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Important (legislative) evolutions in The United Kingdom, The Netherlands, Belgium and France
United Kingdom : Charitable donations to EU organizations eligible for tax relief
We welcome the announcement that under the Finance Act 2010 it is proposed that UK charitable tax reliefs will be extended to certain organizations in the EU, Norway and Iceland that are deemed to be equivalent to UK charities or Community Amateur Sports Clubs.
To be eligible, European Charities will have to:
- be able to demonstrate that were they based in the UK they would be regarded as a charity under the law of England & Wales – in other words they must have exclusively charitable purposes within the definition set out in the Charities Act 2006
- be registered with the equivalent of the Charity Commission in their home country
be managed by a "fit and proper persons"
Please click here for more information.
The Netherlands : New infringement procedure against The Netherlands (March 2010)
The Commission has formally requested the Netherlands to change its rule that gifts (see press release), donations and inheritances to Dutch and foreign charities can only qualify for tax relief if the charities have registered themselves with the Dutch tax authorities. The Commission considers that this is unnecessarily restrictive, since it does not allow for the possibility of tax relief in case the foreign charity has not registered itself in the Netherlands. Nothing prevents the Dutch tax authorities from requiring the taxpayer to prove that the conditions for tax relief have been met. The Commission therefore considers the Dutch rule to be contrary to the free movement of capital.
Belgium : New law on tax deduction for cross border gifts and jurisprudence on legacies to a UK charitable trust (January 2010)
New law
After a small and very insufficient modification of the tax law in favour of cultural organizations in December 2008, Belgium has now extended the income tax deductions for cross border gifts to nearly all the categories of non profit organizations listed in its domestic law.
The tax deduction is applicable if the beneficiary is located in one of the states of the EEA (European Economic Area), if it can be considered as similar to one the abovementioned types of organizations and if the organization is recognized in its own country under conditions that are comparable to those which are set out by the law, which in fact means "being recognized by the public authorities of the concerned country".
Now that the principle of equal treatment has been consecrated by the law, specific criteria have to be foreseen in order to organise a reasonable "comparability test".
Belgium has abandoned the principle of the law of 22 December 2008 on cultural organisations, which consisted in imposing to foreign entities a procedure of governmental recognition in order to be eligible for receiving tax deductible gifts. Such a system penalizes donors who made gifts to foreign organizations that meet in fact all the criteria but did not make the step of filing a request in Belgium.
Like for other countries, the new Belgian system is inspired by the decision in the Hein Persche case, which states that the donor should have the possibility to prove that the organization can be compared to a domestic qualifying organization. Consequently, the donor will have to keep all the documents concerning the nature of the foreign organization, its formal recognition and the evidence of the payment which has been made.
A Royal Decree will establish rules concerning the documents that the donor should produce for the so called "comparability test". This decree is expected by the end of March 2010.
It should be noted that cultural institutions which are an emanation of a foreign EU member State or of a subdivision of that state (for instance a State museum, or a regional museum in the other country) will in principle not qualify for income tax deduction. The Belgian tax authorities will most probably follow the preliminary report (exposé des motifs) to the law of December 22, 2009. According to this report, the principle of free movements of capital as foreseen by article 56 of the Treaty of Rome is only applicable to private legal entities (associations, public benefit foundations, or private foundations) and not to public institutions. Donors who envisage making a significant gift to a (EU) foreign museum should first verify the legal status of such a museum before making the gift, either directly or through TGE . Private universities located in other EU member states are apparently not mentioned in the categories of entities that can benefit from the equal treatment.
The new regime will apply to all the gifts made as from January 1, 2010
UK charitable trusts and Belgian inheritance tax: Great Ormond case
As a consequence of a notification by the European Commission in October 2002, the preferential regime for legacies and gifts to charities foreseen by the Belgian legislation has been extended to charities located in the EU member states. However, here again, in the application of the "comparison test" we might be confronted with significant differences between two national legislations, to such extent that it would not be possible to grant the equal treatment.
The Belgian legislation foresees that the tax privilege (reduced inheritance tax rate) is only granted to non-profit organizations that are structured as a legal entity. At first sight, UK charities structured as a trust should be excluded from equal treatment.
The Court of appeal of Brussels, to whom the "Great Ormond" case was submitted, took however a very pragmatic approach at this level. In its decision of September 9, 2009, it considers that the trust in question, which has been recognized by the UK Charity Commission and appears to be a non-transparent taxpayer in both countries, can reasonably be compared to a "legal entity" in the sense where this concept is interpreted in Belgium. As a consequence and in application of article 56 of the Treaty of Rome (free movement of capital), the Court decided that the equal treatment should be provided to the appellant.
The Belgian State did not bring the case to the Supreme Court.
This jurisprudence is certainly an excellent news for UK charitable trusts, but it should be examined how the Courts of other European countries will react on similar cases in the future.
France : New French legislation on cross-border giving (January 2010)
Further to the Persche case (decision of the ECJ C-318/07 on January 27, 2009) and further to a notification by the European Commission on November 20, 2009, France has modified its legislation on tax deductibility for gifts to non-profit organizations located in other EU member states.
The law of December 30 (Loi n° 2009-1674) foresees that tax relief will be provided for gifts to non-profit organizations located in another EU member states, but also to entities located in a country of the European Economic Area, if there is a tax treaty with the concerned country, which foresees administrative assistance and exchange of tax information.
This equal treatment will be applicable insofar the foreign organisation can be considered as similar to a French organization which fulfils all the conditions foreseen by the French legislation.
The procedure for checking whether the foreign organization can be compared to a French qualifying entity is quite interesting, since it foresees two systems.
The first system, which is quite similar to the Dutch system, gives the poss |
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