Taxation of Charities’ (1 June 2012, Rotterdam) analyses whether the Proposal for a Council Regulation on the Statute for a European Foundation (Fundatio Europaea, in short FE) provides for an effective, efficient and feasible solution for the tax issues which are currently related to cross border charitable giving and fundraising within the European Union. The non-applicability of tax incentives is a barrier for cross border fundraising. A solution for this problem should not only solve it (be effective), but should require a minimum of extra investments of charities and governments (be efficient) and it should be acceptable for all Member States (be feasible). The paper discusses several possible solutions which can be distinguished within the framework of the EU. Next, the application of tax incentives on cross border charitable donations and fundraising in the European Union is described. The solution of the ECJ and its place in the framework of solutions are discussed. The Proposal and its solution are analysed, starting with the historical background of the proposal, the problems and solutions considered by the European Commission and the European legal context of the proposal. The paper then briefly describes the legal features of the FE, the public benefit purposes included in the Regulation, the registration and supervision of the FE, the entry into force of the regulation and the tax treatment of the FE. Next, the Proposal’s solution for the tax issues in the light of the solution framework is analysed. The paper concludes that the European Foundation is effective in removing tax barriesr for cross border charitable giving to and fundraising of charities that adopt the legal form of an FE. It is an efficient solution as well for those charities. For Member States that have to introduce a new supervisory framework it might be less efficient. It is questionable whether the FE is a feasible solution. This depends on the Member States’ trust in each other’s supervisory authorities. The current economic situation and the debate on abuse of tax incentives in relation to cross border charitable giving in some Member States imply that expectations on the adoption of the Proposal must not be set too high.