COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 06.06.1997 
COM(97) 241 final 
COMMUNICATION FROM THE COMMISSION 
on 
PROMOTING THE ROLE OF VOLUNTARY 
ORGANISATIONS AND FOUNDATIONS IN EUROPE 

TABLE OF CONTENTS 
I. Introduction 1. 
II. Scope 1 
III The role and importance of Voluntary Organisations and Foundations 3 
IV The sector and the European Institutions working together 6 
V Problems and challenges facing the sector 8 
VI Conclusion 11 
Annex I. The survey 16 
Annex II. Overview of the Legal and Fiscal Framework for Voluntary Organisations and 
Foundations 26 
Annex III Legal and Fiscal Framework for Voluntary Organisations and Foundations 31 
fcA 
INTRODUCTION 
PURPOSE 
1 This Communication concerns one sector 
of the social economy in the European 
Community - that of voluntary organisations 
and foundations. These organisations are 
playing an important role in almost every field of 
social activity. They contribute to employment 
creation, active cîtîzerjship, democracy, provide 
a wide range of services, play a major role in 
sport activities» represent citizens' interests to 
various public authorities and play a major part 
in promoting and safeguarding human rights as 
well as having a crucial role in development 
policies. 
1.1 Over the years they have made an 
increasing contribution to the development of 
Europe which is something that should be 
encouraged and developed, 
1.2 Given this importance, the European 
Commission carried out an extensive survey in 
order to gain a better knowledge of the sector 
and to identity issues to be addressed. The 
results of the survey are given in annex 1. 
1.3 The aim of the document is to illustrate 
the growing importance of the sector within the 
European Union, to show what problems and 
challenges these organisations are facing and to 
open up a dialogue on the basis of a set of ideas, 
in order to favour their development at 
European and national level, to improve their 
capacity to meet future needs and maximise 
their contribution to European integration. 
1.4 This document presents a series of 
measures which could be taken at Member State 
level, but does not seek to impose on Member 
States specific solutions or actions. It is up to 
individual Member States to take on the 
different issues as they see fit. However, 
conforming to the principles of subsidiarity and 
proportionality there are some objectives which 
can be dealt with at Community level. These 
ideas are outlined in the "Conclusion \ II. SCOPE J 
Voluntary organisations 
1 Of the three sectors - co-operatives, 
mutual societies, and voluntary organisations -
which go to make up the social economy, that 
of voluntary organisations is by far the most 
difficult to delimit or define. 
2.1 At their most basic, voluntary 
organisations are simply groups of people who 
have come together for some purpose or other. 
2.2 At one end of the spectrum, the world of 
voluntary organisations merges imperceptibly 
into the tissue of everyday social, community, 
and family life; at the other end can be found 
great institutions of enormous national and even 
international importance such as universities, 
hospitals, research and cultural institutions, 
which many people are accustomed 
(erroneously) to think of as straightforward 
"public" bodies. Others, in contrast, have 
hundreds of professional staff, thousands of 
volunteers and a turnover of many millions of 
ECU's. Very many voluntary organisations 
work closely with public authorities in 
conventional spheres like social work; others 
maintain a strong tradition of complete 
independence and are concerned with radical 
social programmes or "alternative" lifestyles. 
2.3 There is, however, some agreement that 
voluntary organisations share to varying degrees 
the following features: 
a) they are distinguished from informal or ad 
hoc, purely social or familial, groupings by some 
degree, however vestigial, of formal or 
institutional existence. 
(b) they are non-profit-distributing^ that is 
to say they have purposes other than to reap 
profits for their management or members. 
(c) they are independent, in particular, of 
government and other public authorities, that 
is to say free to govern themselves without 
interference according to their own rules and 
procedures. 
(d) they must be managed in what is 
sometimes called a "disinterested" manner. The 
use of this term is meant to indicate not just that 
voluntary organisations must not themselves be 
profit-seeking, but also that those who manage 
them ought not to do so in the hope of personal 
gain. 
(e) they must be active to some degree in 
the public arena and their activity must be 
aimed, at least m part, at contributing to the 
public good; 
2.4 The degree to which particular voluntary 
organisations share the above five features will 
vary • considerably. Deciding, for example, 
whether a voluntary organisation is indeed 
independent is not easy, and the notion of the 
"public good" is bound to be controversial. The 
definition does, nonetheless, offer a degree of 
coherence in a complex area. 
2.5 This paper deals with all organisations 
which share, to some degree, the above five 
features. However, three very specific kinds of 
organisation have been consciously excluded. 
These are political parties, which can be 
voluntary organisations but are clearly a special 
case; religious congregations (that is, in the 
strict sense, and not excluding organisations of 
religious inspiration active in work of general 
public benefit); and trade unions and employers' 
organisations. 
Foundations 
3 Like voluntary organisations, foundations 
also undertake a wide range of activities. In 
some countries the foundation is frequently the 
preferred vehicle for pursuing purposes 
indistinguishable from those typically pursued in 
other countries by voluntary organisations. 
From the legal point of view, however, 
foundations form a more homogeneous group 
than do voluntary organisations, the only 
important distinction being between those that 
are for essentially private, and those that are for 
essentially public, benefit. It is foundations 
which have some public purpose (even while 
remaining private bodies) which are the focus of 
this Communication. 3.1 For present purposes foundations are thus 
bodies with their own source of funds which 
they spend according to their own judgement 
on projects or activities of public benefit. They 
are entirely independent of government or 
other public authorities and are run by 
independent management boards or trustees. 
Types of voluntary organisation 
4 Voluntary organisations and* foundations 
are difficult to categorise and define. Part of the 
difficulty at the European level lies simply in the 
different national traditions which they reflect, 
and their strong tendency to combine several 
different objectives. Most voluntary 
organisations and foundations can, however, be 
considered as having one or more of the 
following functions: 
(a) Service delivery or provision to provide to 
their members or clients services such as social 
services, health care, training, information, 
advice or support. 
(b) Advocacy: Le. organisations whose 
purpose is to campaign, lobby, and otherwise 
argue on behalf of some cause or group with the 
aim of changing public perception or policy. 
(c) Self-help or mutual aid: organisations 
typically formed by groups of individuals with 
some common interest or need in order to 
provide mutual help, information, support and 
cooperation. 
(d) Resource and co-ordination: so-called 
"intermediary bodies" which co-ordinate the 
activities of, or provide information and support 
to, either individual organisations working in a 
particular field or to the sector in general. Such 
organisations fulfil the important function of 
providing an interface between the sector and 
public authorities. 
4.1 Many voluntary organisations and 
foundations are, of course, national and even 
international in scope. The great majority, 
however, carry out their activities in regions or 
localities. In general, the narrower their 
geographical focus the greater the range of 
functions voluntary organisations tend to fulfil 
and the more difficult it is to separate these 
functions one from another. Throughout Europe 
hundreds of thousands of autonomous local 
groups working at the level of the 
neighbourhood, city quarter, village, or small 
rural area, whose aim is to improve the quality 
of life for the local community. Such 
organisations in effect simultaneously fulfil, 
typically in an informal way, all the functions 
described above - providing services and mutual 
support, drawing attention to the needs of the 
community or of particular groups within it, and 
providing a mechanism through which the 
community can make its aspirations known to 
public authorities. 
The legal and fiscal framework for 
Voluntary Organisations and 
Foundations 
5 The importance of having clear, positive 
legal and fiscal frameworks for voluntary 
organisations and foundations to work in cannot 
be underestimated. Organisations find it 
difficult to develop their work when such 
frameworks do not exist, whether they be at 
national or European levels. Annex II gives an 
overview on the way that legal and fiscal 
frameworks for the sector are based in the 
European Union. 
m. THE ROLE AND IMPORTANCE OF 
VOLUNTARY ORGANISATIONS AND 
FOUNDATIONS 
6 It is clear from the results of the 
Commission's survey that voluntary 
organisations and foundations, though often 
very small, together command sizeable assets 
and mobilise large human resources, both 
salaried and volunteer. Like other forms of 
enterprise, and particularly small and medium 
sized enterprises many voluntary organisations 
and foundations are also economically active -
they sell products, provide services for which 
they are paid, and generate surpluses which are 
then reinvested. 
6.1 The contribution of the sector to the 
economy is very considerable indeed. Just how significant has recently been revealed by the 
results of the first rigorous comparative survey 
of the sector in four Member States (the United 
Kingdom, France, Germany and Italy) directed 
by the John Hopkins University, Baltimore1. 
These results are of conceivable interest. 
6.2 The study found that: 
in Germany the sector accounts for 3.7% of 
total employment and 10% of total service 
employment. That is no less than a million 
people. The non-profit sector is especially 
important in health: 40% of the hospital patient 
days are provided by the sector^ as are 60% of 
the residential care facilities. 
in France 4.2% of the employed work in the 
sector or over 10% of the total employed in the 
service sector. In all some 800,000 people are 
employed. Non-profit organisations look after 
over half of those in residential care and about 
20% of primary and secondary school students. 
Non-profits are especially prominent in social 
services and in sport where 80% of those with 
sporting interests belong to non-profit clubs. 
in Italy nearly 2% of the employed work in the 
sector or over 5% of those employed in the 
service sector. In total the sector, which is 
prominent in social services, employs about 
400,000 people. Non-profits run 20% of 
kindergartens and over 40% of residential care 
facilities. 
In the UK 4% of the employed work in the 
sector or over 9% of those in the service sector. 
Altogether about 900,000 people are employed 
in the sector, which plays an especially 
important role in the provision of research and 
education: - all colleges are run by non-profits, 
as are 22% of primary and elementary schools. 
6.3 Finally, the combined expenditures of the 
sector in these countries was no less than 127 
million ECU (17 billion in Italy, 31.3 billion in 
France, 36.6 billion in the UK and 42.2 billion in 
Germany). 
Published in 1994. 
The figures for non-profit operating 
expenditures as a percentage of gross 
national product are no less impressive: 2% 
in Italy; 3.3% in France, 3.6% in Germany; 
and 4.8% in the UK 
6.4 Moreover it is in terms of employment 
growth that the most interesting facts of all 
emerge. What the study found ~ in any event in 
France and Germany where figures were 
available - was that over the decade from 1980 
to 1990 the sector has been a powerful creator 
of employment. In France the sector accounted 
for one out of every seven new jobs created in 
that decade and in Germany one out of every 
eight or nine! This is a very significant finding 
indeed. 
6.5 These figures should not, perhaps, come 
as a complete surprise, given the growth of the 
sector in the recent past and the reasons which 
seem likely to be behind it (see paragraphs 1.4 
and 1.5 of annexe I). Some of these reasons are 
likely to be, historical, or to have been specific 
to particular Member States. Other factors, 
however - the discovery of new needs and the 
development of new social preoccupations, and 
above all the tendency of governments to 
engage voluntary organisations and foundations 
in the delivery of services of which they 
themselves were formerly both designers and 
providers have been increasing throughout the 
Community. 
6.6 But such policy developments have not 
developed evenly in all the Member States. The 
extent to which they have been accompanied by 
clear constitutional or administrative changes 
designed to favour the involvement of voluntary 
organisations and foundations has varied. . 
6.7 The figures demonstrate clearly that the 
sector has shown itself capable of opening up 
new opportunities contributing not just to 
improving the quality of life but also 
employment and economic growth. It is for 
this reason that the sector should be 
encouraged to play a bigger part in the quest 
for job creation as stated in the 
"Employment Pact'% for example in the 
context of Local Employment Initiatives. 6.8 Throughout the Community many 
voluntary organisations and foundations are 
engaged in the training and retraining of the 
unemployed, sometimes as providers of 
government programmes but often on their own 
account, as well as providing services for less 
favoured people - for people with disabilities, 
for alienated youth, for those who for one 
reason or another have repeatedly failed to gain 
a hold in the job market . 
6.9 Voluntary organisations and foundations 
also give valuable training to numerous 
volunteers, many of whom later find 
employment on the conventional jobs market as 
a result of the experience and expertise they 
have acquired. Volunteering is also for many 
people an invaluable means of preserving the 
work habit at a time when, particularly for the 
long term unemployed. The voluntary sector is 
likely to provide with enriching opportunities 
for new experiences aiming at gaining social 
abilities which will enhance employability and 
moreover, the feeling of ownership and 
citizenship among young people. The European 
Voluntary Service deals with this issue and 
provides an educational experience based on the 
active involvement of young people in a local 
project. Volunteering is also very important for 
older retired people who are looking to continue 
to use their skills and maintain a continued 
active role in society. 
Social importance 
7 There are no accurate figures of knowing 
how many persons in the Union are members of 
voluntary organisations but, on the basis of 
some Member States1 estimates it is commonly 
reckoned to be somewhere between a third and 
a half of the population, approximately a 
hundred million. 
7.1 Historically the influence and 
achievements of voluntary organisations, and 
their sister organisations foundations, would 
be difficult to overestimate. It is to voluntary 
organisations and foundations to which we owe 
the origins of many of the services such as 
education, health and social services which we 
take for granted today. Their contribution to the 
development of social and political ideas, and to 
the intellectual climate in which we now live, 
has been similarly immense. Voluntary 
organisations and foundations have played a 
vital role in the dissemination of scientific ideas 
and of technological developments and have 
provided forums for the exchange of thinking 
across the whole range of human concerns. 
They have led the fight for the recognition of 
human rights and the dignity of the human 
person, and for the preservation of our cultural 
heritage and of the natural environment. Many 
promote a spirit of solidarity on behalf of the 
less favoured, the sick or people with 
disabilities, the poor and the excluded, the aged 
and the young, and between those who have 
jobs and those who do not, between men and 
women, between generations, between the more 
prosperous regions and the poor or struggling 
regions. Voluntary organisations make 
important contributions to the fight against 
social exclusion, sexual exploitation of women 
and children, as well as racism and xenophobia. 
They have played a major role in the 
mobilisation of public opinion in favour of 
development, promoted democracy, and have 
established privileged links with the 
representatives of civil society in the developing 
countries, as well as providing much needed 
emergency help and food aid in times of crisis, 
often showing heroism working in troubled 
regions. 
7.2 Today voluntary organisations and 
foundations are active in every conceivable field 
of human interest or endeavour and their 
contribution to the welfare and development of 
our societies and to our diverse cultures remains 
as essential as it has ever been, especially in 
view of the process of European integration. At 
the same time they continue to innovate, to 
discover new needs and to experiment with 
ways of responding to them. 
In this way voluntary organisations and 
foundations continue, as they have always 
done, not just to provide the seed bed or 
"gene poor from which future social and 
other policies may eventually grow but also 
the political, social and intellectual climate in which change comes to be seen as desirable 
on a wider scale. 
Political importance - Citizenship 
8. For many people, membership of, or 
volunteering for, voluntary organisations and 
foundations, provides a vital means through 
which they can express their sense of 
citizenship, and demonstrate an active concern 
for their fellows and for society at large. 
8.1 The part that voluntary organisations play 
in strengthening a sense of citizenship and 
providing a means for its expression is of 
growing importance at the European level. 
Indeed, they have an active part to play in 
creating a sense of European citizenship as 
mentioned in Article 8 of the Treaty on 
European Union. Voluntary organisations and 
foundations have long fostered international 
contact and understanding between peoples and 
are now showing a keen interest in the part 
citizens have to play in the forging of the 
European Union and in giving substance to the 
citizen's Europe. Their experience and basic 
philosophy, together with their growing 
organisation at the-European level, fit them well 
for this role. 
Political importance: Promoting 
Democracy 
9. Voluntary organisations and 
foundations foster a sense of solidarity and of 
citizenship, and provide the essential 
underpinnings of our democracy. In the light 
of the challenges now facing the European 
Community, and indeed in the different 
countries of East and Central Europe, these 
functions have never been more vital. 
9.1 There is no doubt that voluntary 
organisations and foundations make a profound 
and indispensable contribution to the democratic 
life of Europe. Indeed, the existence of a well-
developed association and foundation sector is 
an indication that the democratic process has 
come of age. For many people participation in a 
voluntary organisation may be their only 
experience of democratic processes outside of 
the normal electoral framework. 
9.2 Their contribution to the effectiveness 
with which representative democracy functions 
should not, however, be underestimated. Above 
all, they now play an essential part as 
intermediaries in the exchange of information 
and opinion between governments and citizens, 
providing citizens with the means with which 
they may critically examine government actions 
or proposals, and public authorities in their turn 
with expert advice, guidance on popular views, 
and essential feedback on the effects of their 
policies. 
9.3 That voluntary organisations and 
foundations are important to the democratic 
process does not mean that they could ever take 
on the role occupied by elected representatives. 
There are, indeed, some dangers in the sort of 
"single issue" lobbying which some voluntary 
organisations tend to espouse. Their 
preoccupation with particular causes or with 
particular individuals or groups can make them 
unjustifiably impatient with the balance between 
competing interests which all democratically 
elected governments seek to achieve There is a 
need for greater understanding about the 
constraints of policy decision making. 
IV THE SECTOR AND THE EUROPEAN 
INSTITUTIONS WORKING TOGETHER 
9.4 The European Institutions have a long 
history of contacts and informal consultation 
with the voluntary sector. This is the case with 
many of the European Commission's services, 
such as DGIB, DGVIII with Development 
Agencies and ECHO which have achieved an 
experience of particular interest in their 
cooperation with humanitarian aid NGOs, DGV 
and the platform of European Social NGOs 
arising out of the Social Forum, DGXI and 
environmental organisations, DGXXIII and the 
Consultative Committee for Cooperatives, 
Mutuals, Associations and Foundations. DGX 
in particular looks to the voluntary sector to disseminate information on European issues to 
the citizens. 
NGOs are involved in a significant number of 
research projects funded within the 4th 
Framework Programme (1994-1998). The 
targeted Socio-Economic Research Programme 
widely covers the issue of the role of the sector 
in the economy and its importance for social 
cohesion. It is intended to put even more 
emphasis on this topic within the 5th 
Framework Programme (1999 - 2002). 
The European Parliament also relies on a large 
number of voluntary organisations in order to 
obtain information and views on a wide range of 
issues. The heterogenity of the sector is valued, 
in particular, for its knowledge and experience 
of social policy, environmental, aid and 
development issues and for providing a vital link 
with citizens in their localities, especially to 
those most vulnerable in society. 
9.5 The increasingly pivotal role the 
voluntary sector plays in a wide range of issues 
central to the construction of Europe, including 
in particular, in many Member States, in the 
management and delivery of key aspects of 
social welfare services, has been acknowledged 
and reflected in the Commission's main 
statements on social and employment policy, for 
instance in the Green and White Papers on 
Social Policy and the White Paper on Growth, 
Competitiveness and Employment. 
9.6 However, for many years the contacts 
between the European Institutions and the 
voluntary sector took place on a completely ad 
hoc basis and it was not until the Treaty of the 
European Union, in 1992, that the importance 
of links with this sector was first formally 
expressed in the creation of Declaration 23 
which is annexed to the Treaty. 2 
Declaration 23 states: "The Conference stresses the 
importance, in pursuing the objectives of Article 
117 of the Treaty establishing the European 
Community, of cooperation between the latter and 
charitable associations and foundations as 
9.7 A high level of political commitment exists 
at European level to ensuring that more 
systematic consultation with the voluntary 
sector is instigated, as regards both the 
development and implementation of policy, 
commensurate with their increasingly important 
role, especially in social policy, in the Member 
States3. 
Subsequent to the creation of Declaration 23, a 
number of developments have taken place which 
moved forward the process of consolidating co­
operation with, and instigating more systematic 
consultation of, NGO's and other voluntary 
sector organisations. Key amongst these 
developments were: 
• the holding of the first European Social 
Policy Forum in March 1996, which brought 
together over 1000 participants mainly from 
NGOs, on the eve of the beginning of the 
Intergovernmental Conference. This saw the 
launch of a new policy objective: the building 
over time of a strong civil dialogue at European 
level to take its place alongside the policy 
dialogue with the national authorities and the 
social dialogue with the social partners. It is 
intended that the Forum be held every two 
years. 
This emerging civil dialogue has two main 
aims: 
-to ensure that the views and grassroots 
experience of the voluntary sector can be 
systematically taken into account by policy 
makers at European level so that policies can be 
tailored more to real needs, and; 
institutions responsible for welfare establishments 
and services ". 
It should also be noted that the Commission has had 
a long standing dialogue with the sector in other 
areas such as with Development NGOs through the 
EC-NGO Liaison Committee which receives 90% of 
its funding from the Commission. -to disseminate information from the 
European level down to the local level so that 
citizens are aware of developments, can feel part 
of the construction of Europe and can see the 
relevance of it to their own situation, thus 
increasing transparency and promoting 
citizenship. 
• the creation in 1995 of a Platform of 
European social NGO's, representing a large 
number of organisations, in order to assist in 
the preparation of the European Social Policy 
Forum and to facilitate the development of civil 
dialogue. 
• the setting up of a "Comité des Sages" in 
1995 to prepare a report on fundamental rights 
to be discussed at the Social Policy Forum with 
a view to it providing an input to the IGC 
discussions on the revision of the EU Treaty. 
This report which advocated a Europe of civic 
and social rights has also sparked off a 
Europe-wide debate through a series of national 
seminars involving, in particular, the voluntary 
sector and the Social Partners. 
• the creation, in 1997, of a new budget line, 
B3-4101, to promote co-operation with 
NGO's and other voluntary sector 
organisations and to strengthen the capacity 
of these organisations to engage in civil 
dialogue at European level; 
9.8 In the context of the preparations for the 
IGC an ongoing dialogue was developed 
between the sector, the Commission and the 
European Parliament, 
Important issues relating to the sector have been 
discussed in the framework of the IGC. These 
include: 
a legal base for regulations concerning 
associations at European level 
a legal base for incentive measures both in 
employment and the social field 
the integration of Declaration 23 into the 
Treaty and specific provision for the 
consultation of, and dialogue with charitable 
associations and foundations on all policy 
matters which concern them 
a modification of article 8a to take (by co-
decision) measures to facilitate freedom of 
circulation. 
The Commission intends to make relevant 
proposals according to the outcome of the IGC. 
With regard to future progress, in order to 
retain the maximum amount of creativity and 
free expression, it is important not to over-
bureaucratise or institutionalise consultation of 
the voluntary sector and to strive instead for a 
flexible but systematic approach in developing 
the civil dialogue and relations between the 
voluntary sector and the European Institutions 
which takes full account of the principle of 
subsidiarity and of the specificities of each 
Member State. 
9.9 The Commission has also attempted to 
open up a wide range of funding programmes to 
the sector. This includes the Structural Funds, 
the PHARE and TACIS programmes for East 
and Central Europe, the Leonardo da Vinci 
Programme, the Declaration 23 and the new 
Third Sector and Employment budget lines, the 
SME and Social Economy budget lines, as well 
as the European Voluntary Service Programme 
which encourages transnational volunteering, 
the EDF for cooperation and development with 
the LOME countries, and specific budget lines 
for external actions, in particular cooperation 
with the ALAMED countries, to name but a 
few. 
It is estimated that overall some 800 million 
ECU (of which 196MECU is in the form of co-
financing) annually of EU development 
assistance is channelled through NGOs and the 
Commission looks to the sector in many policy 
issues towards developing countries. The European Commission is also working 
closely with NGOs in the fight against sexual 
exploitation of children and women. 
The Commission would like to see its 
cooperation with the sector developed 
further in view of deepening European 
integration. Proposals to this end are made 
in the "Conclusion". 
V PROBLEMS AND CHALLENGES 
FACING THE SECTOR 
10. Voluntary organisations and Foundations 
are working under enormous pressure and 
within a constantly changing environment. In 
some cases organisations are taking on the 
running of services that were hitherto provided 
by the public authorities. However, there are 
very real problems and challenges facing the 
sector in the way that it can respond to 
providing these new services. Organisations 
which have traditionally played the role of 
providing a back up for state run services, 
suddenly find themselves having to run those 
services themselves. This may mean completely 
new staffing arrangements, new management 
structures and needs, a complete change in the 
financing of the organisation, a change in the 
way that it works with the public authorities, 
and indeed with other voluntary organisations 
and foundations. How will the organisation be 
resourced? Will funding come from public 
authorities in the form of long term grants or 
short term contracts: indeed, will there be 
enough funding? Will an organisation be able to 
increasingly draw on support from the public 
(individuals) or the corporate sector? This 
change may also mean a major rethink in the 
raison d'être of an organisation. Should an 
organisation which was set up to promote the 
needs of specific parts of the population (people 
with disabilities, socially excluded, ethnic 
minorities, etc.,) and to provide some back up 
services, be asked to suddenly take on the 
running of the mainstream service itself? 
