The Shifting World of European Philanthropy

1
The Shifting World of European Philanthropy
Public initiatives and Transnational Giving
Europe
Ludwig Forrest Clive Cutbill 28/04/2009 EAPG
London Roundtable 
2
International Philanthropy
Worldwide similarities

• Private cross-border giving is
• Growing
• Still subject to huge fiscal and legal barriers
• Hindered by
• fundraisers only just starting to think
  sufficiently internationally
• lack of structured information
• Possible for clever donors, fundraisers or
  advisors (or huge gifts)
• The bigger the gifts or inheritances , the easier
  the quest for a solution may be in practice

3
Problems for private giving

• Version 10 Unequal treatment of national and
  cross-border philanthropy
• Gift and inheritance taxes to be paid in the
  different countries
• Income tax deductibility for the donor
• Version 20 Practical Issues

4
The tax motive in philanthropy

• Most philanthropists
• do not make charitable gifts to get tax breaks
  but
• want to operate tax-efficiently
• Subject to the principles of territoriality
• Philanthropic gifts and legacies are likely to be
• exempted from tax
• or taxed at a lower rate
• Tax deductions for lifetime gifts to charitable
  structures
• Preferential tax rates for income and gains of
  charities

5
When is a charity not a charity? Taxation and
territoriality

• In many jurisdictions, taxation benefits only
• Apply to income and gains of indigenous
  charities
• Available for gifts to indigenous charities
• Subject to
• Available estate tax treaty relief
• Developments within the EU
• Interaction with local benefit rules
• Switzerland has minimum internal benefit rules
• Israel considers only who benefits
• UK (and other jurisdictions)consider the charity
  - not where the funds are used
• UK requirements (at present)
• Subject to the law of a constituent part of the
  UK
• Subject to the jurisdiction of courts in the UK

6
Tax-efficient giving UK taxpayers

• UK taxpayers gifts to UK charities
• Inheritance Tax exempt transfer
• No Capital Gains Tax on disposal to charity below
  market value
• Gift Aid (Deduction against Income Tax and
  Capital Gains Tax)
• Gifts of qualifying shares, securities and real
  property
• Deduction against Income Tax only
• High tax-efficiency of gift of appreciated assets
• Contrast UK taxpayers gift to a non-UK charity
• Inheritance tax chargeable transfer
• Capital Gains Tax on disposal
• No Income Tax or Capital Gains Tax relief for gift

7
Top of the Pops of cross-border giving friendly
countries

• Slovenia
• Slovakia, Sweden
• Netherlands
• Denmark (?)
• Finland (?), Poland
• Italy
• Belgium (?)
• Estonia (?)
• Cyprus, Latvia, Malta
• Ireland, UK (? ???)
• Austria (???)
• France (??)
• Spain, Portugal
• Luxembourg (? ?)
• Czech Republic, Lithuania, Hungary
• Greece
• Germany
• Not classified Switzerland, Romania, Bulgaria
  and OSRE countries

8
Momentum

• EC Treaty -Infringement procedures - European
  Court of Justice
• Coordinated approach
• Best practices and practical solutions

9
Territoriality within the EU

• EC Treaty, Article 12 Non-discrimination
• Belgian Inheritance Tax cases
• Centro di Musicologia Walter Stauffer v Finanzamt
  München für Körperschaften
• Italian charity charged to German tax on rental
  income
• German charity would be exempt
• Advocate Generals Opinion
• Formal requests (Germany UK, Poland, Ireland,
  Estonia, others)
• Hein Persche v Finanzamt Lüdenscheid 29 January
  2009
• Donations by German to Portuguese charity
• Unresolved issues
• Legal form
• Objects
• Practical recognition

10
Coordinated approach

• Problem
• Solution
• Objective
• Issues
• Perspectives

11
Best practices and existing solutions

• No Gift Inheritance taxes No income tax
  advantages for donors
• Charity friendly double tax treaties and
  reciprocity agreements
• High tax exempt thresholds
• Supporting national beneficiary having ties with
  intended foreign beneficiary
• Set up a charity (bigger gifts)
• Find an ad hoc partner
• Create a hosted Fund
• Transnational Giving Europe

12
Transnational Giving Europe

• Who we are
• A network of European foundations and
  associations with the aim to facilitate
  transnational giving in Europe
• No legal entity but a uniform and reliable
  framework allowing tax effective cross border
  cash donations
• The only tool at European level allowing tax
  deductibility for donors wanting to support
  foreign beneficiaries

13
Transnational Giving Europe

• History
• Founded in 1997 over 10 years of experience
• Founding Fathers King Baudouin Foundation,
  Fondation de France, Charities Aid Foundation,
  Oranje Fonds
• Constant growth in members and volume

14
Transnational Giving Europe

• Members 
•  
•  
•  
•  

15
Transnational Giving Europe

• Extension in 2009
• Carpathian Foundation (Hungary, Romania,
  Slovakia) February 2009
• CAF Bulgaria (Bulgaria) March 2009
• Vita (Italy) April 2009
• Fondation de Luxembourg (Luxemburg) June 2009
• Others ?

Active in 12 (soon 14) European Countries
16
Transnational Giving Europe
17
Transnational Giving Europe

• Gift procedure
• First contact with the TGE-organisation in the
  home country of the donor or the beneficiary
• Validation of the beneficiary status (Grant
  Eligibility Application)
• Payment Process
• Fiscal receipt and information
• Reporting on the use of the donated funds by the
  beneficiary
• Fee 5 up to 50.000 1 for the next
  400.000 maximum fee 6.500,00

Grow faster to disappear sooner
18
Transnational Giving Europe

• Of interest to
• Beneficiaries with prospecitve donors abroad...
• having global partners such as multinational
  corporations or alumni
• benefiting from borderless interest in a specific
  cause
• capitalising on global exposure offered by the
  internet
• ...who do not want to set up branches or sister
  organisations for that sole purpose and without
  having to master different national laws

19
Transnational Giving Europe

• Of interest to
• Donors with global interests
• expatriates
• alumni from foreign universities
• multinational corporations
• In short Everybody who is interested in tax
  effective cross-border giving

20
Transnational Giving Europe
References

• Beneficiaries
• Insead
• Ashoka
• Le Louvre
• Universities and Colleges of Oxford and Cambridge
• Room to Read
• London Business School
• Freudenberg Stiftung
• Van Loon Museum
• and many more...

• Donors
• Individuals (over 1200 alone in Germany) and
• Corporate donors for example Nike and SAP

21
Questions?

• Ludwig Forest Clive Cutbill
• Philanthropy Advisor Head of International
  Philanthropy
• Partner, Charities Philanthropy Team
• King Baudoin Foundation Withers LLP
• Brederodestraat 21 16 Old Bailey
• B-1000 Brussels London
• Belgium EC4M 7EG
• Direct Line 32 2 549 02 38 Direct Line 44 20
  7597 6095
• Email forrest.l_at_kbs-frb.be Email
  clive.cutbill_at_withersworldwide.com