Europe: facilitating Cross-Border Philanthropy

It is well-known that most EU countries do not provide incentives for donors wanting to support a foreign beneficiary. Income tax deductibility is not granted for donations made by individuals and corporate donors to foreign beneficiaries, while cross-border donations and legacies are often taxed at the highest applicable gift and inheritance tax rates. The launch of the www.givingineurope.org website and the promotion and extension of the Transnational Giving Europe (TGE) network are two important initiatives from the King Baudouin Foundation to improve the environment of cross-border philanthropy in Europe. This article focuses on TGE. Legal and Fiscal Barriers The potential of cross-border giving is growing. The European population is increasingly mobile, and as a consequence there is an increasing dispersal of assets across several European countries and more and more donors wanting to support foundations and charities abroad. But, huge fiscal and legal barriers still impede transnational generosity. Most European countries do not grant income tax deductibility to donors wanting to support a foreign beneficiary in another Member State and even tax (with gift or inheritance taxes) such gifts, donations or legacies at the highest applicable rate. This unequal treatment of national and cross-border philanthropy infringes the fundamental freedoms guaranteed by the European Community treaty. Two Steps to Enable Cross-Border Giving The Walloon case , pending before the European Court of Justice, could therefore be very helpful in at least tackling one of these two problems, as other Member States could be required to modify their legislation to ensure, as a minimum, equal tax rates on gifts and inheritances, regardless of whether the beneficiaries are domestic or reside in another Member State. To obtain a completely free European cross-border philanthropy, equalisation of gift and inheritance taxes is only the first step. Non-discriminatory tax deductibility for donors would be the second. But adapting national income tax deductibility rules and providing tax deductibility to resident donors supporting foreign beneficiaries could be more difficult to implement and less acceptable to Member States. It is therefore quite realistic to think that in the near future an important improvement is more likely to happen with regard to gift and inheritance tax rates rather than to income tax deductibility rules. Overcoming Barriers: How TGE Works The Transnational Giving Europe network is therefore an important private initiative that provides an efficient solution and a serious alternative to that second problem for the coming years. At European level, TGE is the only practical and secure solution for tax-effective cross-border cash donations. The TGE network, a partnership between the Charities Aid Foundation, the King Baudouin Foundation, the Fondation de France, the Oranje Fonds, Maecenata International and, since early 2006, the Foundation for Poland, enables donors, both corporations and individuals, resident in one of the participating countries, to financially support non-profit organisations in other Member States, while benefiting directly from the tax advantages provided for in the legislation of their country of residence. A donor resident in one of the participating countries and wishing to make a gift to a public interest organisation in one of the other Member States can contact the foundation in the country of his/her residence. The home foundation establishes contact with the foundation in the recipient country for an assessment of the beneficiary (which is another non-profit organisation). If the evaluation is positive, the donor makes the gift to his home-country foundation which then provides the donor with a tax receipt and transfers the gift to the recipient country foundation in favour of the beneficiary organisation. By providing such a secure and tax-effective cross-border giving framework, TGE is of course particularly interesting for national organisations with prospective donors abroad. Receiving tax-free contributions from foreign donors, appealing to expatriates, approaching global partners such as multinational corporations, benefiting from borderless interest in a specific cause or capitalising on global exposure offered by the internet is within arm?s reach. The TGE network enables organisations to extend fundraising to foreign countries, without having to set up branches or sister organisations for that sole purpose and without having to master different national laws. Two concrete examples of beneficiaries using TGE are museums having donors abroad and high schools or universities relying on donations from individuals and companies and having a significant number of alumni in other countries. Steady Growth, Great Potential Figures for the TGE network are showing a steady increase. The transnational gifts settled through the network amounted to 315,843 euros in 2002, 515,329 euros in 2003 and 601,658 euros in 2004. Last year, 1,395,217 euros was transferred with the help of TGE. These rising figures could be considered satisfactory but, still, they could be better. First, a lot of beneficiaries and donors across Europe are not yet aware of the TGE option and this must be improved by effective promotion. Secondly, TGE will only show its full potential when extended to most of the EU Member States. TGE is currently operational for donations from and to Belgium, the United Kingdom, France, the Netherlands, Germany and Poland. But extension to new EU countries is on its way. Foundations and associations interested in the goals of the Transnational Giving Europe network and keen to allow both national beneficiaries and national donors to receive or give tax-effectively across borders are more than welcome to contact the network. After five years of facilitation of cross-border gifts between five countries, the network is now mature enough to extend the scope of its activities to other European countries. Conclusion Transnational Giving Europe, together with interesting European legal developments like the Walloon case and proposals like the European Foundation Statute, really tend to create a more enabling environment for European cross-border philanthropy. Facilitating it and improving it by securing tax-efficient giving free of fiscal and legal constraints will finally allow donors to express their philanthropy all across Europe. It will not mean that all donors will stop supporting national beneficiaries (cross-border philanthropy is still of marginal importance compared to national philanthropy) but it will ensure that the growing number of donors wanting to broaden their scope of action will be able to do so efficiently ? and allow European cross-border philanthropy to fulfil its potential for dynamic change.