10.1 These are all areas that have major 
implications for organisations in the way that 
they are resourced and trained, and public 
authorities should be aware of the importance of 
giving voluntary organisations and foundations 
the resources and time to be able to adapt to 
new needs. 
10.2 Despite their increasing reliance on 
foundations and voluntary organisations to 
carry out a wide range of functions, public 
authorities have not on the whole 
acknowledged their responsibility to ensure 
that the sector is as well placed as possible to 
make its distinctive contribution to the 
public good, The result is that in many 
Member States the sector» as a sector, 
operates in what amounts, at least in 
strategic terms, to a policy vacuum. This lack 
of a coherent framework of public policy has 
inhibited it from contributing, to the 
optimum extent possible, to the solution of 
the problems which we face. It is time it was 
remedied. 
10.3 One of the greatest problems facing policy 
makers is the present serious lack of information 
about the sector. In an important sense, policy­
making has also been inhibited by the structure 
of government itself, and in particular by the 
habit of public authorities of relating to 
associations and foundations as suppliers of 
services to particular client groups or as 
interlocutors in particular subject areas. Social 
service departments have contact with 
organisations supplying social services, 
environment departments with those active in 
the environmental field, and so on. Over a 
period of time, such departments and their 
officials can acquire a close and detailed 
knowledge of the particular organisations with 
which they deal. Within government as a whole, 
however, such knowledge as departments may 
acquire remains fragmented. For the most part it 
is rare for public authorities to have an overview 
of the sector as a whole or of its needs, or of 
significant developments within it. The same 
phenomenon has no doubt also been one of the 
factors which in a number of Member States has 
inhibited the growth of a "broad sectoral" consciousness amongst voluntary organisations 
and foundations themselves. 
10.4 The urgent need now is for public 
authorities to complement their "vertical" 
approach and to begin to look seriously at 
"horizontal" issues affecting the sector as a 
whole with a view to developing appropriate 
policies. At the same time, the public role of 
voluntary organisations and foundations 
needs to be acknowledged and the 
acceptance of the sector as a full partner in 
the debate on all policy and implementation 
matters which concern them, needs to be 
actively encouraged at all levels. 
10.5 Over the past ten years the amount of 
transnational work done by voluntary 
organisations and foundations has increased 
dramatically. This is due to a growing number 
of European funding programmes being opened 
up to the sector which encourage transnational 
collaboration, and an expanding number of 
organisations who are interested in developing 
their services in other countries* 
10.6 .There is also a large and continuously 
growing number of European wide federations 
or networks of voluntary organisations and 
foundations. Some, such as the Red Cross 
Liaison Committee act as a co-ordinating 
organisation for individual national 
organisations which share the same aims and 
objectives, as well as the same name. Others 
such as the European Foundation Centre or 
CEDAG (the European Council for Voluntary 
Organisations) act as a focus point for lobbying 
the public authorities on behalf of the sector, 
and providing and developing examples of good 
practice within their - often - diverse 
membership. 
10.7 There are also many development and 
emergency aid agencies which have a long 
tradition working overseas, but which are 
working more and more together at a European 
level and with the European Commission. 
Indeed, the EC-NGO Liaison Committee of 
Development NGOs, works closely with 
DGVIII (Development), with ECHO, DGIB and 
with other Dgs of the European Commission. 
10.8 The ability of voluntary organisations to 
make their full contribution in transnational 
activities in the social and employment field has 
been limited by the suspension of some 
European programmes since 1995 pending a 
European Court of Justice ruling on the legal 
basis of such measures. In its proposals to the 
IGC, the Commission has endeavoured to 
remedy this by proposing a legal base for the 
transfer of best practice, networking and 
exchange of experience on a transnational basis 
in such fields as the fight against social 
exclusion and the promotion of equal 
opportunities and the combating of 
discrimination on the grounds of gender, 
disability, race or age. This would enable the 
Community to adopt such incentive measures as 
have already been established for education, 
training and public health. 
10.9 There are however, many other 
problems facing organisations trying to 
develop their transnational European work: 
They include: 
* difficulties finding like minded 
organisations in other countries in order to 
develop joint projects. 
Although on paper an organisation may seem to 
have the same aims and objectives, in reality it 
may not. The role of an organisation working 
with a specific client group in one country may 
differ a great deal from one working in another. 
There are also difficulties in organisations 
working together which is often due to 
differences in culture and language 
* inability of organisations to access 
European funding* 
Decision making for many European funding 
programmes is frequently made at national rather 
than at European level. Many organisations have trouble 
obtaining good up to date information on 
European funding. They also may have 
difficulties with Member States which are 
reluctant to allow voluntary organisations and 
foundations access to specific European funding 
programmes in which the Member States have 
a decision making role. 
* difficulties finding matching funding for 
projects which are co-financed through 
European funding programmes 
Matching funding for projects often comes 
from public authorities who may be putting 
forward their own rival bids, or not be interested 
in supporting the project. 
* over dependence on European 
Community Funds leading to difficulties m 
forward planning and continuity of management 
owing to the incompatability of the short term 
nature of this funding and the long term core 
funding needs of voluntary organisations. 
Difficulties in obtaining funds at national 
level has led some organisations to look for 
European funding which can be inappropriate to 
their main aims and objectives. Failure to 
continue receiving these funds can undermine 
their existence. 
* difficulties faced by organisations due lo 
late payments of European funding. 
Payments held up for various reasons at 
European or national levels can often cause 
problems for organisations carrying out 
transnational projects. 
* lack of legal recognition for 
organisations in other countries. 
This can cause serious problems for 
organisations wishing to open offices in other 
Member States, or provide services that are 
financed by public authorities from another 
Member State. The Commission has already 
proposed certain measures (notably the Statute 
for a European Association) aimed at giving 
10 
organisations a legal personality in other 
countries within the European Union. 
* weak representativeness of organisations 
taking part in consultation 
In some cases European networks lack the 
structure and adequate membership to ensure 
that views of a wide spectrum of operating 
organisations at local, regional and national 
levels are taken into account. 
* tack of understanding by some public 
authorities on what European work voluntary 
organisations and foundations wish to do. 
Many organisations complain that 
public authorities are not aware or being 
supportive of the transnational work that they 
are trying to do. This often results in 
transnational projects being hindered. 
* lack of adequate training. 
Inadequate training can lead to poorly run 
organisations and the inability to respond to 
challenges and new needs. 
* lack of access to networking techniques 
Subsequent to poor training some 
organisations are not able to develop links with 
other like minded organisations. 
10.10 Not all these problems are 
insurmountable, and indeed some of them are 
already being dealt with by the European 
Commission and by some Member States. 
However, it should be stated that they are often 
dealt with on an ad hoc basis, and not as part of 
a coherent strategy and policy towards the 
sector. The following section presents a number 
of ideas which can be addressed by the sector 
itself, as well as at Member State and European 
levels. 
VI CONCLUSION 
MEMBER STATE LEVEL The Commission believes that for the most part 
action will need to proceed, in line with the 
principle of subsidiarity, at the level of the 
Member State or, where appropriate, at the 
level of the region or the locality. 
The Commission proposes that the Member 
States examine attentively the following areas: 
• acquiring a much deeper knowledge and 
understanding of the sector at aD levels 
There is no doubt that policy making is at 
present severely hampered by the lack of 
systematic and reliable data about the sector. 
Indeed there are parts of the Community where 
the sector has had so little public profile that 
policy makers appear to have been scarcely 
aware of its existence. All concerned actors, 
European,national, regional, local authorities 
and the voluntary sector itself, need therefore to 
address the question of what practical steps they 
could each undertake to map the extent and 
contribution the voluntary sector makes. 
* the relationship ("partnership**} between 
public authorities and the sector 
Voluntary organisations are being asked to take 
on an increasingly important role, by public 
authorities across the Community and by the 
European Commission itself. It is therefore 
important that voluntary organisations are given 
the opportunity to be involved in planning 
services and policy making with public 
authorities at all levels. Relationships between 
voluntary organisations and public authorities 
should be clearer and new partnerships 
developed. Partnership between voluntary 
organisations and governments will involve 
contractual arrangements between individual 
voluntary organisations and public authorities 
which will properly involve their own 
constraints. But whatever relationship they may 
have with governments, voluntary 
organisations and foundations are 
independent of government and must remain 
so. Public authorities should review public 
policy and make proposals about what would 
need to be done for policy to help the 
voluntary sector to increase its capacity and 
where relevant to improve its skills in order 
11 
that it can best fulfill the new roles it is being 
called on to address. 
• the law governing voluntary organisations 
and foundations 
The competent authorities should examine what 
scope exists for clarifying and adjusting legal 
frameworks so that they are conducive to the 
voluntary sector fulfilling its full potential at 
national, regional and local levels. 
• the fiscal basis and competition rules on 
which the sector operates 
The taxation rules applicable to the sector have 
to be clear and simple, and incentives as well as 
exemptions have to be studied attentively. Any 
individual tax treatment has to be justified in 
relation to the constraints specific to this sector 
and to its method of internal organisation which 
differentiates it from traditional economic 
actors. 
• how the continued financial health of the 
sector is to be secured 
Positive legal and fiscal regimes are important 
for the growth of the sector in each country, as 
well as to ensure public accountability. 
However, public authorities should also ensure 
that the sector is seen positively by society and 
that funding by public authorities, the corporate 
sector and private donations are all encouraged. 
• training 
The growth of the sector has not been matched 
by an increase in training to help voluntary 
organisations develop their skills and expertise 
in order to meet new needs. All too often, 
training budgets are the first to be hit when 
funding becomes difficult to obtain and 
voluntary organisations are asked to cut costs. 
Public authorities should ensure that voluntary 
organisations are given adequate training in 
order to provide the services and do the work 
that is being increasingly asked of them. 
• information society developments 
Voluntary organisations and foundations have a 
clear interest in being associated closely with 
information society developments. The 
participation of voluntary organisations and 
foundations in pilot projects, particularly in the 
applications field, should be encouraged. • better access to programs co-financed by 
the Structural Funds 
Many voluntary organisations are concerned 
about access to finance from the Structural 
Funds. Insofar as the implementation of 
Community Support Frameworks and 
operational Programmes is the responsibility of 
Member States, the latter are encouraged to 
examine and review current administrative 
practise so as to facilitate access to information 
and broader participation by the voluntary 
sector. The same applies insofar as the 
designation of beneficiaries for global grants is 
concerned. 
VOLUNTARY SECTOR 
FOUNDATIONS LEVEL AND 
It is important that voluntary organisations and 
foundations make every effort to promote 
themselves, through use of the media and new 
information technology. They should try to be 
open and accessible in order that the public and 
public authorities understand their aims and 
objectives and how they work. Organisations 
should encourage relevant training for their staff 
and volunteers, and when appropriate, should 
try to develop good links with public authorities 
and the corporate sector. 
The sector should look to diversify its funding 
base in order not to become too dependant on 
any one source of funding. Networks of 
organisations should also try to ensure that their 
membership base is as comprehensive as 
possible in order for them to be truly 
representative. 
EUROPEAN COMMUNITY LEVEL 
In addition, the Commission proposes the 
following at European Community level: 
• Voluntary organisations play an extremely 
important role as interfaces between citizens and 
government authorities, although in many cases 
this role still does not receive proper 
recognition. Voluntary organisations are asking 
for their work in this sphere to be recognised; 
they are no longer satisfied with a single 
12 
lobbying role, but are asking to be consulted 
systematically and regularly by Community 
bodies on all matters»and on all decisions which 
might affect the work they do, how they do it 
and their efforts to achieve their objectives. 
The Commission will maintain and further 
develop a continuous exchange of information 
and points of view by establishing systematic 
and regular dialogue and consultation with the 
sector5. In this connection the Commission 
welcomes the establishment by the 
aforementioned movements of the Consultative 
Committee for Cooperatives, Mutual Societies, 
Associations and Foundations, which aims to 
ensure the consultation and the horizontal co­
ordination of the sector. The Commission will 
also look to develop its dialogue with the sector 
through the European Social Policy Forum and 
the new budget line promoting cooperation with 
charitable associations, and will examine how 
the representation of voluntary organisations on 
other existing advisory committees can, where 
appropriate, be organised. The development of 
this dialogue and partnership will contribute 
to a better understanding and building of 
European integration at all levels. As well as 
this, the revised treaty should include such 
measures as the fight against exclusion, the 
promotion of employment, and measures in 
areas such as non discrimination and 
immigration, which call for this strengthening of 
dialogue. 
• The role of voluntary organisations in 
present-day society will not be recognised 
without more knowledge of how this sector 
operates, and of its requirements and 
expectations. As people are very far from being 
fully aware of all this, particularly in all the 
Member States and at European level, an effort 
must be made in this direction. One of the ways 
of making progress in this matter is to give a 
higher profile to voluntary organisations and 
In this context it should be recalled that the 
European Commission has published a directory on 
European Non Profit organisations in order to 
enable officials to consult more systematically and 
as widely as possible. their work. For these reasons, and in order to 
support the effort to improve knowledge of this 
sector, the Commission will consider proposing 
a year of voluntary organisations and 
European citizenship. 
• The Commission recognises the 
importance of the role that voluntary 
organisations can play as disseminators of 
information, and as bodies close to ordinary 
citizens, and proposes to involve them more 
closely in its activities of disseminating 
information. Voluntary organisations have 
played an important role in the development of 
past "European years". This role has not always 
been acknowledged. The Commission therefore 
intends to ensure that the role of voluntary 
organisations is recognised and publicised in 
all "European Years" relevant to the sector. 
• The European Parliament has proposed 
that studies be made on the expansion of the 
social economy in the European Community, in 
particular the establishment of an observatory 
to follow developments in this sector in the 
single market. The Commission considers that 
for voluntary organisations and foundations, this 
task could be undertaken within the European 
observatory for SMEs, and proposes that the 
collection and analysis of information, in the 
framework of the existing structures, should be 
based on what voluntary organisations do and 
want to do at transnational level, and 
particularly on the problems which they 
encounter in doing so, i.e. problems arising from 
differences in their legal forms in the various 
States, money transfers, leasing or purchasing 
premises in other states, obtaining subsidies, the 
effectiveness of the mutual recognition of 
vocational qualifications, obstacles to 
sponsoring in the Member States, etc. It would 
also look to identify areas of good practice 
which could be promoted and disseminated. 
• To undertake transnational activities, 
voluntary organisations need instruments which 
are not yet widespread, but which are a sine qua 
non for any activity of this kind. These 
instruments range from a knowledge of 
languages to familiarity with current differences 
in the various Member States concerning 
13 
taxation, working methods, administrative 
procedures etc. There is great demand for 
training on the part of those voluntary 
organisations which are interested in expanding 
their transnational activities. The Commission 
will therefore give an impetus to promoting 
better access to European training 
programmes which officials of voluntary 
organisations wishing to expand into Europe 
could use. 
On the other hand the involvement of the 
voluntary sector during the European year of 
life long learning gives evidence of the actual 
and potential contribution of this sector to life 
long learning, including adult education which is 
largely managed by the voluntary sector. In the 
years to come, this contribution is likely to 
become crucial to build a knowledge society for 
all. 
• Voluntary organisations often have 
difficulty in finding partners or people to work 
with outside their own Member States who 
could help them in their transnational activities, 
and facilitate access for them to a number of 
Community funds for which this is a condition 
of eligibility. All the more because the numerous 
Community instruments and policies available to 
enterprises for finding partners at European 
level (BC-Net, Europartenariat, BCC etc..) are 
not always suited to the needs of voluntary 
organisations.6 Accordingly, the Commission 
will see that they are made easily accessible to 
voluntary organisations, and that they meet their 
specific requirements. 
• Voluntary organisations and foundations 
have a clear interest in being associated closely 
with information society developments. An 
effort should be made to raise their awareness of 
the opportunities and benefits that the 
information and communication technologies, 
services and applications can offer them. The 
Commission has already set up the Information Society Project Office as a "one stop shop" 
within the Commission to facilitate access to 
information in this area. The Information 
Society Forum will seek to involve all parties 
concerned, including voluntary organisations 
and foundations, in the policy debate. The 
participation of voluntary organisations and 
foundations in pilot projects, particularly in the 
applications field, should be encouraged. 
• Many voluntary organisations are calling 
for easier access to sources of finances, 
including to the Structural Funds as well as 
other sources. The complexity of application 
systems and administrative procedures, which 
often lead to delays in payments can prevent 
small, lean voluntary organisations from making 
the valuable contributions they have the 
potential to make in the implementation of the 
various EU funding programmes. 
Insofar as the Structural Funds are concerned, 
the Commission will, in conjunction with the 
Member States, continue to actively explore 
ways of facilitating access to Community 
finance, including the possibility of pre-financing 
by the Member States and the increased use of 
global grant finance. In general terms, it will be 
proposing ways of streamlining and simplifying 
procedures in the context of the reform of the 
Structural Funds which is due to take effect 
from the year 2000. Likewise, it will continue 
to encourage a broad interpretation of the 
concept of partnership extended to economic 
and social partners7, compatible with the need 
for proper and effective systems for monitoring 
the management of public funds. 
The Commission will also explore ways of 
publicising more widely information on existing 
Community Finance which is available to 
voluntary organisations and foundations.8 
The RECITE and ECOS/OUVERTURE 
programmes, and also the PACTE programme can 
facilitate the internationalisation of voluntary 
organisations and foundations. Article 4 of the Framework Regulation No. 2081/93 
on the Structural Funds. 
DGVIII (Development) already has a document 
"Digest of Community Resources available for 
financing the activities of NGOs and other 
Governmental and/or Decentralised Bodies 
representing Civil Society in the fields of 
Development CO-operation and Humanitarian Aid". 
14 
The results of activities financed under the new 
budget line B3-4013 will help shed some light 
on the employment dimension of the third 
sector. In particular the actual and potential 
role of the voluntary sector and foundations in 
the employment development process and their 
job creation capacity will be examined and 
examples of best practice identified. The 
Commission will ensure that the resulting 
analysis and conclusions are widely 
disseminated. 
The European Commission's support through 
training and the use of information technologies 
will improve their capacity to network in order 
for them to fully participate in European 
Community Programmes. 
• The survey has shown that there is a 
growing interest by voluntary organisations in 
developing their transnational work. Voluntary 
organisations are keen to learn different models 
and ways of working from organisations in 
other countries. Many organisations find this 
difficult to do, due to the lack of resources. The 
Commission could help organisations such as 
foundations to explore the possibility of them 
setting up a special fund in order to facilitate 
the transnational work of voluntary 
organisations. In particular, the fund would 
enable voluntary organisations to pre-finance 
certain projects for which grants have been 
asked from public authorities, and also enable 
study visits, and the attendance of conferences, 
seminars and training events for organisations 
which normally lack the means to do so. 
• The numerous difficulties facing voluntary 
organisations when they contemplate 
transnational projects are often the result of 
national legislations which are ill-suited to the 
new needs, but they can also arise from the 
effect of measures taken at Community level, 
which, since they were drafted with other 
objectives in view, may turn out to be obstacles 
for voluntary organisations and foundations. For 
this reason the Commission proposes to study 
and monitor closely the effects of Community 
policies, actions and legislation on this sector. 
This follow-up and analysis should be carried 
out systematically also through better inter-departmental co-ordination, with the aim 
both of monitoring the implementation of 
Community rules in the sector and of promoting 
the structures of voluntary organisations and 
their access to the Single Market. 
The Commission intends to conduct a broad 
dialogue involving the sector, the European 
Parliament, the Committee of the Regions, 
the Economic and Social Committee, 
Member States and other interested parties 
in order to fully discuss the issues contained 
in this document. The Commission intends 
to hold a series of conferences and seminars 
to discuss the Communication and issues 
arising out of it. 
15 
ANNEX! THE SURVEY Growth of the sector 
I How many voluntary organisations and 
foundations are there? How are they financed? 
How many people belong to voluntary 
organisations? How many people do they 
employ? How many people work for voluntary 
organisations or foundations as volunteers? 
How big is the sector, and is it growing? How is 
it developing at the European level? What are its 
needs and aspirations for the future? 
1.1 Unfortunately, as has already been made 
clear, there is a serious lack of information 
about the voluntary sector in Member States, 
and still more at the European level. This lack of 
essential facts reflects not simply what has, until 
fairly recently, been a lack of interest amongst 
scholars and policy makers, but also the absence 
of any sort of convenient sampling frame. 
1.2 In an attempt to throw some light on the 
scene, the Commission therefore decided to 
carry out a questionnaire study of voluntary 
organisations in all the Member States. The 
method used was to distribute questionnaires to 
voluntary organisations throughout Europe via 
their representative organisations in Brussels 
and at national level. The survey was carried out 
between June and October 1993 and altogether 
some 2300 replies were received. This is a 
surprisingly good response and the Commission 
is grateful to everyone involved. The response 
may itself be taken as an indication of the 
lively interest that voluntary organisations in 
the different Member States have in 
developments at a European level. 
1.3 Given the method used, which was the 
only one open to the Commission, the study 
must be regarded as strictly exploratory and its 
results, which are not in any sense scientific, 
should be treated with caution. The findings are, 
however, of interest and are discussed below. 1.4 All the evidence suggests that the 
associative sector has grown enormously since 
the end of the last war and the survey clearly 
reflects this phenomenon, highlighting in 
particular the very marked increase in the 
number of voluntary organisations in the last 
twenty or so years. The growth of the sector in 
the last decade might justly be called explosive. 
Of the voluntary organisations which responded 
to the questionnaire, some 75% were founded 
after 1961, about 65% after 1971 and about 
45% after 1981. There is no reason to believe 
that the sample was abnormally "young" nor 
does growth appear to be slackening. There are 
minor differences between the sector in different 
Member States - for example, for reasons which 
will be obvious, the sector appears to be on 
average younger in Spain and Portugal than 
elsewhere in Europe (84% of the Spanish and 
85% of the Portuguese sample were founded 
after 1971 and 63% and 62% respectively after 
1981) - but the same basic phenomenon can be 
observed everywhere in Europe. 
1.5 There are no doubt many reasons for this 
very marked growth but the following factors 
have almost certainly been influential; 
• increases in prosperity following the 
second world war and latterly increased leisure 
time (shorter working week, longer holidays 
and two-day weekends) 
• the shift evident in most European 
economies during the 80's towards the 
provision of services 
• the increasing delegation to voluntary 
organisations of services (particularly social 
services) previously delivered by public 
authorities ("social privatisation") 
• changes in public preferences away from 
uniform and relatively impersonal services of the 
kind typically provided by public authorities 
towards the more individual client-oriented 
approach favoured by voluntary organisations 
16 
• the identification of a whole range of new 
needs and the growth of new social 
preoccupations (e.g. sexual equality, the 
environment and preservation of the biosphere, 
foreign aid to developing countries following 
the granting of independence to former colonies 
in the 60% peace etc.) 
• the employment crisis in the late 70'$ and 
early 30's leading to the creation of 
employment schemes involving voluntary 
organisations 
• historical reasons peculiar to particular 
Member States such as the release of pent-up 
associative demand following political changes 
in Spain and Portugal or the movement to create 
structures outside the purview of the state 
following the social and political upheavals of 
196S 
• demographic changes taking place in 
Europe such as the increasing number of 
retired/unemployed people leading. Member 
States to offload services from the State to the 
private and associative sectors as a way of 
cutting public expenditure 
Numbers of members 
1.6 One well-known voluntary organisation in 
the Community has over 13 million members. 
Most voluntary organisations, however, are 
small, often having no more than a handful of 
active adherents. Because of the methods used 
by the Commission, the sample contains a 
disproportionate number (30%) of "intermediary 
organisations" in the sense explained in 
paragraph 4 and of national organisations. The 
results will therefore have considerably 
overestimated the average size of voluntary 
organisations in the Community. (Most 
intermediary organisations responding to the 
survey were federations - that is, umbrella 
bodies providing some centralised services (such 
as information and combined lobbying) for a 
number of separate voluntary organisations or 
branches (usually with their own legal identity) 
working in the same field. Nonetheless the 
figures are of interest. 1.7 In the sample, about 40% of voluntary 
organisations had fewer than 100 members and 
more than half had fewer than 200. The range 
was, however, very wide. Thus 13% of the 
sample had between 1 000 and 5 000 members, 
and 15% had over 5 000. As would be 
expected, national organisations tended to have 
more members than those with a regional focus 
- they appear, roughly speaking, to have twice 
as many members as regional organisations. 
