44 A company is free to opt for non-exemption in its tax declaration in order to record hidden reserves to finance investments. Investment reserves may be recorded for a period of three years. Deductible donations exceeding EUR 227 are deductible to the extent of 10% of the profits. ? Earnings Tax Earnings realised by a foundation from shareholdings in Dutch companies are subject to earnings tax. Earnings tax has the effect of final taxation and cannot be offset against any corporate tax due. The Earnings Tax Act provides for earnings tax reduction or an exemption for legal persons which are not subject to corporate tax and may therefore claim a refund of earnings tax paid. ? Real Estate Transfer Tax A 6% real estate transfer tax is generally levied on properties and rights to properties located in the Netherlands. Real estate tax exemptions may apply to donations. If a foundation re- ceives Dutch properties as a donation, it does not have to pay real estate transfer tax. In this case, the applicable gift or transfer tax is not less than any property transfer tax that may be due. An acquisition in accordance with inheritance law is not considered an acquisition. Mergers, reorganisations or changes in the legal person are also exempt from real estate transfer tax. ? Value-added Tax As an enterprise, the foundation is subject to value-added tax. Exceptions exist for founda- tions that are financed by government subsidies or that do not demand any consideration for their services. Taxation of the Donors Donations to charitable foundations may be deducted from personal income tax (in the case of natural persons) or corporate income tax (in the case of legal persons). Donations are by definition made without consideration. Such donations are considered as a transfer of assets from the donor to the donee. In a further step, the tax authorities examine whether the donor has retained the power of disposal over the donated asset or not. Donations in kind may also be made, for example, of artworks (paintings, etc). Since the modification of the law effective 1 January, donations to foundations based abroad are subject to the same tax rules as dona- tions to Dutch foundations. Expenses that have already been reported as business expenses or other income-related cost are not recognised as donations.