Cross Border Charitable Giving

This book is for individuals or nonprofits who want to make gifts across international borders. It covers such issues as laws blocking the use of charitable funds to finance organized crime or terrorism, avoiding cooptation of the grantmaking process for fraud or personal gain, and applicable laws in the foreign countries that receive grants.

The tax treatment of cross-border charitable contributions increasingly concerns both individuals and corporations. Individuals make donations of money, financial, and nonfinancial assets, including intellectual property, time, and skills on their own or someone else's behalf to support communities all over the world. Corporate social responsibility is important to many international businesses as an element of brand-building and, more generally, as a means of matching corporate operations with stakeholder values. Contributions support causes such as science, education, health, the environment, safety, and many others around the globe. From the donor's perspective, the deductibility of a contribution to a foreign recipient in the donor country is a key factor in maximizing the amount available for the actual charitable purpose along with minimizing the need for intermediaries and tax exemption in the recipient country. Seminar H at the 2012 IFA Congress in Boston will focus on the income tax treatment of cross-border charitable and other pro bono contributions from individual and corporate donors.

In this article, the authors examine the tax treatment of cross-border charitable contributions in selected countries, under EU law and in tax treaties.

Throughout the European Union, national income tax systems support charitable activities by way of preferential treatment. However, a number of Member States operate relief regimes which appear to trigger the question of compatibility with Union law with respect to the fundamental freedoms. In this first study to examine charity and donor taxation regimes across a wide range of Member States, the author focuses on compatibility with EU non-discrimination law. She examines twenty national regimes, both comparatively and from the perspective of overarching EU law. The countries covered are Austria, Belgium, Bulgaria, Cyprus, Estonia, Finland, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Malta, The Netherlands, Poland, Portugal, Slovakia, Spain, Sweden, and the United Kingdom. Although charity and donor taxation falls within the competence of the Member States, they must nonetheless observe primary Union law and grant non-discriminatory treatment where a fact pattern falls within the ambit of the fundamental freedoms. In the course of defining this framework, the study addresses such issues as the following: types of relief schemes maintained for charities and donors; administrative requirements; international aspects (both inbound and outbound); privileged donations and capital gains treatment of in-kind donations; eligible donees; whether and to what extent charitable entities and donors can actually rely on the fundamental freedoms; specific applicability of each of the relevant fundamental freedoms; the issue of comparability; justifications for restrictive measures in Member State practice; and the issue of proportionality.

Non-profit organizations are increasingly subjected to the forces of globalization. Although this should not come as a surprise, it is curious to note that the taxation of international philanthropy is an area where discrimination as to residence is still very obvious. Whereas domestic philanthropic flows of money enjoy substantial tax privileges throughout the democratic western world, these privileges often do not apply in situations where borders are crossed. In recent years, the importance of support from charities and social investments has increased substantially, but cross-border philanthropy still remains hampered by numerous tax issues. By comparing the relevant legal and tax systems in selected countries, and by taking into account other legal developments relevant to international philanthropy, the author attempts to find a common approach to solve the tax obstacles of international philanthropy. The book begins by defining the scope of the study including the concept of "landlock", political philosophies substantiating tax relief for philanthropic organizations and an analysis of bilateral treaties. This is followed by a comprehensive and comparative overview of the approach taken in three legal and tax systems regarding international philanthropy, i.e. Germany, the Netherlands and the United States. The work also examines whether EU law allows states (within and without the European Union) to maintain "landlocked" tax positions and, if so, under what type of conditions this may be permitted. The book concludes with a proposal of a new paradigm of non-discriminating treatment of philanthropy by examining ways to abolish landlocks.

Based on a case study, answers are given on several questions regarding taxation and cross border charitable giving from a Dutch persective. This paper was written for the 2012 EATLP conference in Rotterdam.