1.8 Of the federations responding to the 
survey very nearly half represented more than 
fifty organisations, with 9% representing over 
500. Such bodies do, of course indirectly 
represent large numbers of members of 
individual voluntary organisations: in our sample 
over half (55%) of federations indirectly 
represented more than 10 000 members with 
32% representing over 100 000. The average 
number of members indirectly represented was 
over 1 300 000. 
1.9 The size of voluntary organisations and 
federations appears to vary according to a 
number of factors. Larger bodies tend to be 
older, as do organisations working in fields of 
obvious and enduring interest, such as social 
services and education. As has already been 
remarked, voluntary organisations with wide 
geographical scope tend to be larger than those 
with a relatively parochial focus. The size of the 
membership also reflected to some degree the 
size and relative wealth of the Member State 
and the relative maturity of the sector. 
Employment 
1.10 The numbers of staff employed by 
voluntary organisations varies very widely -
from none at all to many thousands. The great 
majority of voluntary organisations are, in 
effect, small enterprises and, like their 
counterparts in the conventional economy, most 
employ no more than a handful of staff. A few, 
however, are large organisations by any 
standards, employing large numbers of full and 
part-time salaried staff. 
1.11 The average voluntary organisation in our 
sample employed 40 full and 10 part-time staff. 
The equivalent average figure for intermediary 
17 
organisations was a little higher. These averages 
do, however, conceal wide variations. Thus 
some 14% of our sample employed no paid staff 
at all, 17% employed over 50 people (full and 
part-time), 6% between 101 and 500, and 4% 
over 501. The commonest number of employees 
was between 1 and 5. Full-time staff appear to 
work on average for 36 hours a week and part-
timers for 20 hours. These figures varied less 
from country to country than they did according 
to the area in which the voluntary organisation 
was active: for example, as might be expected, 
voluntary organisations active in the health or 
social services field tended to employ many 
more salaried staff than those active in, say, civil 
rights. 
Volunteers 
1.12 Another very important source of support 
for voluntary organisations is, of course, 
volunteers. 81% of our sample said that they 
employed volunteers. Voluntary organisations in 
some countries appeared to make rather greater 
use of volunteers than others, but in no country 
did the proportion of voluntary organisations 
which have volunteers working for them fall 
below 60%. Again, the numbers of volunteers 
employed varied widely: 30% of voluntary 
organisations (including federations and other 
intermediary organisations) told us that between 
1 and 5 volunteers were active in their 
organisation; about 18% reported that they were 
supported by between 6 and 10 volunteers; 60% 
had over 51 volunteers, 10% had between 101 
and 500, and 7% had over 500. A few voluntary 
organisations (3%) were supported by over 
2 000 volunteers. On average each volunteer 
spent about nine hours a week working for the 
organisation they supported. 
1.13 Although there did not appear to be major 
differences between the number of organisations 
in different Member States using volunteers, the 
ratios of salaried staff to volunteers varied 
widely from country to country - from about 1:1 
to about 1:8. Such differences did not appear to 
be related to the size or wealth of Member 
States or any other particular factor. It may be 
that they simply reflect varying traditions, or the extent to which volunteering is, or is not, 
organised. 
1.14 The numbers of volunteers employed also 
varied markedly according to the voluntary 
organisation's main field of activity. For 
example, voluntary organisations working 
mainly in the field of culture and recreation, or 
in human rights, clearly depended to a much 
greater extent on volunteer workers than did 
voluntary organisations working in health, 
education, or social services. However, while 
there was some tendency for voluntary 
organisations to rely on either salaried staff or 
volunteers, it was not necessarily the case that 
voluntary organisations with few salaried staff 
had few volunteers, or vice versa - the mix 
varied a great deal. 
Assets 
1.15 The voluntary organisations and 
federations in our sample had: 
• financial assets amounting to 2,208 
thousand ECU, 
• property amounting to 702 thousand 
ECU;' 
• equipment amounting to 1,102 
thousand ECU; 
• other assets amounting to 835 
thousand ECU; 
• total assets of 10,068 thousand 
ECU. 
These averages conceal wide variations between 
voluntary organisations themselves and between 
countries. By and large it is, as would be 
expected, voluntary organisations in the richer 
Member States which have on average bigger 
assets, though the variation in even these 
countries is as wide as anywhere. Voluntary 
organisations in Member States where there are 
still remnants of the old mortmain laws, or 
where the laws governing inheritance are still 
relatively rigid, have discernibly fewer assets in 
the form of property. 
Expenses 
1.16 Data on organisations' annual expenditure 
was broken down into salaries and wages, 
administrative costs, and other costs. On 
average the costs incurred by our sample 
organisations amounted to the following: 
salaries and wages: 27,743 
thousand ECU 
administrative costs: 465 
thousand ECU 
other costs: 1,044 
thousand ECU 
total costs 31,149 
thousand ECU 
There were minor differences between 
countries: broadly voluntary organisations from 
better off Member States spent more than 
average on wages and salaries. Not surprisingly 
larger organisations spent rather more on 
administration than did federations, which were 
generally more expensive to run than simple 
voluntary organisations. 
Sources of Income 
1.17 Very many voluntary organisations 
depend to some degree on external subsidies of 
one kind or another, typically from public 
authorities, but often from individuals or other 
private donors. Many others are virtually self-
supporting, obtaining their income from 
membership fees or by the sale of services or 
other products. To get an idea of how they 
financed their expenditures, we asked voluntary 
organisations in our sample to state what 
proportion of their income was from their own 
resources and what proportion came from so-
called external sources, such as gifts and 
subsidies. 
1.18 For the purposes of the study, income 
from the sale of services (whether to members 
or non-members) or products (e.g. 
publications), membership fees, investment 
income and income from contracts, were all 
counted as "own resources". Under "External 
resources" were included subsidies from 
government bodies and other public authorities, and support from individuals, international 
bodies, foundations and companies. 
1.19 On average membership fees (30%) and 
the sale of services (30% of which 20% were to 
members and 10% to non-members) made the 
largest contribution to voluntary organisations' 
"own resources", followed by contracts (17%), 
sales of products (15%), and investment income 
(8%). To put the matter in another way, on 
average a typical European voluntary 
organisations derives some 62% of its "own 
resources" from economic activity of one form 
or another - i.e. from selling services directly or 
under contract, or from selling products such as 
publications. Again these averages did, 
however, conceal wide variations in the amounts 
that voluntary organisations gained from various 
sources and in their relative importance. For 
example, in two Member States the most 
important source of income in the "own 
resources" category was sales to non-members; 
and in another membership fees apparently 
contributed little in comparison with contracts 
with public authorities. 
1.20 There was less variation apparent when 
we looked at "external resources". By far the 
most important source of external income for 
voluntary organisations in all but one Member 
State was reported to be subsidies from public 
authorities (52%). This was followed by support 
from individuals (22%), support from 
international bodies (10%), grants from 
foundations (9%), and lastly support from 
companies (7%). Again to put these averages 
into perspective, grants from foundations were 
generally not an important source of income 
(between 3% and 6%) in all but two Member 
States, as were supports from business. 
1.21 Of all the sources of internal and external 
income, subsidies were clearly the most 
important, followed by membership fees. The 
following diagram compares all the sources of 
internal and external income and gives their 
mean percentages of the total. 
19 
Own and External Resources 
0,15 0.20 
avaraga part in % 
1.22 Additional information was also sought 
from voluntary organisations and federations 
about the balance of "own" to "external" income 
over the last three financial years. The ratio of 
own resources to external resources was on 
average about 45:55, with no significant 
fluctuations over the three years. In each year, 
however, there were some voluntary 
organisations/federations claiming that 100% of 
their income was derived exclusively either from 
their own or from external resources. In other 
words most voluntary organisations appear to 
generate a little under half their income 
themselves, relying for the remainder mainly on 
subsidies of one kind or another; but there are 
numbers of voluntary organisations which are 
either wholly self-sufficient or alternatively, 
wholly dependent on external aid. Sphere of Activity 
1.23 The questionnaire used the following ten 
main spheres of activity with which to classify 
voluntary organisations/federations: 
1.24 The figures in brackets indicate the 
proportion of respondents naming each of these 
areas as one in which they were active. These 
figures take account of the fact that, as has 
already been made clear, many voluntary 
organisations are active in a number of fields at 
once. This is clearly revealed by the following 
diagram showing the proportions of voluntary 
organisations whose main activity may lie in one 
field but which are also active in others. There 
were, as would be expected, differences 
between countries, though it is noteworthy that 
social services was named most frequently in all 
Social Services 
Education and Research 
Development and Housing 
Culture and Recreation 
International Activities 
Civil Rights and Advocacy 
Health 
Philanthropy and Voluntarism 
Environment 
Business and Professional Voluntary organisations (57%) 
(46%) 
(40%) 
(36%) 
(35%) 
(35%) 
(26%) 
(23%) 
(18%) 
( 8%) 
20 
Areas of Activity and Main Areas of Activity - frequencies in % 
£ Social Services 
Culture and Recreation 
Development/Housing 
Education and Research 
International activities 
Health 
Civil Rights 
Environment 
Philanthropy 
Business 
30 
frequencies in % 60 
but two countries (it is unlikely that this finding 
simply reflects our particular sample). Greater 
differences appeared, however, when we looked 
in more detail at the type of social services 
provided where voluntary organisations in 
different countries appear to specialise in 
different sub-areas such as family care, youth 
work or services to elderly people or people 
with disabilities. The latter three groups were, in 
fact, most often mentioned. This may reflect the 
fact that governments most often turn to 
voluntary organisations to provide services for 
these particular groups. 
1.25 Looking in a little more detail at the 
figures on, for example, "culture and 
recreation", reveals that 41% of voluntary 
organisations whose main activity lies in this 
field are also involved with other cultural and 
artistic activities - 37% with sport, 29% with 
recreational and entertainment clubs and 27% 
with the media and communication. Voluntary 
organisations which gave another area as their 
main field of activity were also active in "culture 
and recreation". 
1.26 A further example is provided by "health": 
36% of voluntary organisations which claimed 
that health was their main area of activity were 
involved in rehabilitation, 35% were involved 
with public health services, and 26% were active 
in nursing homes. Nursing homes were also 
mentioned by, for example, 29% of voluntary 
organisations which gave "Philanthropy and Voluntarism" as their main area of activity; and 
17% of voluntary organisations who were 
mostly involved in "social services" were also 
involved in "rehabilitation". 
1.27 This "multi-functionality" is typical of the 
philosophical approach adopted by voluntary 
organisations and often also reflects their 
circumstances as key sources of aid or 
information in a particular locality. Voluntary 
organisations in .this sense are rarely entirely 
"subject-oriented": their focus is above all on 
people and their problems. In this spirit, many 
voluntary organisations provide what is, in 
effect a "one-stop-shop" either for the 
inhabitants of a particular area, or for the group 
which is their special concern. Thus a voluntary 
organisation dealing with, for example, people 
with disabilities, will deal not simply with the 
immediate results of a particular disability, but 
will tend to occupy itself also with the 
information and advice needs of its clients and 
with the whole range of concerns affecting 
them, including, most importantly, their rights as 
citizens. This latter is a particularly important 
point: as a glance at the diagram will show: 
while only 6% of our sample regarded 
themselves as primarily concerned with human 
rights, 35% gave it as a field in which they were 
active. The same multi-functionality is evident 
throughout the diagram. 
1.28 When we looked at the expenditure and 
assets of voluntary organisations working in 
different fields we found that bodies concerned 
with social services and health had the highest 
expenditure. The voluntary organisations and 
federations whose main concern was with civil 
rights and advocacy had the lowest costs and 
the smallest assets. Environmental voluntary 
organisations/federations and those whose main 
objective was education and research were best 
off from the point of view of assets. 
1.29 As regards the "own resources" of 
voluntary organisations, the most important 
source of income for bodies in the field of 
culture and recreation was the sale of services to 
members and membership fees, both providing 
29%o. In the fields of education and research and 
international activities, contracts, (25% and 
27% respectively) were the most important 
source of self-generated income, while in the 
area of health it was membership fees (36%). 
Voluntary organisations providing social 
services also said that membership fees 
constituted a significant part of their "own 
resources" (33%), as did those dealing with civil 
rights (38%), development and housing (31%) 
and the environment (35%). In contrast, charity 
organisations obtain the bulk of their own 
resources by selling services to members (28%) 
and non-members (26%). For business and 
professional organisations, membership fees are 
by far the largest element in the "own resources" 
category. 
Ï.30 As regards external sources of income, 
organisations working in all fields are largely 
supported by subsidies of one kind or another. 
Subsidies provide from 31% of total external 
income of charitable voluntary 
organisations/federations to 73% of such 
income for business and professional bodies. As 
has already been noted, support from individuals 
is also an important source of income. 
Charitable voluntary organisations and 
federations, for example, said that support from 
individuals represented 37% of their external 
income. Environmental voluntary organisations 
claimed the proportion to be 29%, and in the 
fields of social services, education and research 
and international activities^ it represented a fifth 
of external resources. The major exception to 
this picture was provided by business and professional voluntary organisations, which 
derived only 2% of their external income from 
individuals. 
Geographical scope 
1.31 In asking about the geographical area 
covered by voluntary organisations, we were 
chiefly interested in gaining an impression of 
what sort of proportion of our sample 
considered Europe as a significant, if not the 
only, focus of their organisation. The results 
varied surprisingly widely: in one country only 
4% of respondents regarded their scope as 
extending to Europe, compared to 35% in 
another country. They should, however, be 
considered together with our findings (reported 
below) on the number of actual or intended 
partnerships or other activities undertaken by 
voluntary organisations at the European level. 
Interestingly, there appears to be little 
correlation between how important a focus 
organisations consider Europe to be and their 
propensity to form European partnerships. 
1.32 The scope of a. voluntary organisation's 
interest is not, of course, necessarily closely 
related to its organisational structure. For 
example, an internationally active voluntary 
organisation may well be locally based, whereas 
one which may be active at a national level 
within a particular Member State may lack any 
interest in Europe. As a broad rule, however, 
the greater an organisation's geographical scope 
the more it appears to play an active role at all 
levels. Thus most national organisations 
considered that they were also active at local 
and regional level, but few local organisations 
considered that their scope extended to national 
level. In line with this, most of the voluntary 
organisations that are active at the European 
level are, in fact, nationally organised. 
Target groups and beneficiaries 
. 1.33 We asked voluntary organisations which 
particular groups of people their organisation 
worked with or was concerned with and to 
indicate to whom, or to which bodies they 
offered services and on what basis. The great 
majority of voluntary organisations and 
22 
federations defined their target public widely -
46%> of respondents said that they served the 
"general public" or alternatively "young people" 
(37%>) or "adults" (35%). In contrast, very few 
voluntary organisations mentioned more 
narrowly-defined groups as their particular 
concern. It may be doubted whether there is 
much significance in this finding. Since 
voluntary organisations were not, in practice, 
confined to one choice from the list provided in 
the questionnaire, the likelihood is that most 
respondents whose activity was directed on the 
one hand at a specific group of people e.g. 
"drug addicts" or "veterans" and, on the other 
hand at the population as a whole (whether to 
draw attention to their work or to canvass for 
support) indicated both the specific group and 
"general public". 
1.34 When we asked voluntary organisations to 
whom they provided services the answer was, 
again, most often the "general public" (39%), 
followed as the next most frequent categories by 
the "target group" (38%) and members. (36%), 
governments or other public bodies (22%). The 
extent to which these services were provided 
free or in return for payment varied according to 
the country concerned and to whom the service 
was provided. Free services were most often 
provided to the general public and to members, 
and paying services to the voluntary 
organisation's particular target group or clients 
or to public authorities. 
1.35 Overall, more free goods or services were 
provided by voluntary organisations/federations 
than goods and services against payment. Not 
surprisingly, voluntary organisations and 
federations that mainly offer their services free 
rely more heavily on support from outside than 
do bodies which charge. To what extent 
services are provided free or, alternatively, have 
to be paid for depended heavily on the voluntary 
organisation's field of action. For example, the 
support of the homeless is likely to involve the 
provision of free (or at least very cheap) goods 
or services whereas it may be reasonable to 
charge for, say, adult education. Similarly, 
sports clubs, where perhaps relatively costly 
equipment is needed, or which are prestigious, will provide fewer free benefits than those 
voluntary organisations involved in social 
services, especially of a relatively informal kind. 
These findings, together with those on 
voluntary organisations* sources of income 
are a clear indication of the important 
redistributive effect which these bodies have. 
European Community-wide partnerships 
between voluntary organisations 
and foundations 
1.36 Because of the method we used, our 
sample undoubtedly contained a greater 
proportion of voluntary organisations which are 
active at the European level than would be 
expected in a more scientific sample. The figures 
are nonetheless impressive evidence of the 
extent to which the sector is already beginning 
to come together throughout the Community: 
50% of those voluntary organisations answering 
the relevant question, or nearly a quarter of the 
total sample, said that they were already 
involved in cross-border activities in some form 
of partnership with nationals or organisations 
from other Community countries. 
1.37 Given that the inspiration for the majority 
of the well-known networks already working at 
European level came from countries in the north 
of the Community, it might have been expected 
that the tendency to form partnerships might be 
less marked in the south than in the north. In the 
event, the findings did not support this 
hypothesis: there were differences between 
countries, which are not altogether easy to 
explain, but no clear division was discernible 
between the overall picture north and south. 
1.38 Looking ahead, 46% of our respondents 
said that they envisaged entering into cross-
border partnerships at some time in the future. 
Interestingly, an analysis by country showed, in 
effect, that it is voluntary organisations in those 
countries that have hitherto formed a below-
average number of partnerships which have the 
strongest future intentions. In other words, 
when it comes to operating on the European 
stage, voluntary organisations in countries now 
lagging behind appear to have every intention of 
catching up. 
23 
L39 Of voluntary organisations already in 
partnerships, 27% were active in "social 
services", 14% in the field of "culture and 
recreation", 13% in "international activities". 
11%» in "education and research" and 10% in 
"development and housing". Again, there was 
evidence that voluntary organisations working 
in some fields where few partnerships have yet 
been formed have stronger future intentions as 
regards cross-border work: for example, no 
fewer than 75% of our sample voluntary 
organisations which are active in the field of 
"development and housing" said that they were 
planning partnerships for the future. On the 
other hand, only 22% of voluntary organisations 
active in the health field said that they were 
planning to enter into partnerships. This may 
well reflect the fact that many voluntary 
organisations supply what are, in effect, public 
services - and furthermore in a highly regulated 
field. In these sorts of circumstance, 
partnerships may simply offer voluntary 
organisations less and thus be less attractive. 
Problems in forming partnerships 
1.40 Just over half the voluntary organisations 
involved in them said that they had met 
problems in forming or running their 
partnerships. The broad findings were as 
follows: M.lt*j~t* ' Vrt ''t •<*<• Mr C»/ "" '+ trtt'ttt 'tt 
The figures in brackets indicate the proportion 
of respondents encountering each kind of 
problem. Few differences were apparent 
between national, regional or local 
organisations, though there was a tendency for 
smaller organisations to be less preoccupied 
with difficulties. The outstanding finding is, of 
course, the extent to which "communication" 
has caused difficulties, though the extent of 
legal and fiscal problems is also noteworthy. It 
seems likely that the legal difficulties, at least, 
will be largely removed by the proposed Statute 
for a European Association. Language is 
probably the most important impediment to 
"communication" but it is likely that there are 
other complicating cultural factors at work as 
well, such as misunderstanding of role and 
importance of the sector in different countries, 
misunderstanding of how organisations work, 
the lack of understanding of cultural, legal and 
fiscal backgrounds, the existence of different 
ways of working etc.. 
Main future needs of voluntary 
organisations 
1.41 We asked respondents to tell us what they 
felt were their voluntary organisation's main 
needs for the future. The results are given 
below. 
24 
Main needs of European associations/foundations 
30 40 50 
frequencies in % 
It is clear from the results that the perceived 
need for more funds and more staff, and above 
all the former, is more or less universal. The 
same demand exists in the sector in all the 
Member States, though there is a tendency for 
voluntary organisations in poorer countries, 
where the sector tends to be less well 
developed, to feel their comparative lack of 
funds more keenly. Voluntary organisations are 
not, on the whole, capital-intensive, and it is not 
surprising, therefore, that there should not be 
the same desire for more capital. Nonetheless 
almost a quarter of our respondents mentioned 
capital as a need. 
1.42 The desire for more paid staff appears to 
be felt most by older voluntary organisations 
(those founded between 1945 and 1950): 
younger voluntary organisations, in contrast, 
appear in relatively greater need of information 
and management advice. The desire for more 
volunteers was very widespread but particularly 
evident amongst voluntary organisations 
working in the fields of "health" and, for 
obvious reasons, in "philanthropy and 
voluntarism". The need for more training was 
mentioned by almost a quarter of respondents 
and appears to be felt by voluntary organisations 
working in all fields regardless of their age. Points for the Commission: 
- development of the 
sector at the European 
level 
1.43 Finally, we invited respondents to let us 
know of any points which they would like to 
bring to the attention of the Commission and to 
put forward any suggestions they might have 
about how the Commission might help the 
development of the sector at the European level. 
The answers we received ranged widely from 
simple demands for "recognition" in a quite 
general sense (either of the non-profit sector or 
of some particular organisation) to relatively 
complex suggestions for changes in, or 
extensions to, European Community policies. 
25 
ANNEX H OVERVIEW OF THE LEGAL 
AND FISCAL FRAMEWORK FOR 
VOLUNTARY ORGANISATIONS AND 
FOUNDATIONS 
II. 1 The following is an overview of the legal 
and fiscal basis on which foundations and 
voluntary organisations operate in each of the 
Member States. Following the definition given 
in paragraph 2.3 no account is taken of 
"economic" associations which exist in some 
Member States and which can engage in 
commercial or other profit making activities, nor 
of the several varieties of private foundation. 
Legal basis 
n.2 The freedom to establish or join, or indeed 
to leave, a voluntary organisation is nowadays a 
right (normally guaranteed under the 
constitution) in all Member States of the 
Community. The right of association is, of 
course, also guaranteed under the European 
Convention on Human Rights. Generally 
speaking it is possible for nationals of any 
Member State to establish a voluntary 
organisation or foundation anywhere in the 
Community, although some Member States 
stipulate that there should be a minimum 
number of their own citizens or residents 
involved10. Some Member States have however, 
special statutes precisely to enable foreign 
nationals to establish voluntary organisations 
which, though subject to the same national 
registration or publication requirements as any 
other voluntary organisation, are then run 
according to such internal regulations as may be 
laid down in the country from which the 
founders originate. 
II.3 Generally speaking, where jurisdictions 
make the distinction between private and public 
Article 16 of the ECHR permits derogations to the 
right of association in the context of a political 
activity of non-national citizens. 
This is in fact in contravention of Articles 6 and 52 
of the Treaty on European Union. law both voluntary organisations and 
foundations are entities of private law. Not all 
Member States define either voluntary 
organisations or foundations explicitly, and not 
all make a fundamental legal distinction between 
voluntary organisations on the one hand and 
foundations on the other. For present purposes, 
however, voluntary organisations can be taken 
as groups of private individuals who have come 
together for some non-profit end in the public 
interest. In contrast, foundations are entities 
which have charge of assets set aside for 
purposes in the public interest in the form of an 
endowment or of a regular dedicated source of 
income. 
IL 4 That part of the sector of interest here is, 
therefore, neither wholly private nor wholly 
public in nature. It follows that fundamental to 
the law must be some means of demarcating its 
proper sphere of operation from the territory 
occupied by purely private activity, by 
government, or by commercial companies and 
other forms of profit making enterprise. Within 
the Community this has been achieved either 
formally - by setting but the basic features of 
internal organisation and governance to which 
non-profit organisations must conform, or by 
objects - by laying down what spheres of 
activity count as in the public interest and by 
establishing other rules defining how the non­
profit status of the organisation is to be secured. 
11.5 Broadly speaking the first of these 
approaches - that of defining non-profits by their 
formal features is characteristic of the civil code 
tradition, and the second - that of delineating the 
sphere of non-profit activity in the public 
interest ("charity") by the purpose of the activity 
itself- is the fundamental feature of the common 
law tradition. 
