Full text: Taxation of foundations in Europe

25 Endowments inter vivos are effected by means of a gift. To become effective, the gift must be certified by a notary according to the general rules governing gifts. If a foundation is established causa mortis, the testator bequeaths particular assets to the foundation to be established for public utility purposes. The assets, rights and funds are transferred to the foundation exclusively for public utility purposes and without the aim of profit-making23. The definition of “public utility” is very broad and includes philanthropic, edu- cational, scientific, social, humanitarian, sport- or family-related or environmental purposes. However, when the purpose of the foundation benefits solely the family of the founder or where it is political or religious in nature (in the sense of serving a political party or religion), it can no longer be deemed a public utility purpose. The organisational structure of public utility foundations consists of an administrative board (conseil d’administration) or a supervisory board (conseil de surveillance) working together with a board of directors (directoire). The foundation statutes need to be approved by the Ministry of the Interior. In addition to these bodies, a foundation needs to have sufficient funds to pursue its purpose. The recognition of the foundation is established by means of a decree by the Conseil d’Etat and published in the Journal Officiel24. 5.3. Types of foundations 5.3.1. Public Utility foundation (fondation reconnue d’utilité publique) Given their public utility, these foundations may claim public subsidies. Subject to approval by the regulatory authorities, the foundation can receive endowments as long as these are made without consideration. The foundation becomes a legal person upon publication of its establishment. In principle, foundations benefit from the same tax advantages as organisations with non- profit purpose or public utility associations. Private persons may deduct 66% of their donations to public utility foundations from income tax, but not more than 20% of their taxable income. Companies can deduct 60% of their do- nations, but not more than 5‰ of their revenues. Excess amounts can be carried forward for five financial years, if applicable. To the French tax authorities, not the registered seat, but the place where the foundation carries out its activities is relevant. These have to be performed in France, at least partly. The same rule applies to donations to foundations based abroad that carry out a small part of their activities in favour of a limited number of persons in France. Here, the tax deductibility depends on whether the foundation is recognised as a public utility foundation under the 23 Cf. ibid, p. 888. 24 Cf. ibid. p. 897 et seq.

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