1. THE EUROPEAN FOUNDATION PROPOSAL An effective, efficient and feasible solution for tax issues related to cross border charitable giving and fundraising? Prof. dr. Sigrid Hemels

2. 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

3. 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.

4. 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. EffectiveYes EfficientNo FeasibleYes

5. 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.

6. 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.

7. Exhaustive list of public benefit (a) arts, culture or historical preservation (j) assistance to, or protection of, people with disabilities; (b) environmental protection;(k) protection of animals; (c) civil or human rights;(l) science, research and innovation; (d) elimination of discrimination;(m) education and training; (e) social welfare, including prevention or relief of poverty; (n) European and international understanding; (f) humanitarian or disaster relief;(o) health, well-being,medical care; (g) development aid and development cooperation; (p) consumer protection; (h) assistance to refugees or immigrants; (q) assistance to/protection of vulnerable and disadvantaged persons; (i) protection of, and support for, children, youth or elderly; (r) amateur sports; (s) infrastructure support for public benefit purpose organisations. Something is missing….

8. 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).

9. 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.

10. 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. EffectiveYes, for FEs,not for other charities EfficientYes, for FEs, additional costs for MS FeasibleNo, prevention of tax abuse is not addressed  focus Proposal on legal issues and position of donors and charities.

11. 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.