11.6 Many commentators draw a sharp 
distinction between these two approaches, and it 
is certainly true that the legal traditions from 
which they derive are very different. The 
practical effect of the difference in approach 
can, however, be exaggerated. Many 
jurisdictions contain special legal provisions for 
voluntary organisations with certain aims 
regarded as of public interest which, combined 
26 
with different levels of tax relief, means that in 
practical effect organisations in many Member 
States are defined in terms of both their formal 
structure and their objects. It is also true to say 
that in practical terms the basic provisions of the 
law on foundations (and in particular the 
emphasis given to the preservation of assets, 
with all that that implies) in code countries are 
also very similar to those found in common law 
jurisdictions. The clear link here is probably 
historical. The common law on charity has 
enjoyed an unbroken tradition and has never 
drawn a fundamental distinction between 
foundations and voluntary organisations - both 
are charitable trusts. Since foundations are the 
older form, it appears that the law was simply 
applied later to voluntary organisations without 
any major adaptations. In contrast many code 
countries have not enjoyed the same continuity, 
the result being that the law has diverged. 
11.7 Voluntary organisations may be 
incorporated or unincorporated and both forms 
are found in all jurisdictions. It seems likely that 
the majority of voluntary organisations in the 
Community are in fact unincorporated and thus 
without legal personality. There are some 
disadvantages to being unincorporated: it is not 
always easy for the voluntary organisations to 
acquire any assets it may need, and its individual 
board members or trustees, in whose names the 
business of the voluntary organisation is carried 
on, may be uncomfortably exposed to liabilities. 
In most places the law has, however, developed 
ways of mitigating the difficulties - by the use of 
the law of agency, for example, or by a common 
fund to which members contribute and to which 
creditors have first recourse, and in most 
jurisdictions the unincorporated voluntary 
organisation does not appear to be prevented 
from taking part in legal process as a voluntary 
organisation (that is to say under its own name 
rather than that of a responsible board member), 
11.8 In code countries the incorporation of 
voluntary organisations is generally achieved by 
the publication of statutes conforming to the law 
in the relevant official journal, together with a 
list of (board) members. Incorporation (or, more 
accurately, the registration which is its condition) may be refused on the grounds that 
the statutes of the body are non-conforming. A 
refusal to register a voluntary organisation in 
these circumstances is an entirely administrative 
matter and implies no political judgement on the 
status of the organisation. It needs, therefore, to 
be carefully distinguished from the 
circumstances in which organisations may be 
refused special status for tax purposes (see 
below, paragraph 5.14 and 5.15). The statutes 
(and often a full or partial list of members) are 
typically required to be registered with either the 
local court or with the responsible ministry, 
regional or local authority. All foundations have 
legal personality, which again is normally 
achieved by the publication of statutes etc.. 
Unlike voluntary organisations, however, 
foundations are generally subject to some 
degree of a priori control to ensure that the 
statutes are in strict conformity to the law, that 
(since they are often intended to exist "in 
perpetuity") management succession has been 
properly allowed for, and that their intended 
assets are adequate to achieve their ends. 
11.9 In common law jurisdictions no special 
form' of incorporation is available for. either 
voluntary organisations or foundations. Instead 
bodies seeking the convenience or protection of 
incorporation have a number of different forms 
to choose from depending on the area of activity 
in which they are engaged. By far the most 
common is the so-called "company limited by 
guarantee'" - in effect a non-profit-distributing 
company - but there are other forms available 
such as the "housing association" or the so-
called "friendly society". There are also 
(comparatively rare) examples of charitable 
voluntary organisations and foundations which 
have been incorporated by Royal Charter or by 
special Act of Parliament. 
11.10 Incorporation is available everywhere by 
one means or another, but the resulting degree 
of legal capacity is not always as great. In a 
number of Member States legal capacity is 
effectively unlimited (in any event as long as the 
body concerned acts in accordance with its 
statutes). In others, however, neither voluntary 
organisations nor foundations can receive gifts 
27 
and legacies or own real property without the 
express permission of the relevant public 
authority. 
H.11 There are differences too when it comes 
to the difficult question of the degree to which 
voluntary organisations and foundations (but in 
particular voluntary organisations) are allowed 
to engage in economic activity without the loss 
of tax privileges. Some degree of economic 
activity is allowed in all Member States, the rule 
generally applied being that such activity must 
not be voluntary organisations1 principal activity 
in the sense that it must be carried out not for its 
own sake kit for acme non-profit ain\ and must 
ke ancillary to the objects of the voluntary 
organisations in the sense that it must be directly 
tied to the voluntary organisation's objects and 
not simply designed to improve the 
organisation's general financial position. In line 
with the non-distribution constraint under which 
all voluntary organisations operate, any surplus 
from economic activity has, of course» to be put 
towards the achievement of the voluntary 
organisation's aims. In some jurisdictions, it is 
possible for a voluntary organisation or 
foundation to supplement its income by creating 
or acquiring an entirely separate commercial 
company which then remits its income to the 
parent body. 
As far as competition rules are concerned, all 
competition rules will be adhered to, taking into 
account the specificities of the sector. 
Taxation 
n. 12 All Member States allow some voluntary 
organisations - broadly speaking, those which 
are regarded as having purposes in the public 
interest - some degree of relief from direct 
taxation either by exempting them from taxes 
imposed on companies and other forms of profit 
making enterprise, or by imposing a lower rate 
than that paid by companies, or by establishing a 
minimum income threshold below which tax is 
not incurred. These forms of relief are not 
necessarily mutually exclusive. Where voluntary 
organisations are exempt from company tax 
they may have to pay income tax instead. Some 
Member States allow partial or full exemption from property taxes on real property owned or 
occupied by the voluntary organisation or 
foundation, In addition there may, rarely, be 
partial relief from employment taxes. 
11.13 If the principle of a degree of tax 
exemption for some voluntary organisations and 
foundations is universal, the approach adopted 
by Member States differs significantly, as does 
the extent to which relief is given to bodies 
working in different spheres. In some 
jurisdictions, voluntary organisations and 
foundations are in principle subject to the same 
tax regime as companies and receive no relief 
from direct taxation unless they are recognised 
(either, as having certain objects, by law, or 
individually by the relevant authorities) for tax 
purposes. In others (and in particular those 
where voluntary organisations and foundations 
are defined as being in the public interest) tax 
relief is accorded as of right but may be lost if 
the voluntary organisations is regarded as 
carrying on commercial or lucrative activity 
outside the limits recognised by law or 
jurisprudence. In such circumstances the 
privileged tax status of the organisation may be 
removed altogether. Alternatively relief may be 
withdrawn only in respect of those activities 
which are regarded as profit making in the 
relevant sense. 
11.14 Besides these differences in approach 
there are significant variations in the way in 
which Member States delineate the sphere of 
activity that they regard as being in the public 
interest. There are thus considerable differences 
in the extent of tax relief for which voluntary 
organisations and foundations working in 
different fields are eligible. Some jurisdictions 
define the area of public interest for the 
purposes of tax relief very generally and 
broadly, including, for example, any activity of 
public utility or benefit. Such jurisdictions 
typically give full relief to all bodies meeting this 
broad criterion. Other Member States take a 
much more restrictive approach. In one, for 
example, reliefs are presently available only for a 
small number of individual organisations named 
by the law. Yet other Member States take both 
a restrictive approach and one which also 
28 
discriminates between different sorts of bodies. 
Thus only very limited relief may be granted to 
all non-profit bodies, fuller exemption being 
confined to bodies operating in a restricted 
number of fields - such, typically, as health, 
culture or social services - and subject to 
stringent management and accountability 
requirements. Such special tax status is subject 
to administrative and political discretion and in 
some Member States appears to be increasingly 
rarely accorded. 
Tax relief for donors 
11.15 All Member States grant a measure of tax 
relief to donors to voluntary organisations or 
foundations, whether they be individuals or 
companies or other forms of organisation. 
Reliefs may be granted up to a maximum 
amount in any one tax year or, alternatively, up 
to a maximum proportion (expressed as a 
percentage) of an individual's gross or after-tax 
income. The arrangements for companies are 
usually similar, relief generally being granted 
either up to a maximum amount or up to a 
proportion of profits before or after tax. 
Minimum amounts or proportions may be 
imposed and, in the case of companies, the 
permitted base for calculating the maximum gift 
may be turnover rather than profits. 
11.16 Some Member States grant some degree 
of tax relief to donors to any voluntary 
organisation or foundation active in the public 
interest as broadly defined. In others, more 
restrictive criteria are applied, relief to donors 
typically being restricted to gifts to those 
voluntary organisations which are themselves 
granted special status for tax purposes. Indeed, 
unless they possess the required status, 
voluntary organisations in these Member States 
do not normally have the capacity to receive 
gifts at all (see paragraph 5.10 above). In 
jurisdictions where voluntary organisations or 
foundations normally have limited legal 
capacity, voluntary organisations given a general 
dispensation to receive gifts may nevertheless be 
required to dispose of any gift of real property 
within a specified period. In some Member States the voluntary organisation or foundation 
may be charged tax on the gift received. 
11.17 Member States also take a different 
attitude when it comes to legacies. In some 
Member States individuals are free to leave all 
or part of their estate to a voluntary 
organisation or foundation of their choice and, 
while this appears to be a less common practice 
than in the past, many still do so. Alternatively 
they may create a new body - usually a 
foundation - with some cherished aim. Such 
testamentary gifts are generally tax free both to 
the donor's estate and to the recipient body. In 
those countries where voluntary organisations 
and foundations have limited legal capacity, 
however, it may be impossible to leave anything 
but a notional part of an estate to a voluntary 
organisation or foundation unless the recipient 
body has received the required dispensation 
from the authorities. Willing an estate may be 
further complicated by strict laws governing 
inheritance or by requiring that considerable 
assets be set aside before a foundation can be 
created. 
Indirect tax 
11.18 Article 13(A)(1) of the Sixth Directive 
77/388/EEC of 17 May 197711 requires Member 
States to exempt from VAT "certain activities in 
the public interest". These include hospital and 
medical care, goods and services closely linked 
to welfare and social security work or the 
protection of children and young persons, 
education and training for young persons and so 
on. Many voluntary organisations and 
foundations are, of course involved in the 
provision of just such services and their 
transactions are exempt from VAT, provided 
Known as the "Sixth Directive", it governs the 
harmonisation of the laws of the Member States 
relating to turnover taxes and introduces a common 
system of VAT and a uniform basis for its 
assessment. 
These exemptions are subject to certain conditions 
(see Anicle 13.A.lb),g).h),i)) and are not given 
automatically 
29 
that they obtain prior authorization from the 
Member State in which they are established, i.e. 
they are exempt from the need to file VAT 
returns, to charge VAT to their clients or to pay 
output tax. In addition, under Article 13(A)(2) 
Member States can make the granting of any of 
the listed exemptions to any body (other than 
those governed by public law) subject to a 
number of conditions designed in effect to 
ensure that exempt bodies are bona fide non­
profit organisations whose activities will not 
affect the competitive position of taxed 
commercial enterprises. On the face of it the 
ability to impose conditions on the granting of 
exemptions would seem to leave a good deal of 
scope for variations in the treatment of 
voluntary organisations but in practice, with a 
few minor exceptions all Member States appear 
to have implemented the exemptions outlined in 
Article 13. 
11.19 In addition to the exemptions mentioned 
above, a number of Member States "zero rate" 
certain supplies. This can benefit non-profits by 
allowing them to reclaim input tax. 
30 
ANNEXE m THE LEGAL AND FISCAL 
FRAMEWORK FOR VOLUNTARY 
ORGANISATIONS 
(ASSOCIATIONS) AND 
FOUNDATIONS 
BELGIUM 
ASSOCIATIONS 
LEGAL POSITION 
Right of association guaranteed by law? 
Yes - Article 27 of the Constitution as 
revised in 1994. 
Basic definition 
An association, in the strict sense of the 
term, is a contract via which several 
people agree to pool certain material 
resources with an aim other than the 
production or sharing of profits, 
(associations involve a degree of 
permanence in the shared existence). 
Minimum number of founders 
Three (for ASBLs). 
Two for AIs formed under Belgian or 
foreign law. 
Main types of association 
De facto associations (not incorporated 
in one of the forms laid down by law, 
and not having a legal personality). 
ASBL (Associations Sans But Lucratif) 
defined by the Law of 27 June 1921 as 
organizations which do not engage in 
industrial or commercial operations, and 
which do not seek to procure material 
gain for their members. 
International Associations under Belgian 
law (IA) (Associations Internationale de 
droit beige) limited to associations with 
philanthropic, religious, scientific, 
artistic, or educational objectives (Law 
of 25 October 1919). International Associations under foreign 
law (Associations Internationale de droit 
étranger) with the same aims as 
associations under the IA Belgian law 
(cf. Article 8 of the Law of 25 October 
1919, which entitles an association with 
its head office abroad to open an office 
in Belgium). 
Membership nationality requirements 
ASBL: Three-fifths must be of Belgian 
nationality or resident (established and 
registered) in Belgium; otherwise the 
association will not be able to claim legal 
status vis-à-vis third parties, who will 
themselves, however, be entitled to hold 
this against them; 
IA(Belgian law): at least one 
administrator of Belgian nationality, no 
requirements for ordinary members. 
IA(foreign law): none 
Legal personality, and how acquired. 
ASBL - by publication of statutes, plus 
the full names, trades/professions and 
addresses of the association's 
administrators in the annexes to the 
"Moniteur". 
IA (Belgian law) - by Royal Decree 
(published by extract in the "Moniteur"); 
legal personality effective vis-à-vis third 
parties ten days after publication of the 
statutes plus the full names, 
trades/professions and addresses of the 
association's administrators in the 
annexes to the "Moniteur". 
IA (foreign law) - legal personality 
effective vis-à-vis third parties ten days 
after publication of the statutes, plus the 
same information as for IAs under 
Belgian law (including the address of the 
office in Belgium). Such publication 
requires prior "recognition" by the 
Government.. 
Legal capacity 
Immovable property 
All types of association are restricted to 
the permanent ownership of only such 
31 
9. 
10. immovable property as is strictly 
required for the fulfilment of their 
purposes (extension of legal capacity for 
the "Notre-Dame de la Paix" university 
departments at Namur and the "Saint 
Louis" university department at 
Brussels). 
Donations 
ASBL: acceptance of donations of 
movable property (including cash) above 
FBR400 000 and of immovable 
property must be authorized by Royal 
Decree. 
IA: acceptance of any donation 
(irrespective of its value) must be 
authorized by Royal Decree. 
No authorization required for: goods 
transferred to one ASBL by another 
ASBL to promote activities similar to 
those of the donor, donations granted by 
public bodies to an ASBL, proceeds of 
collections, etc. 
Statutes 
ASBL: There must be a written 
document (authenticated or under 
private seal) which must contain certain 
items of information, including the 
objective for which the association was 
formed (Article 2 of the law of 1919). 
IA (Belgian law): idem (the statutes 
listed in Article 2 of the law of 1919 
must be mentioned). 
IA (foreign law) - As for IA (Belgian 
law), plus the address of the office in 
Belgium; otherwise can exercise in 
Belgium all the rights accorded by its 
national statute. 
Registration requirements 
None as such, but see publication 
requirements above (para 6). A list of 
international associations is kept by the 
Ministry of Justice. 
Commercial activity 
Unclear. In theory not allowed, but in 
practice acceptable so long as not the 
association's principal activity (i.e. not carried out for its own sake but for a 
non-profit end) and ancillary to its main 
object. (Ancillary means directly tied to 
the association's objects and not simply 
designed to improve the association's 
financial position, and any profits are put 
towards the association's aims.) 
11. Disposal of assets on liquidation 
To ends of no benefit to the individuals 
involved, in general as laid down in the 
statutes. 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of 6th VAT Directive 
All exemptions of relevance to 
Associations coming under Article 13 
have been implemented. Organisations 
must meet the criteria set out in Article 
13(A)(2)(a). 
13. Other specific exemptions 
No. There is a lower rate (6%) for 
vehicles for the transport of disabled, 
sick, injured or blind persons, daily or 
weekly publications of general 
information and "produits de 
récupération". 
14. Zero Rates 
DIRECT TAX 
15. General position 
A. Income tax 
Not generally subject to company tax 
unless considered to be carrying on 
commercial/gainful activity outside the 
limits recognised by law (Article 182 of 
the Code des impôts sur les revenus: 
CIR) or case law. Associations are liable 
for the more favourable taxes on legal 
persons (CIR Articles 220-226), 
including in particular: 
income tax and capital gains tax, and to 
property tax unless the building is used 
for religious, educational, medical, social 
work or charitable purposes. 
32 
B. other taxes 
A "compensatory inheritance tax" of 
0.17% is payable on the association's 
total assets held in Belgium. Tax on gifts 
to Belgian associations is reduced to 8% 
(1.1% if the donor is another ASBL or 
IA , a recognised mutual society, an 
establishment of public utility or a 
professional union). Inheritance tax on 
legacies made in their favour is reduced 
to 8.8%. 
16. Recognition of associations for tax 
purposes 
Under Article 104, paragraphs 1 and 3-5 
of the "Code des impôts sur les 
revenus", gifts to certain institutions and 
organizations - in particular those 
established in the form of associations or 
foundations to which approval has been 
granted by law or by Ministerial or 
Royal Decree - are tax-deductible. 
Approval by Royal Decree is granted for 
a maximum period of three years 
(renewable). Officially approved 
institutions are generally exempt from 
capital gains and property taxes. In 
certain cases, express authorization is 
required for the acceptance of 
tax-deductible donations by approved 
institutions established in the form of 
associations or foundations (cf. 7 
above). 
17. Criteria for recognition 
To qualify for recognition, an institution 
must have legal personality, be of a 
non-profit-making nature, both in itself 
and as regards its members, be able to 
provide documentary evidence of its 
accounts, be active in the country or one 
of the cultural communities, keep its list 
of donors open to inspection by the tax 
authorities and not spend more than 
20% of its budget on administration. 
18. Qualifying purposes for recognition 
Apart from institutions recognised by 
law, the activities of approved bodies 
must fall within one of the following fields: cultural promotion (libraries, 
private radio and television stations, 
museums, sports groups, tourism and 
leisure associations), scientific research, 
development aid, or social work. 
19. Gifts by individuals 
Tax-deductibility provisions apply solely 
to gifts to recognized bodies (including 
associations and foundations). Up to 
10% of total taxable revenue up to a 
limit of Bfr 10 million (index-linked) is 
deductible. Gifts of major works of art 
to museums are deductible at 
government valuation. 
20. Gifts by companies 
Tax-deductibility provisions apply solely 
to gifts to recognized bodies (including 
associations and foundations). Up to 5% 
of net operating profit up to a limit of 
Bfr 20 million (non index-linked) is 
deductible. 
ACCOUNTS AND AUDITING 
21. See paragraph 17 above for recognised 
associations. 
Other forms of associations do not have 
to publish accounts. In general, internal 
supervision by members, external 
verification by tax authorities. 
To obtain authorization by Royal Decree 
to accept a gift, ASBLs must 
nevertheless have been lodging their 
annual accounts with the civil court, 
where they are open to public 
inspection, since their establishment or at 
least for the past ten years 
FOUNDATIONS 
LEGAL POSITION 
22. Constitution 
Requires agreement of public authorities 
to establishment and to statutes and 
Royal Decree. The statutes together 
with the names and addresses of 
33 
23. administrators must be published in the 
annexes to the "Moniteur", and any 
changes in the statute must also be 
approved and published. 
Basic definition 
Assets irrevocably given over to one of 
the following non-profit ends: 
philanthropic, religious, scientific, 
artistic or educational. No members 
(Articles 27 etseq.of the Law of 27 June 
1921). 
24. Nationality requirements? 
Not for administrators, but siège must be 
in Belgium. 
25. Legal personality and how acquired 
Yes, by Royal Decree approving the 
statutes (published by extract in the 
"Moniteur") and publication of the 
statutes in the annexes to the "Moniteur" 
(may be done retroactively to the act of 
constitution. 
26. Legal capacity 
Cf. ASBL (7 above) 27. Disposal of assets on liquidation 
By court-appointed receivers for the 
purpose laid down in the statutes of the 
foundation or, failing that, to ends as 
close as possible to those for which the 
body was founded. 
TAX POSITION 
28. As for recognised associations. 
ACCOUNTS AND AUDITING 
29. 
The Government has a duty to ensure that the 
foundation's funds go towards the purposes for 
which it was created. All foundations must 
produce annual accounts and budgets and 
present them to the Government within two 
months of producing them. Both are published 
in the annexes to the "Moniteur". At the request 
of the government ministry, administrators 
found guilty of fraud or mismanagement can be 
removed by the court. In such cases, new 
administrators are appointed according to the 
statutes or, at the request of the court, by the 
Government. 
34 
DENMARK 
ASSOCIATIONS 
LEGAL POSITION 
1. Right to association guaranteed by law? 
Yes - under constitution 
2. Basic definition 
None: NB Associations are not 
necessarily "non-profit" organisations. 
3. Minimum number of founders 
Not stipulated 
4. Types of associations 
Single 
5. Membership nationality requirements 
None - anybody (legal person or 
individual) residing permanently in 
Denmark can form an association. 
6. Legal personality and how acquired 
Yes - by will of the members. Legal 
personality is acquired as soon as 
members have signed adequate statutes 
and nominated a management 
committee. (For requirements see 
below.) 
7. Legal capacity 
Unlimited 
8. Statutes in prescribed form? 
No. But statutes of unregistered 
associations must at least contain rules 
governing relations between members 
and the methods for nominating their 
management bodies. The statutes of 
registered bodies must contain 
provisions required by law - e.g. the 
name, head office, the number of 
members charged with managing the 
association and how they are nominated, 
membership conditions and relations 
between members, the accounting period 
and method of presentation of accounts 
etc. Changes have to be notified to the 
register. 
9. Registration requirements The following categories of association 
must be declared in the "Register of 
Foundations" within three months of 
their creation: employers associations; 
trade unions and professional 
associations which have as their principal 
aim the protection of the economic 
interests of the professional group to 
which their members belong; all private 
law associations with assets of more 
than 250 000 Kroner (approx 31000 
ECUs) except those:- contracted to 
carry out legal social aid obligations on 
behalf of communes or departments; 
bodies holding property connected with 
the national church; legally recognised 
religious congregations; or educational 
establishments authorised by the state, 
provided such bodies have no other 
powers or objectives. 
10. Commercial activity 
Associations, like foundations (see 
below) can engage in economic activity, 
but receipts from such activity are 
subject to the same taxes as those 
imposed on commercial companies. 
11. Disposal of assets on liquidation 
Freely determined by the association's 
statutes (but see paragraph 17 below). 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of 6th VAT Directive 
All exemptions of relevance to 
associations coming under Article 13 
have been implemented. 
13. Other specific exemptions 
Sales of second-hand goods in shops 
owned by recognised associations and 
special events organised by them. 
14. Zero rates 
Newspapers. 
DIRECT TAX 
15. General position 
35 
Employers' associations, trade unions 
and other professional groupings whose 
main purpose is to look after the 
economic interests of the occupational 
group to which its members belong 
(labour market groupings) are taxable 
under the Funds Tax Act. Other 
associations which simply look after 
their members' professional and 
economic interests of a market-and 
service-oriented nature (trade 
associations) are similarly liable to tax 
under the Funds Tax Act. The principle 
behind this Act is that foundations and 
associations must basically be subject to 
the same rules as public limited 
companies. The rate of tax is the same as 
for corporation tax, i.e. 34%. 
When reporting their taxable income, 
labour market groupings need to include 
only earned income, unearned income 
and profits. Membership subscriptions 
are thus not to be counted as taxable 
income. These groupings are entitled to 
deduct for tax assessment only that 
expenditure which relates to taxable 
income. 
Trade associations are taxed in full on 
earned income, but other income is 
taxed only if it exceeds DKr 200 000. 
Trade associations and labour market 
groupings are entitled to deduct amounts 
distributed for charitable or non-profit 
purposes. They are also entitled to 
deduct provisions set aside for 
non-profit or charitable purposes. 
Trade associations are also entitled to 
deduct amounts distributed for purposes 
which accord with their Memorandum of 
Association, provided that the recipient 
of any given distribution is liable to pay 
tax on the relevant amount in Denmark. 
Other associations, corporations and 
foundations (stifelser) not covered by 
the Funds Tax Act, are covered by the 
Corporation Tax Act, § 1. 1 (6). 
Associations are liable to pay tax only on 
their earned income. Similarly, associations are entitled to deduct 
operating expenditure only if it relates to 
earned taxable income. 
Trade associations are also entitled to 
deduct allocations intended to meet 
purposes which accord with their 
Memorandum of Association, insofar as 
those purposes may be considered to be 
charitable or non-profit. 
Associations may set aside provisions to 
fulfil charitable or non-profit purposes at 
a later date. 
16. Recognition of associations for tax 
purposes 
By law or, for the purpose of receiving 
tax-deductible gifts or annuities, at the 
discretion of the tax authorities. 
