Full text: Taxation of foundations in Europe

27 5.3.2. Particular types of foundations The business foundation (fondation d’enterprise) By their nature, business foundations are very similar to public utility foundations: They also pursue a public utility purpose and do not intend to make any profits; moreover, endowments to a business foundation are also irrevocable. The duration of a business foundation is lim- ited at the outset. However, it must be set up for a minimum period of five years subse- quently extendable for at least another three years. Business foundations only pursue short- and medium-term objectives. They are established by one or several companies which endow the foundation with an amount defined in the foundation statutes. The minimum capital resources of a foundation are EUR 150,000. Any adjustments to the specified amounts require a change in the founda- tion statutes and, as a result, an approval by the relevant public authority. The foundation acquires its legal capacity upon the publication of its establishment in the Journal Officiel. The business foundation is not allowed to receive any gifts unless these gifts are made by the staff of a company which has co-founded the foundation26. The Act 87-571 stipulates in Art. 19-8 which sources of financing are permissible. Permissi- ble sources are in particular endowments by the founders, subsidies by the state and re- gional or local authorities, remunerations for services provided or income related to these services (such as interest received). Business foundations are dissolved either as a result of time lapse or a unanimous decision of the founders (provided that the endowments guaranteed at the establishment were effec- tively made). The state authorities may also revoke their approval. In principle, business foundations are subject to the same tax rules as public utility founda- tions. Upon the establishment of a foundation, companies may deduct 60% of their endow- ments to the foundation; however, the total amount deducted must not exceed 5‰ of the company revenues. Payments by the company staff are tax-deductible to the extent of 66%; the deductible amount is limited to 20% of their taxable income pursuant to Art. 200 Code Général des Impôts. As regards the taxation of foundation assets, business foundations with a non-profit purpose are subject to a reduced corporate tax rate of 25%; the corporate tax rate for income from rent and lease, agriculture and forestry and securities is only 10%. 26 Cf. Hellio et al (2007), p. 901.

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