Separate lists of bodies eligible to 
receive gifts or annuities are published 
each year by the tax authorities. 
Application may be made for inclusion in 
either or both of these lists. Exemption 
from tax on legacies may be granted at 
the discretion * of the tax authorities. 
Recognition for these latter purposes is, 
in practice, generally given to bodies 
listed as eligible to receive tax deductible 
gifts. 
17. Qualifying criteria for recognition 
Bodies qualified to receive tax benefits 
are structured as non-profit associations 
or foundations. Precluded bodies include 
those performing solely political tasks. It 
is a condition that gifts (and legacies) be 
used solely for charitable or non-profit 
purposes to the benefit of a fairly large 
group of people, and that any surplus at 
liquidation be distributed in accordance 
with those same principles. In addition, 
the body must be resident in Denmark 
(i.e. the head office must be located in 
Denmark and most of the management 
functions must be carried out there). It 
appears that the rules qualifying the 
receipt of tax deductible annuities are 
stricter. 
19. Gifts by individuals 
36 
Single tax deductible gifts can only be 
made to bodies on the list published by 
the tax authorities (see above, paragraph 
16). Each gift must be at least 500 Dkr. 
up to a maximum of 5 000 Dkr. a year. 
The first 500 Dkr. are not deductible. In 
addition, deductible gifts can be made 
through covenants (contractual 
annuities) up to a limit of 15% of earned 
income plus capital gains before tax, or 
up to a maximum of 15 000 Dkr., 
whichever is the greater. Covenants 
must normally be for a minimum of ten 
years. 
20. Gifts by companies 
As for individuals, except that single 
gifts are deductible from taxable revenue 
and covenants are allowed up to a 
maximum of 15% of taxable profit (or 
15,000 Dkr.). 
ACCOUNTABILITY AND 
SUPERVISION 
21. 
None laid down for unregistered 
associations. Registered associations 
must produce accounts conforming to 
good practice and have them examined 
and signed by one or more auditors. 
These accounts must be sent to the 
Registrar of Foundations within six 
months of the end of the accounting 
period. If, at the time it is drawing up its 
accounts, the association has assets of 
more than (approximately) 
ECU 380,000, then at least one of the 
auditors must be professionally qualified. 
In this latter case, the audit must be a 
full one and the auditor must be given 
every facility by the association. Failure 
to conform to registration or 
management, accounting requirements is 
punishable by a fine. The Minister of 
Justice (who is responsible for the 
Register) can require an association to 
include in its statutes any provision 
deemed necessary, and can ask for any information thought necessary to verify 
that the law has been complied with. 
FOUNDATIONS 
LEGAL POSITION 
22. Freedom to establish? 
Yes, but the amount of capital given 
over should normally be at least 200 000 
Dkr. (approx ECU 25,000). Foundations 
with a smaller amount of initial capital 
can be created with the agreement of the 
Ministry of Justice, so long as the 
amount is adequate for the ends 
foreseen. 
23. Basic definition 
None in statute. Essentially, goods or 
capital given over to some purpose 
forming an entity with its own legal 
personality managed according to its 
own statutes by an independent board. 
No members. 
A Fund is a corporate fund if it passes 
over goods or incorporeal rights, 
disburses services and similar things for 
which it normally receives payment, or if 
it exercises a profession with real estate 
selling or real estate demise, or if it can 
qualify as a holding fund. 
24. Nationality requirements? 
Foundations can be created by foreigners 
but they must be established in 
Denmark. In addition, at least half of the 
members of the managing board and all 
the foundation's administrators must be 
resident in Denmark. The authority 
responsible for foundations may, 
however, grant an exemption from the 
residence requirement. In any event, the 
requirement is waived if this provision 
conflicts with international obligations. 
25. Legal personality and how acquired 
Newly-established foundations must 
report to the Ministry of Justice (Civil 
Law Directorate) and the tax authorities 
(Inland Revenue) in the foundation's 
home district within three months of 
37 
being set up. This is simply a formal 
requirement and has no legal effect on 
the foundation's legal status. Corporate 
funds acquire legal personality by 
registration in the register of Corporate 
Funds at the Danish Commerce and 
Companies Agency, for which the 
Minister of Industry, Trade and Shipping 
is responsible. 
26. Legal capacity 
Unlimited 
27. Disposal of assets on liquidation 
Foundations can be merged or liquidated 
if their assets are no longer 
commensurate with their objects. 
Merger or liquidation - by distribution of 
the capital - can take place after 
application by the foundation's 
administrators and with the agreement of 
the Ministry of Justice, or can be 
imposed by the Minister. Bodies 
authorised to receive gifts must agree to 
distribute any surplus on liquidation to a 
similar institution. 
Corporate funds can be merged or 
liquidated if their assets are no longer 
commensurate with their objects or if 
their purposes are no longer being 
served. Merger or liquidation - by 
distribution of the capital - can only take 
place after application by the board of 
the corporate fund and with the 
agreement of the Administration of the 
Corporate Funds, which normally is the 
Danish Commerce and Companies 
Agency, with consent from the Ministry 
of Justice. 
28. TAX POSITION 
Foundations covered by the Funds Act 
or the Commercial Funds Act are 
taxable in accordance with the Funds 
Taxation Act. The principle behind this 
latter Act is that funds and associations 
must basically be subject to the same 
rule as public limited companies. The rate of tax is the same as for corporation 
tax, i.e. 34%. 
Earned income must be included in full 
when taxable income is reported. The 
first Dkr 25 000 of other income is 
tax-free. 
Foundations are entitled to deduct 
amounts distributed for charitable or 
non-profit purposes. They are also 
entitled to deduct amounts distributed 
for purposes which accord with their 
Memorandum of Association, provided 
that the recipient of any given 
distribution is liable to pay tax on the 
relevant amount in Denmark. They are 
further entitled to deduct provisions set 
aside for non-profit or charitable 
purposes. 
ACCOUNTABILITY AND 
SUPERVISION 
For the most part as for registered 
associations (see paragraph 21 above). 
But in addition: the administrative 
authority responsible can remove 
members of the board who commit acts 
which render them unworthy of their 
position, who do not fulfil the nationality 
or residence requirements, who fail to 
act in conformity with the statutes, or 
who are demonstrably incapable of 
fulfilling their role; the administrative 
authority can also appoint members of 
the board (even in non-conformity with 
the statutes); 
bankrupt members of the board must 
resign; 
founders and their relatives cannot form 
the majority on the board without the 
permission of the administrative 
authority. Nor, in the case of a 
foundation created by a company, can 
anybody who owns more than half the 
voting capital form, conjointly with the 
founder and his or her relatives, the 
majority on the board without the 
permission of the administrative 
authority; 
38 
board members cannot receive larger 
fees for their services than are 
considered normal for the type of work 
involved. 
board members cannot take part in 
debates in which they have an interest; 
all foundations must basically have their 
annual accounts audited, and if their own 
capital in the preceding year was over 3 
million Dkr, the auditor must be a 
chartered accountant. The auditor must 
normally be resident in Denmark and 
must be absolutely independent of the 
foundation, its board members and of 
any of its employees concerned with 
accounting or the administration of its assets. The audit must be detailed and 
critical, and the auditor must abide by 
any requirements imposed by the 
relevant authority. He or she must be 
given every facility by the foundation; 
members of the board are responsible for 
any damage to the foundation due to 
their management, as if relevant are the 
foundation's auditors and the companies, 
if any, to which they belong; 
foundations can set aside reasonable sums to 
their reserves, but aside from this their funds 
must be spent on their objects. The amounts 
allocated for reserves or spending can be varied 
by the authority responsible. 
39 
GERMANY 
ASSOCIA TIONS (VEREINE) 
LEGAL FRAMEWORK 
Right of association guaranteed by law? 
Yes: Constitution, Article 9, paragraph 
1: German nationals have the general 
right of association. The legal position of 
the association is governed by Article 21 
et seq. of the Civil Code (BGB) and by 
the relevant provisions of the Law on 
Association (VereinsG). 
Basic definition 
No legal definition. In legal practice and 
theory an association is defined as a 
permanent and structured group of 
persons (natural or legal) who form an 
entity on a voluntary basis with a view to 
attaining a common object. The concept 
of the communality of the members must 
be expressed at least by a common 
denomination and in a body which 
represents them. 
Minimum number of founders. 
Two founder-members. However, there 
must be at least seven when the statutes 
are registered with a view to obtaining 
legal personality. 
Types of associations. 
The Civil Code governs non-profit 
associations (Idealvereine, Article 21 
BGB) and commercial associations 
which aim to make profits 
(wirtschaftliche Vereine, Article 22 
BGB). However, the latter are of only 
marginal importance, and require 
authorization by the public authority 
concerned. The result, de facto, is that 
the concept of an association is more or 
less restricted in Germany to non-profit 
organizations, irrespective of whether 
they have legal status. 
Membership nationality requirements 
No restrictions. 
Legal personality and how acquired. By entry in the register of associations in 
the court local to the head office (Article 
21 BGB). 
7. Legal capacity. 
Unlimited 
8. Statutes 
For registered associations (BGB 57 and 
58). 
9. Registration requirements. 
For associations wishing to acquire full 
legal personality. 
10. Commercial activities. 
A non-profit association may engage in 
commercial activities if they are purely 
ancillary, do not constitute the main 
object of the association and play a very 
secondary role in relation to its main 
non-profit activity. If these commercial 
activities are not completely ancillary, 
they cannot constitute the association's 
main or statutory activity. In principle, 
ancillary activities are allowed only if 
their purpose is to help in the 
performance of activities to which tax 
concessions are attached (not only fund 
raising) and if this purpose can be 
attained only through this activity 
(Articles 65 to 68 of the tax code). The 
income, profits and assets arising from 
other commercial activities of an 
association which is recognized as a 
public utility are liable to ordinary tax. 
11. Disposal of assets on liquidation 
Assets pass to the non-profit association 
named in the statutes. The statutes may 
lay down that the Annual General 
Meeting should nominate the non-profit 
association authorized to receive the 
assets, but in this case the authorization 
of the tax authorities is required. 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of the Sixth VAT Directive 
40 
All the exemptions applicable to 
associations under Article 13 apply. 
13. Other specific exemptions 
None 
14. Zero rates 
No 
DIRECT TAX 
15. General position 
associations are liable for corporation 
tax. If their income does not exceed 
DM 7 500 they are exempt from 
corporation tax (concession). 
16. Associations which are recognized or 
which enjoy tax concessions. 
Tax concessions are granted to 
associations whose statutes and effective 
management are inspired exclusively by 
altruism and the general good and which 
are directly engaged in a philanthropic or 
religious activity (Articles 51 to 68 of 
the tax code). Tax concessions are not 
^confined to associations, but are granted 
on the same conditions to any legal 
persons within the meaning of Article 1 
of the law on corporation tax. 
17. Criteria for recognition 
It must be clearly apparent from the 
statutes and the association's 
administration that in its actions it is 
pursuing an objective for the public 
good. The statutes must state very 
precisely: 
the object; 
the way in which the object is 
attained; 
the non-profit activity aimed solely 
and directly at this object; 
that if the association were to be 
wound up or deprived of its status as a 
public utility, its assets would remain in 
the public utility field; 
that the effective management must 
be in accordance with the statutes. 
18. Recognized bodies 19. Under Articles 52-54 of the Tax Code, 
any association whose statutes and 
actual management are exclusively 
inspired by altruism and the general 
good and which is directly engaged in a 
philanthropic or religious activity is 
recognized as being of public utility for 
tax purposes. 
In tax law, a distinction is made, with 
regard to the financial activities of an 
association of public utility, between 
activities strictly connected with the 
declared object in order to enjoy tax 
concessions and financial activities 
unconnected with this object and 
therefore taxable. 
Activities strictly connected with the 
declared object are those for which the 
receipts are wholly allocated to the 
object which the association has 
declared in order to enjoy tax 
concessions. There are no limits on these 
activities, which are deemed to be 
without profit aim, and which enjoy tax 
concessions. 
On the other hand, activities not directly 
related to the declared object are 
taxable. These are mainly commercial 
activities engaged in by the association 
through enterprises engaged to raise 
funds to be used to attain the object for 
which the association has applied for tax 
concessions. These activities are taxed in 
the same way as any other commercial 
activity, but do not entail the loss of 
non-profit status provided that they do 
not take over from the main activity of 
the association (first paragraph of Article 
55 of the Tax Code). 
Gifts by individuals 
Gifts made by a natural or legal person 
liable to tax in Germany with the aim of 
promoting charitable, ecclesiastical or 
religious activities for activities which 
are recognized as being for the general 
good to an association recognized by the 
tax authorities as being of public utility 
can be deducted from the donor's taxable 
41 
income up to certain ceilings; the 
ceilings vary, depending on the purpose 
of the gift, by between 5% and 10% of 
the donor's total taxable income. 
20. Gifts by companies 
Companies may deduct gifts up to 0.2% 
of the sum of total turnover and salaries 
and wages paid. 
20(a). Gifts to non-resident associations 
Such gifts are not deductible. 
ACCOUNTS AND AUDITING 
21. Accounts 
The association must produce an annual 
profit and loss account. This 
accountancy obligation vis-à-vis 
members is laid down in Articles 27 (3) 
and Article 666 of the Civil Code, and 
vis-à-vis the tax authorities (for the 
purposes of establishing the non-profit 
nature of the social object), in Article 63 
(3) of the Tax Code. 
If the association is engaged in a 
commercial activity, it is required by 
commercial law to keep accounting 
records in the same way as businesses. 
In all cases, two sets of accounts must 
be presented, one for taxable activities 
and the other for non-taxable activities. 
Auditing 
The administrators are responsible to the 
Annual General Mmeeting for keeping 
proper accounts. The statutes may 
provide for a supervisory body and also 
for its powers. If a supervisory body 
(Aufsichtsrat) is set up, the provisions 
applicable to GmbH and AG forms of 
companies are not applicable. The 
responsibilities of such a body are 
determined by the statutes. 
The task of auditing associations has 
passed to the tax inspectorate. It 
comprises the process of regularly 
recognizing and checking their 
non-profit status. As soon as a non-fiscal 
infringement is detected, the file is forwarded either to the Ministry of 
Internal Affairs, which is empowered to 
dissolve an association covering more 
than one "Land\ or - if the association 
does not cover more than one Land - to 
the senior government authority in the 
Land concerned . 
FOUNDA TIONS (STIFTUNGEN) 
22. Constitution 
By a Memorandum of Association 
subscribed to by any person, physical or 
legal, inter vivos (in which case it can be 
revoked up to the date of approval), or 
through a will. The memorandum must 
state the object of the foundation, the 
resources available for pursuing this 
object and the governing body or bodies. 
The resources provided must be 
adequate for pursuing the object which 
the foundation has set itself. An 
application for authorization must be 
made to the Land in which the 
foundation has its head office (under the 
law of the Lander). An appeal against 
refusal of authorization may be made 
only on the basis that the administration 
had not applied its own criteria. 
Definition 23. 
24. 
25. 
26. 
27. Assets to which a legal personality 
attaches. 
Nationality requirements 
Any person may be a founder. 
Acquisition of legal personality 
Through approval by the competent 
authority. 
Legal capacity 
The maximum capacity required to attain 
the object of the foundation. It may do 
all that is necessary, or even simpiy 
useful, in pursuing its objective. 
Disposal of assets on liquidation 
If it has become impossible for the 
foundation to accomplish its object, or if 
the foundation is jeopardizing the public 
good, the administrative authority may 
42 
amend its object while complying with 
the intentions of the founder as far as 
possible. The executive committee must 
be heard. The authority may also abolish 
and dissolve the foundation (Article 87 
BGB). In this event, the assets go to the 
persons designated in the statutes. 
Otherwise, they go to the state. The 
liquidation procedure is as for 
associations. 
TAX POSITION 
28. See associations 
ACCOUNTS AND AUDITING 
29. Accounts 
See associations 
30. Auditing 
The managing body for the foundation is 
subject to the competent administrative 
authority, which is concerned only with 
conformity with the rules of public 
order. It operates in the exclusive 
interest of the foundation. Auditing of 
the accounts is governed by the statutes. 
43 
GREECE 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Yes. Article 12 of the 1975 Constitution 
protects non-profit associations and 
unions provided that they conform to the 
laws of the State, which cannot make the 
exercising of this right subject to prior 
authorization. 
2. Basic definition 
Article 61 of the Civil Code. A union of 
persons with legal personality, formed 
with a view to pursuing a given object, 
as well as a collection of goods assigned 
to serving a given object. 
3. Minimum number of founders 
Twenty 
4. Types of associations 
Common law associations 
Special associations 
Unions of persons (without legal 
personality and to which the provisions 
relating to companies apply if no other 
provision is made). 
5. Membership nationality requirements 
The right of association is extended to 
non-nationals under Article 11 of the 
European Convention for the Protection 
of Human Rights and Fundamental 
Freedom 
6. Legal personality and how acquired 
Following the application to the Court of 
First Instance in the area of the 
administration's office (the 
Memorandum of Association and the 
statutes must be appended), the legal 
authorities verify that the provisions of 
the law are complied with (check on 
legality). The association acquires legal 
personality once the Court's decision is final and the association is entered in the 
register of that court.. 
7. Legal capacity 
Full legal capacity except for acts 
inherent to physical persons. 
8. Statutes 
They must be drawn up in writing and 
are subject to rules on publicity. 
9. Registration requirements 
Registration constitutes acquiring legal 
personality. 
10. Commercial activities 
Making a profit occasionally in order to 
obtain resources for the association is 
authorized. 
11. Disposal of assets on liquidation 
Article 77 of the Civil Code. The assets 
of a legal person which has been wound 
up pass to the State, unless provided 
otherwise by law, the charter or the 
statutes, or by the decision of the 
competent authority. The State is bound 
to pursue the object formerly pursued by 
the legal person, using these assets. The 
assets of the association wound up may 
not under any circumstances be shared 
among the members. 
TAXATION 
INDIRECT TAXATION 
12. Article 13 of the Sixth VAT Directive 
Application of the exemption laid down 
in Article 13. 
13. Other exemptions 
Specific rate (4%) for associations 
pursuing an object for the public good. 
14. Zero rates 
No 
DIRECT TAXES 
15. General position 
Income tax. The basis of taxation for 
legal persons not pursuing a 
44 
profit-making object is constituted by 
the net taxable income arising from the 
leasing of buildings or land and 
securities. The tax is not payable on 
other income or receipts necessary for 
pursuing the association's object, such as 
members' regular subscriptions. In the 
case of foreign associations, only 
receipts necessary for pursuing the 
association's object are not taxed. 
16. .Recognition of association for tax 
purposes 
Associations with an object which is for 
the public good enjoy exemption from 
tax on income arising from the leasing of 
land and real estate and from securities. 
There is also exemption from paying 
inheritance tax and taxes on gifts made 
to legal persons which do not have a 
profit-making object, are legally 
constituted in Greece and pursue an 
object of a national, religious, 
philanthropic, pedagogic or artistic 
nature or for the public good. The 
exemption covers all non-national legal 
persons with the same characteristics 
regarding assets which they might inherit 
in Greece, subject to the principle of 
reciprocity. 
17. Criteria for recognition 
A very broad concept of the public 
good. Covers any object which is not of 
strictly private interest and concerns the 
interests of large groups of persons 
(philanthropic, religious, social, artistic, 
educational). 
18. Qualifying objects for recognition 
The competent authority for granting 
exemption is the tax inspectorate in the 
region of the association's head office. 
19. Gifts by individuals 
Tax-deductible from taxable income, but 
the donor must have Greek nationality. 
If the amount exceeds DR 100 000 in 
one year, it must be deposited in a loan 
and deposit fund. 20. Gifts by companies 
Tax-deductible provided that they have 
been deposited in a loan and deposit 
fund. 
20(a). Gifts to non-resident associations 
Not tax-deductible. 
ACCOUNTS AND AUDITING 
21. Accounts 
The auditing authority is generally the 
local authority. 
FOUNDATIONS 
22. Constitution 
Concession system. Act of foundation 
(act intra vivos before a notary or a 
sworn statement - unilateral act by the 
founder) and presidential decree which 
approves the will of the founder and is 
issued by the competent Minister, 
depending on the objects of the 
foundation. 
23. Definition 
Set of goods intended to implement a 
project for the public good (in principle) 
and with a non-profit object. 
24. Nationality requirements 
25. Acquisition of legal personality 
Concession system. Acquisition occurs 
on the day of publication in the Greek 
Official Journal of the decree granting 
authorization. 
26. Legal capacity 
Full. Acquiring legal personality does 
not automatically imply acquisition of 
the assets assigned. 
27. Disposal of assets on liquidation 
TAXATION. 
28. As for associations. 
ACCOUNTS AND AUDITING 
29. Accounts 
Audit board. 
30. Auditing 
The operations of the foundation are 
monitored by the State. 
45 
SPAIN 
ASSOCIATIONS 
LEGAL FRAMEWORK 
Right of association guaranteed by law? 
Articles 22 (on associations) and 34 
(on foundations) of the Constitution. 
- Law 191/1964 of 24 December 
1964 governing associations and 
Supplementary Decree of 20 May 1965. 
- Law 30/1994 of 24 November 1994 
on foundations and tax advantages for 
private persons engaged in activities for 
the public good. 
Several laws of Autonomous 
Communities. 
Basic definition 
Group or union of several natural 
persons with legal capacity which carries 
out the wish of this group to pursue on a 
permanent basis a given permissible 
object laid down by the statutes of the 
association (definition in the strict 
sense). 
Minimum number of founders 
The law of 1964 specifies a meeting at 
which "several persons" agree, without 
anywhere stating the number of persons 
or founder members required. 
Nevertheless, the usual practice is to 
require a minimum of three persons. 
Types of association 
1 - Associations governed by the Law 
of 24 December 1964 (which does not 
govern public or private foundations, 
civil or commercial organizations or 
corporate bodies). 
2 - Associations governed preferentially 
by special statutes (associations of 
cannon law, associations established by 
the state to attain specific objects, trade 
unions and similar associations, 
associations of civil servants and military 
personnel, administrative associations of property owners, political parties, sports 
associations, students etc.). 
Associations with social, educational, 
cultural or sporting objects, or those 
seeking more generally to promote the 
public good, may be recognized as 
"public utilities" by the Spanish Council 
of Ministers, on a proposal from the 
Minister for the Interior, which gives 
them several advantages, including tax 
advantages. 
Membership nationality requirements 
Non-nationals legally resident in Spain 
have the right of association and may 
exercise it in conformity with the laws 
and regulations, (organic law 7/1985 on 
the rights and liberties of non-nationals 
in Spain) 
Legal personality 
Article 25 of the Civil Code grants the 
status of legal person to corporate 
bodies, associations and foundations for 
the public good recognized by the law, 
and to associations with specific 
interests, whether civil, commercial or 
industrial, to which the law grants their 
own personality independent of that of 
its members. 
In accordance with the legal practice of 
the supreme tribunal, legal personality 
arises from a contract of association. In 
Article 22 (3) the Constitution states 
that associations are entered on the 
appropriate register "for publicity 
purposes only". 
Legal capacity 
Article 38 of the Civil Code grants legal 
capacity to legal persons, which includes 
associations which are recognized in 
law. They may therefore acquire and 
possess goods, and contract debts or 
engage in civil or criminal proceedings. 
Nevertheless, associations which are not 
recognized as public utilities may not 
acquire premises which are not strictly 
necessary for achieving their object, and 
46 
they must obtain authorization for 
certain private donations. 
8. Statutes 
Article 3.2 of the Law of 1964 lists the 
information which must be given in the 
statutes. 
9. Registration requirements 
Entry in a register is obligatory. The 
procedures for such registration vary 
depending on the current provisions in 
the autonomous region of the head 
office of the association. For 
associations subject to the Law of 1974, 
there is a register for each province and 
a national register. 
There are also special registers for 
certain associations governed by specific 
systems. 
10. Commercial activities 
Authorized 
11. Disposal of assets on liquidation 
The procedure for disposing of assets in 
the event of the association being 
disbanded must be specified in the 
statutes. 
TAXATION 
12. INDIRECT TAXATION 
Article 13 of the Sixth VAT Directive: 
exemptions provided for in Article 13. 
Law 37/1992 of 28 December 1992 on 
VAT does not exempt associations 
directly, in that the different rates do not 
depend on the legal form of the entity 
but on the nature of its activities. 
However, it provides for numerous 
operations common to associations 
which are exempt or are eligible for a 
deduction. 
13. Other specific exemptions 
See 12. 
14. Zero rates 
No DIRECT TAXES 
15. General position 
Associations which have been 
recognized as public utilities and which 
fulfil the conditions laid down in Article 
42 of the Law on Foundations and Tax 
Concessions for Private Participation in 
Activities for the Public Good have 
several tax advantages. 
1 - They are exempt from corporation 
tax in respect of the activities which 
constitute their social or specific object, 
including additions to assets derived 
from acquisitions or transfers of cash 
bonds. They are also exempt in respect 
of any profit from commercial activity, 
provided this corresponds to the entity's 
object or specific purpose. 
Income from commercial activities or 
from capital is not exempt, but is also 
eligible for certain concessions, in 
particular the tax band, which is a fixed 
rate of 10%. -
2 - They are exempt from most local 
taxes. 
16. Associations which are recognized or 
which enjoy tax concessions 
Associations which have been 
recognized public utilities and which 
fulfil the conditions laid down in Article 
42 of the Law on Foundations and Tax 
Concessions for Private Participation in 
Activities for the Public Good, and in 
particular the following conditions: 
they must pursue objects for the 
public good (social assistance, civic 
matters, educational, cultural, sporting, 
health, development cooperation, 
environmental protection, promotion of 
the "économie sociale" , voluntary social 
work or research work etc.); 
they must allocate at least 70% of 
their net income to these objects; 
they must submit their accounts 
annually to the competent body in good 
order; 
47 
in the event of liquidation, they must 
assign their assets to achieving objects 
for the public good; 
their statutory representatives must 
be honorary officials. 
17. Criteria for recognition as a public utility. 
These are given in Article 4 of the Law 
on Associations of 1964, as amended by 
the Law on Foundations and Tax 
Concessions for Private Participation in 
Activities for the Public Good. The main 
criteria are: 
the statutory objects must be for the 
public good; 
activities must be open to all and not 
restricted to members; 
the association must be non-profit, 
any profits must not be shared out, and 
no fees must be paid to the committee 
for carrying out its duties; 
it must possess the human and 
material resources necessary for 
achieving its statutory objects. 
it must have been in operation 
continuously for two years prior to 
submitting its application. 
18. Types of associations recognized 
cf. 16 and 17. 
19. Gifts by individuals 
Donors who are natural persons may 
deduct from their taxable income 
donations or gifts to bodies which enjoy 
tax concessions, under certain conditions 
and with certain limitations. Normally, 
this deduction will be 20% of the value 
of the gift. However, total tax-deductible 
expenditure must not exceed 30% of 
taxable income. 
20. Gifts by companies 
Organizations with a legal personality 
may under certain circumstances deduct 
gifts made to bodies which enjoy tax 
concessions. This deduction may not 
exceed 10% of taxable income in most 
cases. In addition, participation by businesses 
in activities for the public good, and - in 
particular - the acquisition of works of 
art to be offered as a gift and 
expenditure on promoting and 
developing certain arts also attract tax 
concessions. 
20(a) Gifts to non-resident associations 
There is no legislation governing 
associations on this point (for 
foundations cf. 24). 
ACCOUNTS AND AUDITING 
21. Accounts 
Article 11 of the decree of 20 May 1965 
provides that associations must keep 
accounts which show all receipts and 
expenditure. These accounts must be 
sent to all members of the association, 
and then submitted annually to the 
Annual General Meeting, with a budget 
for the following year. 
Lastly, they * must be sent to the 
provincial authorities in the case of 
associations in an Autonomous 
Community which has no regulations on 
this matter, or to the Ministry of Justice 
in the case of associations which have 
been recognized public utilities. 
Auditing 
The law of 1964 provided for the 
auditing of associations by the 
government authorities, but this was 
implicitly repealed by the 1978 
Constitution. 
Associations recognized as public 
utilities must submit an annual report of 
their activities during the previous 
financial year to the Ministry of Justice. 
FOUNDATIONS 
22. Constitution 
A foundation may be constituted 
"inter vivos" or "mortis causa". In the 
first case, there must be a notarized 
written act, and in the second case, its 
48 
constitution must be stipulated in the 
will. 
Entry in a register of foundations, which 
falls within the competence of the 
Ministry of Justice, is compulsory and 
constitutes official formation of the 
foundation. 
23. Definition 
Article 1 of the Law on Foundations of 
1994 defines foundations as 
organizations constituted on a non-profit 
basis which, at the wish of their 
founders, have their assets assigned 
permanently to an object for the public 
good. 
24. Nationality requirements 
Non-nationals may set up a foundation 
in Spain. 
In addition, like Spanish foundations, 
foreign foundations can also engage in 
activities in Spain which relate to their 
object and can enjoy the concessions 
granted to Spanish foundations, 
provided they are represented on 
Spanish territory and are entered in the 
register of foundations. 
Registration may be refused if their 
object is not for the public good or if 
they are not legally constituted in 
accordance with their national legislation 
(Article 5 of the above law). 
25. Acquisition of legal personality 
Foundations assume a legal personality 
once they are entered in the register of 
the charter. Registration may be refused 
if this act is not in conformity with the 
above law. 
26. Legal capacity 
The assets of the foundation may consist 
of any kind of goods and assets which 
can be valued in financial terms. The 
foundation must be the owner of these 
and an inventory of them must appear in 
the register. 
The assets are managed and disposed of 
by the body which manages the 27. 
28. foundation, in accordance with the 
statutes. Notwithstanding, Article 19 of 
the above law sets limits to the disposal 
of the goods of the foundation and 
makes several transactions subject to the 
prior authorization of government 
authority. 
In addition, foundations may not have 
shares in trading companies in which 
they are liable to be responsible 
themselves for the company's debts. 
They may, however, hold shares in joint 
stock companies. 
Disposal of assets on liquidation 
Goods and assets resulting from 
liquidation of the foundation must be 
assigned to private non-profit bodies and 
foundations pursuing objects for the 
public good which are specified in the 
charter or in the statutes of the 
foundation. In the absence of such 
stipulations, the governing body or 
government authorities will decide which 
of these organizations will assume these 
rights. 
Nevertheless, by derogation to these 
provisions, the act establishing the 
foundation or its statutes may provide 
that these goods must be assigned to 
other public bodies pursuing objects for 
the public good (Article 31 of the above 
law). 
TAXATION 
Foundations legally entered in the 
register which fulfil the conditions laid 
down in Article 42 of the above law 
enjoy the same tax concessions as 
associations (cf. 15-20). To do so, they 
must be accredited by the Ministry of 
Finance and must expressly apply for 
them. 
ACCOUNTS AND AUDITING 
29. Accounts 
49 
The management of the foundation must 
draw up an inventory, a balancé sheet 
and accounts, and a report on the 
activities of the foundation and its 
financial management every year. It must 
also obtain a discharge for the budget of 
receipts and expenditure for the previous 
year. All these documents must be sent 
to the government authorities. 
In addition, under certain circumstances, 
an external audit is compulsory. 
Lastly, within the three months 
preceding the end of each financial year 
the management must also draw up and 
forward to the government authorities 
the budget for the forthcoming year 
(Article 23 of the above law). 
30. Auditing 
Supervision by a higher authority is 
intended to assist the foundation in 
exercising its right to exist and to ensure 
that its constitution and operation are 
legal. This supervision is carried out by a 
government body in the case of 
foundations which fall within the 
competence of the government. 
This government body is responsible for 
auditing the accounts. It can request the 
legal authorities to intervene temporarily 
in the foundation and can assume the 
responsibilities of the governing body 
during the period laid down by the 
judge. 
50 
FRANCE 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right to association guaranteed by law? 
Yes - (by the preamble to the 
Constitution of 1958 containing the 
principles laid down in the Declaration 
of the Rights of Man and of the Citizen 
of 1789) and by the Constitutional 
Council (Decision of 16 July 1971, 
French Journal Officiel, 18 July 1971). 
2. Definition 
An association is the convention 
whereby two or more persons have in 
common, on a permanent basis, their 
knowledge or activities for a purpose 
other than sharing profits (Article 1 of 
the law of 1901). 
3. Minimum number of founders 
Two 
4. Types of associations 
Non-recognized or de facto associations 
Recognized associations 
Associations recognized as a public 
utility (no legal definition, this 
recognition is a discretionary act by the 
State). 
5. Membership nationality requirements 
No particular conditions 
6. Legal personality and how acquired 
Non-recognized associations - not 
applicable 
Recognized associations - by declaration 
to the local authorities of the name of 
the association, its objects, its premises 
and the name, profession, domicile and 
nationality of each of the directors, with 
two copies of the statutes. This 
declaration must be published in the 
French Journal Officiel. 
7. Legal capacity 10. 
11 An association declared in this way may 
acquire, possess or administer "only 
such premises as are intended for 
management of the association and 
meetings of its members, and only such 
buildings as are strictly necessary for the 
accompishment of its stated aim" 
(Article 4 of the law of 1901). It may 
receive gifts and legacies only if it has as 
its exclusive purpose the provision of 
assistance and welfare services or 
scientific or medical research, or if it is a 
cultural or family association or an 
association affiliated to a federation 
recognised as a public utility. 
An association which is recognized as a 
public utility has a somewhat wider 
capacity, since the term "strictly" is not 
applied. It may also acquire woodlands 
and land for forestry, and it can receive 
gifts and legacies. If it receives as a gift 
or legacy from a will a building which is 
not necessary for its operation, it must 
sell it and keep the proceeds. The 
charitable works proposed must be 
authorized by the authorities in each 
case and in advance. 
Statutes 
No prescribed form for the statutes, 
which constitute the law of the parties. 
Registration requirements 
None, see point 6 of declaration 
procedure. 
Commercial activities 
Not prohibited, either in the law of 1901 
or in legislation. Profits can be made. 
Disposal of assets on liquidation 
The balance of the assets must not be 
assigned to the members; in accordance 
with the statutes and/or the Annual 
General Meeting, it is generally made 
over to a non-profit organization which 
pursues a similar purpose. 
51 
TAX POSITION 
INDIRECT TAX 
12 Article 13 of the Sixth VAT Directive. 
All the exemptions applicable under 
Article 13 seem to be included in the 
General Tax Code. 
13. Other specific exemptions 
Certain exemptions from the registration 
taxes. 
14. Zero rates 
None 
DIRECT TAXES 
15. General position 
When they are exempt from VAT and 
are non-profit, associations are not liable 
to corporate taxes, such as corporation 
tax, apprenticeship tax and trading tax. 
When they are not liable to the taxes 
levied on businesses at the ordinary rate 
,they are liable to tax on their assets. 
All associations are liable to local taxes, 
i.e. accommodation tax (except for 
unfurnished premises and those open to 
the public) and property tax payable by 
all owners of premises (except low-cost 
accommodation). 
When they are exempt from VAT they 
are liable to a payroll tax. If they have 
more than 10 employees, they are liable 
to the contribution paid by employers for 
ongoing vocational training and the 
employers' contribution to the buiiding 
effort 
They are liable to tax on income from 
their assets. 
16. Recognition of associations 
If an association wishes to engage in 
certain specific activities, it must obtain 
official approval, e.g for tourism and 
leisure activities, certain "authorized" 
activities in the field of health, social 
work or medical/social work, activities 
recognized as being of the nature of public services, i.e. engaging in hunting 
or fishing, organizing officiai sporting 
competitions etc. 
Associations recognized as public 
utilities 
Application for recognition is made to 
the Ministry for the Interior and granted, 
under certain circumstances, by decree 
by the Conseil d'État. This recognition 
imposes certain obligations but gives 
broader entitlement to receive gifts and 
acquire and possess premises. 
17. Criteria for recognition as a public utility 
Must be a recognized association, and 
have operated regularly as such for three 
years, must pursue an object for the 
public good, cover more than the local 
area, have at least 200 members, and 
must adopt model statutes drawn up by 
the Conseil d'État. 
18. Criteria for recognition 
Recognition is conferred by the state, 
which assigns* tasks concerned with 
public services to associations. These 
associations receive various types of aid, 
which are subject to administrative 
constraints and rigorous monitoring. For 
instance, the "ordonnance" of 8 August 
1985 gives sporting federations the 
monopoly for organizing competitions. 
19. Gifts by individuals 
Private gifts are tax-deductible at the 
rate of 1.25% of taxable income for 
recognized associations, and 5% for 
foundations and associations recognized 
as public utilities. These gifts give 
eligibility to a reduction in tax equal to 
40% of the value of the gift (50% when 
they are for free meals or 
accommodation for people in difficult 
circumstances). Only gifts which are 
made to a French association or a 
foreign association operating in France 
are tax-deductible. 
20. Gifts by companies 
52 
Gifts from companies are tax-deductible 
at the rate of 37% or 42% of the taxable 
profit up to 2%o of turnover for gifts to 
recognized associations, and 3%o for 
gifts to recognized public utility 
associations and to foundations. 
Only gifts which are made to a French 
association or a foreign association 
operating in France are tax-deductible. 
ACCOUNTS AND AUDITING 
21. Accounts 
Only associations recognized as public 
utilities, associations subsidized by local 
authorities and associations engaged in 
commercial activities above certain 
thresholds (concerning their budget, 
balance or number of employees) have a 
legal obligation to provide accounts in a 
standardized form. 
FOUNDATIONS 
LEGAL FRAMEWORK 
22. Constitution 
Public utility foundation. The draft must 
be submitted to the Minister for the 
Interior and then to the Conseil d'État, 
which in granting recognition as a public 
utility authorizes the foundation to 
receive its working capital. The statutes 
must be drawn up in accordance with the 
model statutes issued by the Conseil 
d'État, which lay down the composition 
of the administrative committee. This 
usually follows the principle of thirds, 
one third of its members being 
nominated by the founders, one third 
being members ex officio representing 
the public authorities, and one third 
being nominated by the "conseil 
d'administration" - management 
committee. 
Sheltered foundation: set up within a 
public utility foundation without creating 
a new legal entity (rare). 
Business foundation (Law of 4 July 
1990). There is no need for these to be recognized as public utilities. They are 
established for a given period - generally 
5 years renewable - and their action 
programme is approved by the 
administrative authorities. 
23. Basic definition 
Irrevocable assignation of goods, rights 
and resources to work for an object for 
the public good which is non-profit. 
24. Nationality requirements 
By definition, one-third of the 
administrative committee is composed of 
eligible persons representing the 
government authorities and designated 
persons. To engage in activities 
permanently in France or to have the 
same capacities as a French foundation, 
a foreign foundation must be recognized 
as a public utility. 
25. Acquisition of legal personality 
This is acquired once the decree of 
recognition as a public utility has been 
approved by the Conseil d'État and 
published in the French Official Journal. 
26. Legal capacity 
Same conditions for accepting gifts as 
for an association recognized as a public 
utility, but a wider entitlement to possess 
assets including premises. 
27. Disposal of assets on liquidation 
As for associations recognized as public 
utilities (cf. 11), but the administrative 
authority's agreement must be obtained. 
TAXATION 
28. As for associations 
ACCOUNTS AND AUDITING 
Auditing and the obligation to produce 
accounts are the same as for associations 
recognized as public utilities. 
53 
IRELAND 
ASSOCIATIONS 
LEGAL POSITION 
Right of association guaranteed by law? 
The general right to form associations is 
guaranteed by Article 40.6 of the Irish 
Constitution. The more specific right to 
form associations for non-governmental 
organisations is set out in the Companies 
Acts and in the Industrial and Provident 
Societies legislation. 
Basic definition 
There is no specific definition of 
"associations" or similar term in Irish 
law. The specific form which an 
association takes on is determined by the 
type of legal structure which it opts for. 
This is discussed further below. 
Types of association 
There are three main types of structure 
relevant to non-governmental 
organisations: 
(a) Unincorporated bodies. Such bodies 
may have a written Constitution. This 
would set out the aims and objectives of 
the organisation and possibly details of 
the membership and Management 
Committee. In legal terms, the 
Constitution is a contract or binding 
agreement between the members of the 
group to abide by the terms of the 
agreement, i.e. to try to achieve the aim 
set out in the Constitution to carry out 
their activities in accordance with the 
Constitution, etc.. However, while the 
Constitution is legally binding as 
between the members of the group, it 
has no effect in relation to non members. 
Thus the group does not have a legal 
personality of its own. 
(b) A company limited by guarantee. 
This is a variation on the standard form 
of legal personality for business firms in 
Ireland. In this type of company there 
are no shares in the company and the members simply guarantee to pay a 
certain (usually nominal) amount 
towards the debts of the company if it is 
wound up. 
(c) Industrial and provident society. This 
type of structure is frequently used by 
co-operatives. In practice, many of the 
rules in relation to the industrial and 
provident society are quite similar to the 
company limited , by guarantee. 
However, there is one important 
difference in that whereas a group can 
become a limited company for any legal 
purpose, in order to be registered as an 
IPS, a society must be formed "for 
carrying on any industries, businesses or 
trades". 
There are also various other types of 
structure which may be of relevance to 
non-governmental associations including 
Trusts, Friendly Societies, etc.. 
However, the above three are the main 
types of structure which would be used 
in Ireland. 
Minimum number of founders 
Both the company limited by guarantee 
and the industrial and provident society 
must have at least seven members. There 
is no legal minimum to form 
unincorporated bodies. 
Membership nationality requirements 
There are no specific nationality 
requirements in relation to any of the 
main three types of legal structure. 
Legal personality and how acquired 
The unincorporated body has no 
separate legal personality. Both the 
company limited by guarantee and the 
industrial provident society do have 
separate legal personalities. This is 
acquired by submitting the Constitution 
of the body in the required form to the 
relevant government organisation which 
is authorised to certify the particular 
body. The Constitution can then be 
inspected by members of the general 
public. 
54 
7. Legal capacity 
The legal capacity of the body is set out 
in its Constitution. In the case of the 
company limited by guarantee, this is 
known as the Memorandum and 
Articles. In the case of the industrial and 
provident society, this is known as the 
Rules. There are no specific limitations 
on legal capacity in relation to non­
governmental associations other than 
those generally laid down by law in 
relation to legal structures generally. 
8. Statutes in proscribed form? 
In the case of the company limited by 
guarantee, the statutes must be drawn up 
in a form acceptable to the Companies 
Office which is the relevant registration 
body. Sample memorandum and Articles 
are published in the Companies Acts, 
and these or some variation on these 
would generally be utilised by such 
companies. In the case of the industrial 
and provident society, again the Rules 
must be acceptable by the Registrar of 
Friendly Societies, who is the relevant 
registration body. There is no official 
form of prescribed rules but the 
Registrar has approved rules drawn up 
by various non-governmental 
organisations, and these or some 
variation on them are generally utilised. 
9. Registration requirements 
As set out above, both bodies must be 
registered with the relevant registration 
authority. Other than this, there is no 
specific registration requirement. 
10. Commercial activity 
There is no specific limitation on the 
ability of these types of body to carry on 
commercial activity. However, where a 
body wishes to obtain exemption from 
certain taxes from the Revenue 
Commissioners on the basis of its 
charitable activities, it must be "the 
subject of a binding trust for charitable 
purposes only", i.e. the Constitution or 
Rules of the group must contain a binding clause which guarantees that any 
money received by the group will be 
used only for charitable purposes. In 
addition, it is unlikely that a Constitution 
which contained elements of a 
commercial nature would be considered 
to be charitable by the Revenue 
Commissioners. 
11. Disposal of assets on liquidation 
The Companies Acts and the Industrial 
and Provident Societies legislation do 
not contain any general restrictions in 
relation to disposal of assets on 
liquidation. Again, where a company 
wishes to be recognised as charitable by 
the revenue Commissioners, the 
Commissioners will normally insist that 
on being wound up, any assets will be 
transferred to another body of a 
charitable nature. 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of the 6th VAT Directive 
Article 13 has been implemented in 
Ireland. 
13. Specific exemptions 
Specific exemptions of relevance to 
NGOs (including those required by the 
6th VAT Directive) include: 
(a) school or university education and 
vocational training or re-training; 
(b) hospital and medical care or 
treatment provided by a hospital, nursing 
home, clinic or similar establishment; 
(c) services for the protection or care of 
children and young persons; 
(d) supply of goods and services closely 
related to welfare and social security by 
non-profit organisations; 
(e) supply of services and goods for the 
benefit of their members by non profit 
making organisations whose aims are 
primarily of a political, trade union, 
religious, patriotic, philosophical, 
philanthropic or civic nature. 
55 
14. Zero rates 
Items which are zero-rated include 
medical equipment and appliances, i.e. 
invalid carriages and other vehicles, 
orthopaedic appliances, etc., walking 
frames and crutches and similar items. 
DIRECT TAX 
15. General position 
The Companies Acts and the Industrial 
provident Societies legislation do not 
contain any general exemption from 
taxation in relation to non-governmental 
organisations. 
16. Recognised associations 
It is possible for either a company 
limited by guarantee or, more 
exceptionally, an industrial and 
provident society, to seek exemption 
from various taxes from the revenue 
Commissioners on the basis of its 
charitable status. In order to qualify as 
charitable, the objects and powers of the 
company or society must be so framed 
that every object to which its income or 
property can be applied is charitable and, 
as set out above, its main objects and the 
application of its income or property 
must be bound by a binding trust. This 
means that it must be obliged by law to 
advance only its stated main objects and 
to apply its income and property to these 
objects exclusively. 
17. Qualifying criteria for recognition 
In order to qualify as a charity, the 
object of the company must fall under 
one of the following headings: 
(a) advancement of education; 
(b) advancement of religion; 
(c) relief of poverty, or 
(d) other works of a charitable nature 
beneficial to the community. 
In addition to satisfying the above, the 
company must keep annual audited 
accounts and make these available to the 
Revenue Commissioners on request; it 18. 
19. must prohibit the payment of fees and/or 
salaries (other than out-of-pocket 
expenses) to officers and directors for 
services rendered; it must also satisfy the 
other criteria discussed, including those 
in relation to the winding up of the 
organisation. 
The taxes from which an organisation 
may be exempt include income tax, 
corporation tax (in the case of 
companies), capital gains tax, deposit 
interest retention tax, capital acquisition 
tax and stamp duty on a transfer or lease 
of land. 
There is no exemption in relation to 
value added tax, and employees of a 
charity are liable to income tax under the 
PAYE system and Pay Related Social 
Insurance. 
Gifts by individuals and companies 
In some circumstances, gifts by 
individuals and companies may be 
subject to tax relief. One of the main 
reliefs of relevance to the non­
commercial sector is that gifts of 
between £100 and £10,000 to certain 
educational establishments may be 
entitled to relief. 
ACCOUNTABILITY 
SUPERVISION AND 
There is no specific supervision of 
unincorporated bodies. Companies are 
subject to reporting and accounting 
requirements to the Companies office. 
Annual returns and accounts must be 
submitted and records must be kept 
concerning changes in members, 
management, etc.. Broadly similar 
reporting requirements are imposed on 
industrial and provident societies 
(reporting to the Registrar of Friendly 
Societies). In extreme cases, 
investigators can be appointed to 
investigate the operation of these bodies. 
Bodies which regularly fail to make 
returns will be struck off. Generally, 
56 
however, the accountability and 
supervision requirements are not very 
stringent. In the case of charities, the 
revenue Commissioners have a 
supervisory function but again, in 
practice, this is not very onerous. 
FOUNDATIONS 
There is no specific legislation on 
"foundations" in Ireland. A body which 
is recognised by the Revenue 
Commissioners as having charitable 
status may apply to the Commissioners 
of Charitable Donations and Bequests to 
be incorporated under the Charities 
Acts, 1973. However, there are only 
about 25 such bodies in Ireland. 
57 
ITALY 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Articles 2 and 18 of the Constitution. 
Articles 14 to 22 of the Civil Code. Law 
of 27 February 1985, Law No 266 of 11 
August 1991 on voluntary organizations. 
2. Definition 
The law does not give a definition. In 
common practice it is any stable 
organization of a number of persons 
pursuing a common interest, other than 
profit. 
3. Minimum number of founders 
No 
4. Types of association 
Recognized associations 
Non-recognized associations 
Committees 
5. Membership nationality requirements 
No restrictions 
6. Legal personality 
Only for recognized associations, 
following the decree of recognition by 
the government authorities. A condition 
for such recognition is to have sufficient 
assets to pursue the statutory objects. 
The faculty of recognizing legal persons 
may be assigned to the President of the 
Italian Council of Ministers, the Region 
or the Prefects, depending on the 
territorial coverage of their activities. 
There are certain constraints on 
non-recognized associations (cf. 7). 
7. Legal capacity 
Private legal persons may not acquire 
fixed assets or accept gifts or 
inheritances, or even legacies without 
government authorization. Authorization 
is considered to be the condition for the 10. 
11 acquisition to produce its effects. The 
constraints on non-recognized 
associations consist of restricted 
autonomy on assets, in that persons who 
have acted in the name and on behalf of 
the association are also responsible for 
the debts of the association Law No 52 
of 27 February 1985 now allows 
non-recognized associations to acquire 
fixed assets. Non-recognized association 
and committees may take legal action. 
Voluntary organizations which are 
entered in the register, even if they have 
the form of non-recognized associations, 
may acquire the goods necessary for 
their activities and receive gifts and 
legacies. 
Statutes 
The Memorandum of Association must 
be in the form of a public act for 
recognition to be granted. There are 
certain minimum requirements. 
Registration requirements 
No obligation, but if the association is 
not registered, the administrators are 
jointly and severally responsible, with 
the legal person, for its debts (Article 33 
of the Civil Code). 
Commercial activities. 
Associations may engage in commercial 
activities. Such activity should not be 
aimed at making a monetary profit, but 
exclusively at obtaining their purposes. 
If, on the other hand, the commercial 
activities are autonomous in relation to 
the purpose of the association, the 
association may be considered as a de 
facto company, with important taxation 
and social consequences. Article 24 of 
the Civil Code provides that members 
have no right to profit-sharing. 
Disposal of assets on liquidation 
The remaining assets are disposed of in 
accordance with the provisions of the 
Memorandum of Association or the 
58 
statutes. In the absence of specific 
provisions, the decisions of the Annual 
General Meeting which has decided on 
the winding up are implemented. In the 
absence of such decisions, the 
government authorities decide. 
TAXATION 
INDIRECT TAXATION 
12. Article 13 of the Sixth VAT Directive 
Yes. 
13. Other specific exemptions 
Goods and services provided by 
voluntary organizations are exempt from 
VAT. Exemption from registration tax 
and taxes relating to the Memorandum 
of Association and all acts relating to the 
activities of voluntary organisations. 
Exemption from the taxes on gifts, 
transfers, land registry and INVTM (tax 
on the increased value of fixed assets) 
for the associations which receive the 
gifts. This also applies to legacies and 
inheritances. 
14. Zero rates 
No 
DIRECT TAXES 
15. General position 
Recognized and non-recognized 
associations are liable to tax on the 
income of legal persons (IRPEG), which 
is proportional to the sum of the income 
received as land revenue, revenue of a 
land-income nature, income from capital 
or income arising from engaging in a 
commercial activity, whether occasional 
or not. Amounts paid by members as 
contributions or associations' 
subscriptions are not included in the 
taxable amount. 
16. Recognition of associations for tax 
purposes 
The IRPEG is reduced by 50% for 
historical, literary, scientific, experimental and research societies 
pursuing essentially cultural objects. 
Profits from marginal trading and 
production activities earned by voluntary 
organizations are not taxable, provided 
they are used for the institutional 
purposes of the organization. 
17. Criteria for recognition 
Must have legal personality in the first 
case and be a voluntary organization 
within the meaning of Law No 266/91. 
18. Criteria for obtaining tax concessions 
For voluntary organizations, exemption 
must be laid down by the criteria 
established by an inter-ministerial decree 
(involving the Ministry of Social Affairs 
and the Ministry of Finance), which is 
being drafted. 
19. Gifts by individuals 
Gifts for the public good, humanitarian, 
religious or political objects may be 
deducted up to a limit of 2%. 
This limit may Be exceeded when the gift 
is going to organizations for promoting 
study, research, dissemination of 
information, the acquisition, 
maintenance or restoration of part of the 
cultural heritage or to institutions which 
organize fairs and exhibitions with a 
particular cultural or scientific interest 
with the authorization of the Ministry of 
Culture. 
Gifts for the central institute for the 
support of the clergy of the Italian 
Catholic Church, and those for helping 
people in developing countries, may be 
deducted up to a ceiling of 
LIT 2 million. 
Gifts to voluntary organizations which 
are entered in the register are no longer 
tax-deductible. The only deduction 
possible at present is that concerning, on 
the one hand, an organization subject to 
corporation tax or, on the other hand, a 
voluntary organisation with legal 
personality. Entry in the regional register 
59 
of voluntary organizations is therefore 
no longer sufficient. 
20. Gifts by companies 
As in the case of private persons, gifts 
for purposes concerning the public good, 
or humanitarian, religious, or political 
purposes, can be deducted up to a 
ceiling of 2%. 
20(a). Gifts to non-resident associations 
For associations with their head office in 
Italy, the system is the same, provided 
that they are entered in a regional 
register on Italian territory. 
ACCOUNTS AND AUDITING 
21. The administrative authority has the 
power to audit and monitor. 
FOUNDATIONS 
22. Constitution 
Act of foundation (unilateral act 
inter-vivos in the form of a public act or 
will). 
23. Definition 
Private legal person with assets assigned 
to an object. 
24. Nationality requirements 
No. 
25. Acquisition of legal personality 
By government authorization in the form 
of a decree of the President of the Italian 
Council of Ministers 
26. Legal capacity 
As for recognized associations 
27. Disposal of assets on liquidation 
If nothing is laid down in the statutes, 
the government authorities assign the 
assets to other bodies with similar 
objects. 
TAXATION 
Historical, literary, scientific, 
experimental and research foundations 
with exclusively cultural objects within 
the meaning of Article 6 of Presidential 29. 
30. Decree No 601/73 enjoy a reduction of 
50% on taxable income on legal persons. 
Imports of godds for foundations with 
the object of giving assistance or 
carrying out charitable works, education, 
training, study and research are exempt 
from VAT. 
In addition, as a general principle, 
foundations which are not engaged in 
commercial agricultural activities or 
trade activities are not liable to VAT 
within the meaning of Article 4 of 
Presidential Decree No 633/72. 
ACCOUNTS AND MONITORING 
Accounts 
No 
Monitoring 
The government authorities have powers 
to monitor foundations, which consist 
essentially of the power to amend the 
objects of the foundation when these 
have been attained, or have become 
impossible or meaningless. They have 
the power to coordinate the foundations 
and may group foundations together 
when their assets have become 
insufficient. 
60 
LUXEMBOURG 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Yes, under Article 26 of the Constitution 
of 17 October 1868 as amended, the 
Law of 21 April 1928 on non-profit 
associations and foundations, and the 
Law of 11 May 1936 guaranteeing 
freedom of association. 
2. Basic definition 
Article 1 of the Law of 21 April 1928 
defines a non-profit association as one 
which does not engage in industrial or 
trading activities, and which does not 
seek to obtain material gain for its 
members. 
3. Minimum number of founders. 
Three 
4. Types of association 
Non-profit associations (ASBL) 
De facto associations 
5. Membership nationality requirements 
No restrictions. 
6. Legal personality and how acquired 
Acquired on the date when the statutes 
are published. 
7. Legal capacity 
An ASBL may possess, as its own 
property or otherwise, only the premises 
necessary for attaining its statutory 
purposes. There is no limitation on 
furniture. 
Gifts exceeding LUF 500 000 must 
always be authorized by Grand-Ducal 
Decree. 
8. Statutes 
Written act duly authenticated or under 
private seal. 
9. Registration requirements 
The Memorandum of Association must 
be registered. The statutes and the full names, trades/professions and addresses 
of the administrators and the head office 
must be deposited with the register of 
trade and businesses. Any amendments 
must also so be lodged. An alphabetical 
list of members must be deposited with 
the chancellery of the court for the place 
in which the association has its offices in 
the month when the statutes are 
published. They must be updated 
annually. 
10. Commercial activities 
Profit-making activities are not 
prohibited but they must nevertheless be 
occasional and ancillary to the main 
activity. 
11. Disposal of assets on liquidation 
If the statutes contain no provisions, the 
decision is taken by the Annual General 
Meeting. If the meeting cannot make a 
decision, the receivers decide on a 
method of disposal which is as close as 
possible to the social purpose. 
TAXATION 
INDIRECT TAXATION 
12. Article 13 of Sixth VAT Directive 
1-3 Yes 
Other specific exemptions 
Operations with an educational purpose 
organized by public or private 
establishments, operations carried out by 
youth hostels, the organizers of sporting 
or scientific, cultural, educational, 
economic or professional events when 
the income is intended mainly to cover 
organizational costs, theatrical 
representations, conferences, medical 
and paramedical services, provided that 
these exemptions do not distort 
competition. 
14. Zero rates 
No 
DIRECT TAXES 
15. General position 
61 
In accordance with Article 159 of the 
Luxembourg Fiscal Code, ASBLs are 
liable to tax on corporate bodies (ERC). 
Any person liable to the IRC tax is also 
liable to a wealth tax. Article 25 of the 
law of 29 December 1971 lays down the 
rights of registration and the rights of 
succession and transfer on death. For 
gifts inter vivos and legacies, the rate is 
6%. 
16. Recognition of associations for tax 
purposes 
Article 161 of the Fiscal Code provides 
for an exemption from IRC for 
organizations pursuing directly and 
solely charitable or cultural purposes or 
purposes for the public good. However, 
they are still liable to tax if they engage 
in industrial or commercial activities. 
Only disinterested activities of ASBLs 
are exempt from tax and not any 
ancillary or occasional profit-making 
activities. 
17. Criteria for recognition 
Non-profit associations pursuing 
charitable or religious purposes, or 
purposes for the public good (public 
health, youth and sport, sciences, arts, 
culture) may be recognized as being for 
the public good. 
18. Qualifying purposes for recognition 
Application must be made to the 
Ministry of Justice. Purposes must be 
non-profit, and recognized as being for 
the public good in conformity with the 
statutes. A Grand-Ducal "Arrêté", 
adopted with the assent of the Conseil 
d'Etat, confers the status. Tax 
concessions are then awarded on the 
basis of tax law. 
19. Gifts by individuals 
Gifts totalling over Flux 5 000 per 
annum are tax-deductible up to a ceiling 
of 10% of total income or 
Flux 10 000 000. Any gifts must be to 
recognized organizations for the public good and other bodies recognized as 
such in law. 
20. Gifts by companies 
The same rules apply to companies in 
Luxembourg 
20(a). Gifts to non-resident associations 
These are not tax-deductible 
ACCOUNTS AND AUDITING 
21. Accounts 
The annual accounts must be lodged 
with the registry of the civil court on the 
establishment of the association, or at 
least the accounts for the past ten 
financial years, to obtain authorization to 
accept gifts. 
FOUNDATIONS 
22. Constitution 
Assignment of assets by authenticated 
document or by will, with approval by 
Grand Ducal "Arrêté". 
23. Definition 
Foundations are circumscribed by law, 
since the only establishments recognized 
as foundations are those which are 
engaged in philanthropic, religious, 
scientific, artistic, educational, social, 
tourism or sporting activities, using 
revenue arising mainly from capital 
acquired either at the time when they 
were founded or subsequently, to the 
exclusion of the pursuit of material gain. 
24. Nationality requirements 
None 
25. Acquisition of legal personality 
Simultaneously with approval of the 
statutes by the Grand Ducal arrêté. 
26. Legal capacity 
As for associations 
27. Disposal of assets on liquidation 
As provided for in the statutes, failing 
which the Ministry of Justice assigns 
them to a purpose as close as possible to 
62 
that for which the institution was 
established. 
TAXATION 
28. As for associations 
ACCOUNTS AND MONITORING 
29. Accounts 
Every year, within two months of the 
end of the financial year, the accounts 
and budget must be forwarded to the 
Ministry of Justice. These documents are 
published in the "Mémorial". 
30. Monitoring 
Article 40 of the law of 1928 provides 
that the Minister for Justice shall ensure 
that the assets of a foundation are 
allocated to the purpose for which the 
institution was established. 
63 
NETHERLANDS 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Yes - the right of association is 
recognized for any person resident 
within the territory of the Netherlands 
(Articles 1 and 8 of the Constitution). 
2. Basic definition 
In accordance with Article 2.26 of the 
BW (Burgerlijk Wetboek - Civil Code), 
an association is a legal person 
composed of members and constituted 
for a precise purpose other than that laid 
down for cooperatives and mutual 
societies13. It is constituted by a 
multilateral legal act. It cannot share 
profits among its members. 
3. Minimum number of founders. 
Two 
4. Types of association 
Associations under private seal 
Associations by notarized act 
Stateless associations (international 
associations not under any specific legal 
jurisdiction, not provided for in law but 
recognized by the law) 
5. Membership nationality requirements 
No conditions 
6. Legal personality and how acquired 
Full: associations whose statutes appear 
in a notarized act (incorporation of the 
statutes in a notarized act can also be 
done during the life of the association). 
Such an association must be entered in 
the register of associations; 
Limited: associations whose statutes are 
not incorporated in a notarized act. Entry of such an association in the 
register of associations has the effect of 
limiting the responsibility of the 
directors, which will be invoked only if 
the other party claims that the 
association has not met its obligations. 
Foreign associations: the Netherlands 
follows the principle of incorporation. 
This means that an association 
constituted abroad is recognized within 
the Netherlands, and that the foreign law 
applicable (which determines whether 
legal personality can be granted) governs 
the association under Netherlands law. 
7. Legal capacity 
Associations whose statutes are 
incorporated in a notarized act have full 
legal capacity, they may contract debts, 
receive legacies and acquire fixed assets 
without restrictions. Associations whose 
statutes are not incorporated in a 
notarized act '(with limited personality) 
cannot acquire registered goods or 
receive legacies. 
8. Statutes 
No obligatory form, except for statutes 
incorporated in a notarized act, for 
which the content is laid down. 
9. Registration requirements 
None, except for associations 
constituted by notarized act or 
recognized in a notarized act. The act 
must be entered in the register held for 
this purpose by the Chamber of 
Commerce and Industry in the area of 
the head office. 
10. Commercial activities 
An association may engage in 
commercial activities, but the profits 
must not be distributed to the members. 
The purpose of an association cannot be 
to make profits and distribute them to 
the members. 
11. Disposal of assets on liquidation 
These are types of associations in Dutch law. 
64 
The statutes of an association 
constituted by notarized act must specify 
how the assets are to be disposed of on 
liquidation or the procedure for 
determining such disposal (BW - Civil 
Code-and Article 2: 27 (f). Once 
creditors have been paid, the balance of 
the assets is assigned to all parties who 
are entitled to them under the statutes, 
pro-rata to their rights, otherwise to the 
members. If no-one has a claim to the 
remaining assets they pass to the state, 
which will assign them in accordance 
with the object of the legal person as far 
as possible BW, Article 23b (1). 
TAXATION 
INDIRECT TAXATION 
12. Article 13 of Sixth VAT Directive 
All exemptions concerning associations 
apply. 
13. Other specific exemptions 
There are several exemptions for goods 
and services supplied by associations, 
and special exemptions for the provision 
of services and related goods by 
associations to their members, provided 
that the exemptions do not produce 
restrictions on competition and that the 
organization does not attempt to 
distribute the profits to the members. 
14. Zero rates 
No. 
DIRECT TAXES 
15. General position 
Income tax. In general, associations are 
subject to the common law regarding 
taxes. There is no special tax for 
associations (legal persons). An 
association may be subject to 
corporation tax (Vpb) if it is carrying on 
a business which brings it into 
competition with businesses liable to 
corporation tax, in respect of the profit 
which it obtains from this activity. Tax on fixed assets: Associations with a 
real title to fixed assets or the users of 
such assets must pay a local tax. 
16. Recognition of associations for tax 
purposes 
No exact definition. Article 24(4) of the 
law on estate duty provides for tax 
exemptions for recognized organizations 
which exist for the public good. 
An association for the public good is 
completely exempt from corporation tax 
if the profits in any one year are less than 
HF1 13 000 or if the profit for the past 
four years is less than HF165 000, 
provided that there is no profit motive, 
or that the profit motive is secondary 
and the profits are used solely for the 
public good (Article 5 of the law on 
corporation tax and "arrêté" of 20 
August 1971). Charitable institutions, 
libraries, retirement funds, institutions 
for the preservation and management of 
land for nature preservation purposes 
and certain other institutions on specific 
land. 
Tax on income from fixed assets: 
Associations not liable to corporation 
tax may apply for reimbursement of the 
fixed assets deduction, which is 
deducted at source on dividends or 
interest. 
There are provisions for exemptions 
{inter alia on buildings used for religious 
purposes) from property taxes. 
17. Criteria for recognition 
The relevant legislation does not give a 
definition of the public good. The law on 
estate duty specifies that a precise order 
in respect of a legacy or a gift precludes 
their being for the public good. 
According to the law, the public good is 
the opposite of the good of an individual 
or of a restricted group. 
18. Criteria for obtaining approval or 
empowerment 
Recognition by the registration and 
estate duty inspectorate. 
65 
19. Gifts by individuals 
Gifts made to approved Dutch 
associations are tax-deductible at a rate 
of between 1% and 10% of taxable 
income on sums exceeding HFL 120 per 
annum and per donor. Gifts made under 
contracts in authenticated form for at 
least five years are tax-deductible in full 
in all cases where they are for the benefit 
of a Dutch association composed of at 
least 25 members (in which case public 
good is not a criterion), provided that 
such gifts are in the form of an annuity, 
that the association has full legal 
capacity and that it is not liable for 
corporation tax. 
20. Gifts by companies 
Gifts made to associations or 
foundations registered in the 
Netherlands which have an academic, 
religious, charitable, cultural object or 
one for the public good (including 
political parties) are tax-deductible when 
they exceed a total of HFL 500 up to a 
maximum of 6% of taxable income. 
20(a). Gifts to non-resident associations 
The same regulations apply to 
associations registered abroad, which are 
specifically mentioned by the Minister 
for Finance. 
ACCOUNTS AND AUDITING 
21. Accounts 
Within six months of the end of the 
financial year, the administrative council 
forwards to the Annual General Meeting 
an annual report on the situation and 
management of the association. It 
submits the balance and the profit-and-
loss account, together with comments, 
to the meeting for approval. These 
documents are signed by the directors 
and other officials. 
Auditing 
Internal: The statutes may provide that 
the association will have a college of 
commissaires. In the absence of such a college, and of an accountant within the 
meaning of Article 2.393 (1) attesting 
the veracity of the documents, every 
year the Annual General Meeting shall 
appoint a commission of at least two 
members who cannot be members of the 
administrative council. 
External: by declaration of a qualified 
accountant attesting the reliability of the 
documents. There is no obligation to 
publish accounts. 
FOUNDA TIONS (STICHTING) 
22. Constitution 
By authenticated act containing the 
statutes. These statutes must be entered 
in the special foundations register of the 
Chamber of Trade and Industry in the 
area of the head office. 
23. Definition 
A legal person created by a legal act 
which has no members and which has 
the aim of pursuing the object laid down 
in the statutes using the goods assigned 
to this object. 
24. Nationality requirements 
The head office must be in the 
Netherlands, although foundations may 
have offices abroad. 
25. Acquisition of legal personality 
By notarized act. 
26. Legal capacity 
Foundations have full legal capacity 
27. Disposal of assets on liquidation 
According to the procedures laid down 
in the statutes. If there are no claimants 
to the remaining assets, they revert to 
the state, which will allocate them in 
accordance with the object of the legal 
person as far as possible. 
28. Taxation 
As for associations 
ACCOUNTS AND AUDITING 
29. Accounts 
66 
In accordance with BW 2 10 (2), the 
directors of the foundation are obliged 
to draw up a balance sheet and a profit-
and-loss account for the legal person 
within the six months following the end 
of the financial year, and to keep them 
for ten years. 
30. Monitoring 
Internal: In accordance with the statutes. 
External: The government authorities 
may ask the directors for information. If 
cooperation is not forthcoming, the 
President of the Court can order the 
documents to be shown to the 
government authorities. At the request 
of the government authorities, or any 
other person concerned, the Court can 
order the directors to be suspended or 
dismissed and can appoint alternate 
directors. 
67 
5. AUSTRIA 
ASSOCIATIONS 
LEGAL FRAMEWORK 
Right of Asociation guaranteed by law? 
Yes, under Article 12 of the basic 
national law (Staatsgrundgesetz 
StGG): Austrian citizens have the right 
to form associations. "Legal" 
associations are more specifically 
governed by the 1951 Law on 
Associations. 
Basic definition 
No legal definition. The following 
definition is based on legal practice and 
case law. An association is (1) 
voluntary, (2) intended to be permanent 
(3) a structured association of several 
persons (4) intended for attaining a 
given permissible purpose for the public 
good (5) through continuous communal 
activity. 
Minimum number of founders 
One founder (a person who declares 
himself willing to form an association) is 
sufficient. Subsequently, the association 
must have at least three members (cf. 
also 6). 
Types of association 
Austrian legislation distinguishes 
between "ideelle Vereine" (non-profit 
associations), which are governed by the 
1951 Law on Associations, and 
associations set up with profit in mind 
(Associations Charter of 1852). 
Membership nationality requirements 
Non-nationals, even when not resident in 
Austria, are entitled to become members 
of an association in Austria. 
Legal personality and how acquired 
Every association founded in accordance 
with the 1951 Law on Associations has a 
legal personality. The notice of intention to create an association must be 
submitted to the competent authorities 
and be accompanied by a draft of the 
statutes. If no prohibition against 
forming an association is issued within 
six weeks, or if the authorities declare 
that they do not prohibit its formation, 
the association may begin to function. At 
least three members must decide at an 
initial general meeting to form an 
association on the basis of statutes which 
have not been rejected by the authorities. 
The association acquires its legal 
personality by virtue of this decision. It 
acquires its legal capacity by electing 
representatives as laid down in the 
statutes. 
7. Legal capacity 
Full legal personality after it has been 
constituted. L. 
8. Statutes 
The statutes, as provided for under the 
law of 1951," must state that the 
association is registered in accordance 
with Article 12 of the law of 1951. 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of 6th VAT Directive 
Vereine enjoy the same exemptions in 
Austria as listed in Article 13 of the 6th 
VAT directive. 
13. Other specific exemptions 
There are no specific exemptions 
covering a wider scope than defined in 
Article 13. 
14. Zero Rates 
Zero rates do not exist in Austria. 
DIRECT TAX 
15. General position 
Also subject to Corporation Tax 
(Korperschaftssteuer) are "nichtrechts-
fàhige Personenvereinigungen, Anstalten, 
68 
Stiftungen" and àndere 
Zweckvermôgen ". 
16. Exempted from taxation 
Non-profit organizations for the general 
public, for the public welfare, churches 
(§§ 34 - 47 Bundesabgabenordnung), 
small insurance associations (60.000 
ATS), associations in the field of 
agricultural activities for the purpose of 
using common equipment (Weidw und 
Maschinengenossenschaften), etc., 
private foundations, unions which are 
legal professional representatives, 
financing associations for small and 
medium-sized enterprises. 
17. Qualifying criteria 
The most important criterion for 
recognition is the object defined in the 
statutes of the association, such as 
charity, non-profit, public welfare, other 
specific purposes. 
18. Qualifying objects 
Religious communities recognized by 
public law, "pensions - und 
Unterstutzungskassen" under specific 
conditions (§ 6 KSTG). 
The exemptions do not apply to limited 
taxable persons. 
19. Gifts by Individuals 
Gifts by individuals to religious 
institutions (up to 1.000 - ATS p.a.), 
high schools, associations in the field of 
research and development can be 
deducted from income tax. The amount 
of deductable gifts is limited to 10% of 
the total incomes the year before. 
FOUNDATIONS Gesetz (law on foundations) or general 
national legislation: with permanent 
assets for pursuing objects for charitable 
purposes or the public good. 2) Private 
foundation, with legal personality, which 
has been provided with funds by the 
founder to be used, managed and applied 
to pursue a permissible object 
determined by the founder. 
24. Nationality requirements 
None 
25. Acquisition of legal personality 
Type 1 foundations (cf. 23 above): these 
have legal personality, which is acquired 
when the appropriate authorities decide 
that the foundation can be authorized. 
Type 2 foundations: these have legal 
personality, acquired on entry in the 
"Firmenbuch" (register of companies). 
26. Legal capacity 
Both forms of foundation have legal 
personality, i.e. they can complete legal 
formalities and be a party to legal 
proceedings. 
27. Disposal of assets on liquidation 
Type 1: to be stated in the winding-up 
notice of the authorities concerned with 
foundations. 
Type 2: assets pass to the ultimate 
beneficiaries named in the 
"Stiftungserklàrung" (declaration). If this 
is revoked, they pass to the founder or 
to the Republic of Austria 
LEGAL POSITION 
22. Constitution 
Free to create 
23. Basic definition 
There are two different forms of 
foundation. 1) Foundation in accordance 
with the Bundes-Stiftungs-und-Fonds 
69 
PORTUGAL 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Article 46 of the 1976 Constitution, 
Civil Code, Articles 158 to 166 and 167 
to 184, and Decree-Law 594/74 of 7 
November 1974. 
2. Basic definition 
The law does not give a definition. In 
accordance with general practice, a 
group of individuals who pool certain 
goods or services for an object which 
excludes making a personal profit. 
3. Minimum number of founders 
No minimum. 
4. Types of association 
Private associations under the general 
scheme 
Private associations under a special 
scheme (e.g. cooperatives and social 
solidarity organizations) 
Associations without legal personality 
(non-recognized associations and special 
committees) 
5. Membership nationality requirements 
Unless the statutes provide otherwise, 
non-nationals can be members of an 
association 
6. Legal personality and how acquired 
Standard recognition, granted on 
condition that the act of establishing the 
foundation is authenticated by a notary 
and that its content is in conformity with 
Article 167-1 of the Civil Code. 
Publication of extracts of the act of 
establishing the foundation and the 
statutes in the Portuguese Official 
Journal makes the association 
recognizable in law by a third party. 
7. Legal capacity Associations have legal capacity subject 
to the ultra vires rule. In accordance 
with this rule, associations are 
recognized as having not only the rights 
and obligations which are necessary but 
also those which are appropriate for 
attaining their object. Only rights and 
obligations inherent to a human person 
are excluded. 
8. Statutes 
Yes. As for the Memorandum of 
Association, i.e. the notarized act. There 
is an obligatory basic minimum. 
9. Registration requirements 
For associations under the general 
scheme, registration has the sole 
function of publicity, and has no 
constitutive function. 
10. Commercial activities 
Associations may have a financial object, 
not excluding financial advantages for 
the associates,-provided that these are 
not in the form of a profit as such. 
11. Disposal of assets on liquidation 
In the case of goods bequeathed or 
donated with instructions or intended for 
a certain purpose, they must be assigned 
to another legal person, with the same 
instructions or object. In the case of 
other goods, Article 162-2 of the Civil 
Code authorizes members in accordance 
with the statutes or by decision of the 
general meeting to decide on their 
assignment. 
TAXATION 
INDIRECT TAXATION 
12. Article 13 of Sixth VAT Directive 
Yes. 
13. Other specific exemptions 
Medical or paramedical care, educational 
establishments, artistic activities, 
insurance and social assistance services 
14. Zero rates 
70 
Foodstuffs, newspapers, reviews and 
cultural books, pharmaceutical products 
and the like, passenger transport, 
medical services, entertainments. 
DIRECT TAXES 
15. General position 
Income tax for legal persons - ERC -
(20% of taxable income) which is 
payable on total income less certain 
expenses. Subscriptions paid by 
members and subsidies to finance the 
attainment of the association's objects 
are not considered as income. 
Tax on assets. 
16. Recognition of associations for tax 
purposes 
Legal persons of an administrative public 
utility (religious communities, voluntary 
firemen's associations etc.) are exempt 
from IRC, as well as ordinary public 
utilities pursuing exclusively scientific or 
cultural objects, or performing charitable 
or social work; specific institutions for 
social solidarity (IPSS) and persons 
legally similar to these. 
17. Criteria for recognition 
In the first two cases, the organizations 
must cooperate with the government 
authorities, at national, regional or local 
level. IPSSs and similar bodies must be 
registered with the regional social 
security department. Nevertheless, the 
decision is at the discretion of the 
authorities. The extent of the exemption 
may vary depending on the objects. 
18. Qualifying objects for recognition 
Exemptions are granted by the Ministry 
of Finance at the request of applicants by 
means of a decision (despacho) 
published in the "Diâro da Republica 
19. Gifts from individuals 
Natural persons may deduct gifts to the 
organization specified in Article 56 of 
the law on the 1RS up to a value equal to 
15% of their net taxable income. This also applies to legal persons with 
non-profit objects belonging to, or 
established by, religious denominations, 
teaching or educational associations, 
scientific research or culture, literary, 
artistic etc. 
20. Gifts by companies 
Legal persons may deduct gifts given as 
cultural sponsoring or to organizations 
such as teaching or educational, 
scientific research or cultural, literary or 
artistic associations from their taxable 
profits up to a total value equal to 0.2% 
of turnover, and 50% of any sum in 
excess of that. 
20(a). Gifts to non-resident associations 
ACCOUNTS AND AUDITING 
21. Accounts 
The conseil de surveillance - supervisory 
council - is the body responsible for 
monitoring the activities of the 
administrative body. It ensures that the 
accounts of the association are properly 
kept. 
The accounts of associations which 
enjoy tax concessions must always be 
available to the tax authorities. 
FOUNDATIONS 
22. Constitution 
By an act inter vivos or a will. The 
notarized form of the act is required, 
except in the case of a non-public will. 
The charter establishing the foundation 
must state the object of the foundation 
and specify the goods allocated to it. 
The statutes must always be in 
authenticated form. 
23. Definition 
There is no legal definition. In 
accordance with general practice, the 
foundation is an organization pursuing a 
permanent object to which assets have 
been assigned. 
24. Nationality requirements 
71 
No, but the head office must be in 
Portugal. 
25. Acquisition of legal personality 
Foundations acquire legal personality by 
individual recognition, which is the 
responsibility of the administrative 
authority. 
26. Legal capacity 
As for associations 
27. Disposal of assets in the event of winding 
up 
The assets of wound-up foundations are 
disposed of according to the common 
system for associations and foundations 
TAXATION 
28. As for associations 
ACCOUNTS AND AUDITING 
29. Accounts 
30. Auditing 
Foundations remain under the permanent 
supervision of the competent authority 
for recognition. Foundations must have 
a tax council. They may be wound up by 
the authority which recognized them 
once their object has been attained or 
has become impossible to attain, in the 
event of illicit use of resources, if public 
order is endangered or if the object 
being pursued no longer corresponds to 
that laid down in the statutes. 
72 
FINLAND 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Yes. Article 10a of the Constitution Act 
as amended in 1995 and Article 1 of the 
Associations Act of 1989. 
2. Basic definition 
A contract by which several people act 
together for the common realisation of a 
non-profit purpose. (The association is a 
permanent body in the sense that it is not 
momentary 
3. Minimum number of founders 
Three 
4. Types of association 
A. Registered associations: 
- non profit associations 
- economic associations (for example co­
operative societies established before the 
entry into force of the Act on co­
operative societies of 1954) 
- associations subject to permission 
(provided by the Associations Act) 
- associations organised by a legal 
act/statute (for example the Finnish 
Advocates Associations) 
B. Non-registered associations which do 
not have legal capacity 
5. Membership nationality requirements 
Associations Act: none 
Exceptions: if the primary purpose of the 
association is to exercise influence over 
State affairs, it may have as members 
only Finnish citizens, foreigners residing 
in Finland and associations whose 
members are Finnish citizens or 
foreigners residing in Finland or 
associations who have member 
associations made up of Finnish citizens 
or foreigners residing in Finland. Members of the Board: The chairman 
and at least half of the members of the 
board must be resident in Finland if the 
Ministry of Trade and Industry has not 
granted an exception. 
6. Legal personality and how acquired 
Yes. According to the Associations Act, 
legal personality is acquired by 
registration. Only registered associations 
can have legal personality. The members 
of a registered association shall not be 
personally liable for the commitments of 
the association. 
7. Legal capacity 
A registered association has full legal 
capacity as a legal person. A registered 
association may obtain rights, make 
commitments and appear before a court 
or another authority as a party. Non-
registered associations do not have legal 
capacity 
8. Statutes 
Yes. 
9. Registration requirements 
Registration is not compulsory as such. 
If registration is wanted, requirements of 
registration are provided in the 
Associations Act. 
A notification of formation shall be 
recorded in a Memorandum of 
Association which shall include the rules 
of the association and the name and 
domicile of the chairman of the board 
and the persons who have the right to 
sign for the association. The notification 
of formation shall be signed by the 
chairman of the board 
10. Commercial activities 
A non-profit association may only 
practise a trade or other economic 
activity that has been provided in the 
association's rules or that otherwise 
relates to the realisation of its purpose or 
that is to be deemed economically 
insignificant. 
73 
For economic associations there are no 
general statutes (see types of association 
n. 4) 
11. Disposal of assets on liquidation 
After liquidation, the remaining assets 
should be used as required in the rules of 
the association. In the absence of such a 
rule the liquidators must put the 
remaining assets at the State's disposal 
to be used to promote the same or 
similar objects as the liquidated 
association 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of Sixth VAT Directive 
Corporations for the public good 
(charitable organisations, sport 
associations etc.) are liable to tax it their 
income is deemed to be income from 
business activities according to the 
Income Tax Act. This means that in 
practice all exemptions of relevance to 
associations coming under Article 13 
have been implemented 
13. Other specific exemptions 
None 
14. Zero rates 
Printing services for membership 
publications of associations for the 
public good are subject to zero rate 
DIRECT TAX 
15. General position 
Generally subject to company tax (28% 
of taxable income) on all their income; 
liable to real estate tax on taxable value 
of land and buildings 
16. Recognition of associations for tax 
purposes 
According to the Income Tax Act, non­
profit associations (associations for the 
public good) are liable to company tax 
only on their income for business 
activities, and communal tax (12,04% of taxable income) on their income from 
real property used for other than non­
profit purposes. 
The National Board of Taxation may 
grant exemption from tax on income 
from business or real property if the 
operation of associations is socially 
significant 
17. Criteria for recognition 
Associations operate exclusively and 
directly for the public good in a material, 
spiritual or social sense; their activities 
do not concern only a limited group of 
persons; members must not get 
economic benefits (shares of profit etc.) 
from the operation 
18. Qualifying objects for recognition 
Dividends, interests and capital gains are 
not subject to income tax unless the 
property belongs to a business activity. 
Business income does not contain, inter 
alia: 
- sales proceeds, and other proceeds from 
occasions arranged for financing the 
operation of associations; proceeds from 
membership bulletins and other 
publications directly serving the 
operation of associations 
19. Gifts by individuals 
Gifts given to non-profit associations are 
not taxable income. Gifts are not 
deductible in income taxation of 
individuals 
20 .Gifts by companies 
Gifts given to non-profit associations are 
not taxable income. In company 
taxation, gifts are, within certain limits 
(FIM 5000-150.000), deductible if given 
for scientific or artistic purposes to 
associations nominated by The National 
Board of Taxation 
20(a). Gifts to non-resident associations 
ACCOUNTS AND AUDITING 
21. Accounts 
74 
FOUNDATIONS TAX POSITION 
22. Constitution 28. 
According to the Act on Foundations, as 
amended in 1995, the establishment of a 
foundation is subject to a permission 
granted by the National Board of Patents 
and Registration. 29. 
23. Basic definition 
A foundation is established with a deed 
of foundation which must include the 
purpose of the foundation and its 30. 
property. 
A foundation is governed by an 
independent administration, the board of 
which shall be set out in the by-laws of 
the foundation 
24. Nationality requirements 
The members of the board of trustees 
and the persons authorised to sign the 
name of the foundation must be resident 
in a member state of the EEA 
Agreement. However, at least one of 
those persons must be resident in 
Finland, if the Ministry of Trade and 
Industry has not granted an exception to 
this requirement. 
25. Acquisition of legal personality 
Legal personality is acquired by 
registration. Registration of a foundation 
is compulsory. 
26. Legal capacity 
Full legal capacity as a legal person; 
after a foundation has been registered, it 
can acquire rights and undertake 
obligations as well as sue and be sued in 
its own name 
27. Disposal of assets on liquidation 
If the foundation, after its debts have 
been paid, has assets and if the by-laws 
do not provide for their use, they shall 
pass to the State, which shall without 
delay transfer the assets to be used to 
further a purpose related to that of the 
foundation See references above to the tax position 
for associations 
ACCOUNTS AND AUDITING 
Accounts 
Foundation must have a minimum of 
two auditors and two deputy auditors to 
audit their accounts and administration 
Auditing 
The Ministry of justice ensures that the 
administration of the foundation 
complies with the law and the by-laws of 
the foundation 
75 
SWEDEN 
ASSOCIATIONS 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
Yes. Chapter 2, Articles 2 and 20 in the 
Constitution of 1974 
2. Basic definition 
An association (ïdeell fbrening") is a 
legal person in which several persons act 
together for a certain purpose. The 
association may not have any economic 
aims or at least no commercially 
organised activity 
3. Minimum number of founders 
Not regulated 
4. Types of association 
Ideell fbrening which is not regulated by 
statutory law 
5. Membership nationality requirements 
No special requirements 
6. Legal personality and how acquired 
The association is considered to have a 
legal personality if there are statutes and 
a board 
7. Legal capacity 
The association is able to acquire rights 
and obligations, to sue etc., without any 
special restrictions 
8. Statutes 
No, but the statutes have to be as 
complete as necessary for the aim of the 
association 
9. Registration requirements 
There are no general requirements. An 
association with an economic activity 
sometimes has to be registered in the 
Trade Register 
10. Commercial activities 
In principle not allowed. The association 
may, however, carry on some business activity as long as it is not commercially 
organised 
11. Disposal of assets on liquidation 
The assets are divided in accordance 
with the statutes. If the statutes do not 
regulate this matter, the assets may be 
divided among the members 
TAX POSITION 
INDIRECT TAX 
12-14 General position 
Associations with charitable purposes 
are generally not subject to indirect tax. 
Other associations are subject to indirect 
tax on the same conditions as other legal 
persons. 
DIRECT TAX 
15. General position 
Normally not subject to income tax or to 
the net wealth tax. Non-profit 
associations pay no income tax for 
business with a natural connection to the 
non-profit activity. Income from other 
business activities are taxable. 
19. Gifts by individuals 
Gifts over 10 000 SEK are normally 
subject to gift tax. With the exception of 
religious communities and associations 
serving educational, medical, national 
defence, research, social work or 
charitable purposes, the gift is not 
deductible for the donor. 
20. Gifts by companies 
The same as 19. 
ACCOUNTS AND AUDITING 
21. Accounts 
No special supervision for associations. 
FOUNDATIONS 
22. Constitution 
All physical and legal persons can create 
a foundation. 
76 
23. Basic definition 
A property which according to the 
dispositions of the founder (gift or will), 
is singled out to be permanently 
managed for a certain purpose. 
24. Nationality requirements 
None. 
25. Acquisition of legal personality 
A foundation has legal personality as 
soon as it has been created, i.e. when the 
property has been transferred to the 
separate management. 
26. Legal capacity 
27. Disposal of assets on liquidation 
In principle, a foundation cannot be 
liquidated as long as it has assets. 
However, in special cases the assets may 
be used for a purpose which is very 
close to the original purpose. A special 
permit of a governmental authority is 
required for such a procedure. 
TAX POSITION 
28. 
Foundations serving national defence, 
educational, medical, social work, 
research or charitable purposes are only 
taxable for business income. 
Foundations with a non-profit purpose 
are not subject to gift tax. Gifts are not 
deductible for the giver. 
Foundations are subject to indirect tax 
on the same conditions as other legal 
persons. 
ACCOUNTS AND AUDITING 
29. Accounts 
30. Auditing 
Foundations are generally supervised by 
a local government authority. 
77 
UNITED KINGDOM 
ASSOCIATIONS (Voluntary 
Organisations) 
LEGAL FRAMEWORK 
1. Right of association guaranteed by law? 
There is no written right to associations 
although there exists freedom of 
association. There is a freedom to create 
trusts although in some cases trusts with 
non-charitable objects may be void. 
2. Basic definition 
There is no single generally accepted 
legal definition of an association. In its 
widest sense, an association is one 
formed by two or more people who of 
their own volition join together in a 
common purpose which is not in pursuit 
of financial gain. 
3. Minimum number of founders 
In practice two. 
4. Types of association 
Unincorporated associations 
Trust 
Company limited by guarantee 
Industrial and Provident society 
Incorporated by Royal Charter 
Incorporated by Act of Parliament. 
5. Membership nationality requirements 
No requirements for associations as 
such. In the case of a charity in England 
and Wales, the Charity commission will 
only register if within jurisdiction. This is 
normally construed to mean that in the 
case of an unincorporated charity a 
majority of the trustees should be 
resident in England and Wales, in the 
case of a company registration within the 
jurisdiction is sufficient. 
6. Legal personality and how acquired Company limited by guarantee-obtained 
by registration with register of 
Companies. 
Industrial & provident Society-obtained 
by registration with Registrar of Friendly 
Societies. 
Incorporated by Royal Charter-obtained 
through Royal Charter., 
Incorporated by Act of 
Parliament-obtained through Act of 
Parliament. 
Unincorporated associations-No. 
Trust no; however, the body of trustees 
can obtain legal personality through 
Certificate of incorporation issued by 
Charity Commission. 
7. Legal capacity 
There are no restrictions in statute; 
however, in some areas capacity will be 
derived from the objects and powers 
included in the governing document. 
8. Statutes 
No. 
9. Registration requirements 
Registration with the Charity 
Commission for charities in England and 
Wales. For other associations, 
registration will depend on the legal 
structure. Registration with the Registrar 
of Friendly Societies for Industrial and 
Provident Societies, registration with the 
Registrar of Companies for companies 
limited by guarantee. 
10. Commercial activities 
There is a restriction on the commercial 
activities of charities. They can engage 
in primary-purpose trading but not in 
permanent trading as a means of fund-
raising. Charities that wish to trade to 
any substantial degree must set up a 
separate trading subsidiary which can 
then covenant its profits back to the 
parent charity and the tax can be 
recovered. 
78 
11. Disposal of assets on liquidation 
In associations, this will be in 
accordance with the governing 
document. 
In the case of charities, to other charities 
with similar purposes. If the governing 
document does not include provisions 
dealing with this, the Charity 
Commission may give directions by 
Order or Scheme. 
TAX POSITION 
INDIRECT TAX 
12. Article 13 of Sixth VAT Directive 
to 
or 
for Not all exemptions of relevance 
charities have been implemented. 
13. Other specific exemptions 
(a) The supply of education 
vocational training otherwise than 
profit. 
(b) The provision of nursing and 
medical care in an approved institution. 
(c) The provision of welfare services 
otherwise than for profit. 
(d) Fund-raising events. 
14. Zero rates 
These include sales of donated goods, 
supply of advertising for fund-raising or 
educational purposes, certain aids for 
disabled people, vehicles and ambulances 
for disabled people, certain medicines 
and medical equipment supplied to 
charities. Construction of new residential 
property and buildings used for a certain 
charitable purposes are zero rated. 
DIRECT TAX 
15. General position 
No specific exemptions for associations 
as such. 
16. Recognition of associations for tax 
purposes 
Charities are exempt from most forms of 
direct taxation including income tax, corporation tax, capital gains tax, 
inheritance tax. 
17. Criteria for recognition 
To qualify for the exemption, the income 
or gains must be applied to charitable 
purposes only and trading income other 
than primary-purpose trading will often 
be subject to corporation tax. 
18. Qualifying objects for recognition 
19. Gifts by individuals 
When an individual or corporation 
executes a deed of covenant promising 
to pay a particular sum to a charity for a 
period to exceed three years, a sum 
representing tax at the basic rate must be 
deducted and the Inland revenue refunds 
to the charity the basic rate of income or 
corporation tax on that sum. 
Additionally, if the individual is a higher-
rate tax payer, he can receive further tax 
relief trough the adjustment of his tax 
code. A company can claim a deduction 
from its profit for the gross amount, and 
obtains tax relief at its marginal rate. 
Similarly, since 1990 individuals have 
been able to make one-off payments 
under Gift Aid. Currently the minimum 
donation is £250 in monetary form 
20. Gifts by companies 
20(a). Gifts to non-resident associations 
ACCOUNTS AND AUDITING 
21. Accounts 
79 
Financial Statement 
1. TITLE OF OPERATION 
Communication from the Commission on Promoting the Role of Voluntary 
Organisations and Foundations in Europe. 
2. BUDGET HEADING INVOLVED: B5-3202 
3. LEGAL BASIS 
Council Decision of 9 December 1996 on a Third Multi-Annual Programme for Small 
and Medium sized Enterprises in the European Union 1997 - 2000. 
4. DESCRIPTION OF OPERATION 
Expenses incurred in connection with meetings of experts and information campaigns 
with a view to defining future approaches on the role of associations in the European 
Union. 
4.1 Period covered and arrangements for renewal 
The meetings of experts and information campaigns will be for the period of 1997 only. 
5. CLASSIFICATION OF EXPENDITURE OR REVENUE 
5.1 NCE 
5.2 DA 
<Pz) 
A small proportion (meetings of experts and information ) is 100% financed. 
The other subsidies for cofmancing with other resources in the public and/or private 
sectors will be adjusted in accordance with Community interests. 
Conventional subsidies for colloquia, seminars and round tables are allocated at 
particular percentage rates, depending on the needs of the organizers and the importance 
of the event as regards the économie sociale sector 
7. FINANCIAL IMPACT 
There will be a series of meetings and conferences in 1997. Total costs 100.000 ECU 
8. FRAUD PREVENTION MEASURES; RESULTS OF MEASURES TAKEN 
Bearing in mind contractual obligations and the principles of economy and sound 
financial management, all agreements and contracts between the Commission and the 
recipients of payments include anti-fraud provisions (monitoring, reports to be submitted, 
etc.) for checking subsidies and acceptance of services and studies ordered by the 
Commission before payment. 
9. ELEMENTS OF COST-EFFECTIVENESS ANALYSIS FOR THE 
COMMUNICATION ON VOLUNTARY ORGANISATIONS AND 
FOUNDATIONS 
9.1 Specific and quantified objectives; target population: 
The establishment of a co-ordinated policy for networks of European voluntary 
organisations and foundations. 
An information network on the économie sociale (European citizens' advice 
bureaus) has been set up by the European Committee of Workers Cooperative 
Productive Societies, the Euro-Citizen Action Service, the Comité Européen des 
Associations d'Intérêt Général and the European Foundation Centre in order to 
meet the need for enterprises in the économie sociale sector to interact with the 
fl 
Community's business community via the European Euro-Info Centres network 
(the network for networking); 
9.2 Justification: 
It is necesssary to discuss with the Member State governments and voluntary 
organisations (associations) and foundations how best to implement the policy 
recommendations set out in the document. 
9.3 Monitoring and evaluation of the operation 
The voluntary organisations and foundations sector is highly diversified. 
This situation calls for great attention at the preparatory stage of the proposed 
actions so as to strike the right balance between perceived requirements and 
resources employed. 
When the actions are launched, the indicators will be proposed in accordance 
with the specific features of the action on the basis of a standard fact sheet to be drawn up 
by the departments. This fact sheet must take account of the eligibility criteria for the 
various funds and sources of finance. 
Assessment of the results obtained 
The scheduled actions are of prime importance, since they must enable 
associations and foundations to take advantage of the benefits of the 
frontier-free Single Market while complying with competition rules and without 
sacrificing their identity as partnerships. The results will be assessed, for 
example, on the basis of the objectives for each action in the light of the 
European aspects identified on the ground, and of the difficulties encountered 
by économie sociale businesses, because of their involvement in local 
developments, in using the Structural Funds correctly and to the full. 
10 ADMINISTRATIVE EXPENDITURE (SECTION III, PART A OF THE BUDGET) 
s-z 
Actual mobilization of the necessary administrative 
resources will depend on the Commission's annual 
decision on the allocation of resources, taking into 
account the number of staff and additional amounts 
authorized by the budgetary authority. 
10.1 Effect on the number of posts 
Type of p ost 
Official 
s or 
temporar 
y staff A 
B 
C 
Other 
resources 
Total Staff to be 
assigned to 
managing the 
operation 
Permane 
nt 
posts 
1 
1 x A 
1 Temporar 
y posts Source 
Existing 
resource 
s in the 
DG or 
departme 
nt 
concerne 
d 
1 
1 Additio 
nal 
resourc 
es 
no Duratio 
n 
12 
months 
The cost of a staff member 
100.000 ECU. ;A1 to A5 level) is estimated at 
n 
10.2 Overall financial impact of additional human 
resources 
ECU 
Amount Method of calculation" 
s 
Officials 
Temporary staff 
Other resources (indicate none 
budget heading) 
Total none 
10.3 Increase in other administrative expenditure 
as a result of the operation 
ECU 
Budget heading Amount Method of calculation 
s 
Total none within existing budget 
W 
ISSN 0254-1475 
COM(97) 241 final 
DOCUMENTS 
EN 05 06 10 16 
Catalogue number : CB-CO-97-282-EN-C 
ISBN 92-78-21231-8 
Office for Official Publications of the European Communities 
L-2985 Luxembourg