COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT
Date: 2012-02-08
Institutions: European Commission
Subjects: administrative formalities, approximation of laws, cross-border cooperation, foundation, freedom to provide services, institution of public utility, principle of legal certainty, single market, tax system, technical barriers to trade

EUROPEAN COMMISSION 

Brussels, 8.2.2012  
SWD(2012) 1 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Council Regulation on the Statute for a European Foundation (FE) 

{COM(2012) 35 final} 
{SWD(2012) 2 final} 

 
 
 
 
  
 
COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Council Regulation on the Statute for a European Foundation (FE) 

This document is a European Commission staff working document for information purposes. 
It  does  not  represent  an  official  position  of  the  Commission  on  this  issue,  nor  does  it 
anticipate such a position.  

TABLE OF CONTENT 

1. 

1.1. 

1.2. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

5. 

5.1. 

5.2. 

Procedural issues and consultation of interested parties .............................................. 1 

Procedural issues.......................................................................................................... 1 

External expertise and consultation of interested parties............................................. 1 

Policy context, problem definition and subsidiarity .................................................... 1 

Scope ............................................................................................................................ 1 

Data on foundations ..................................................................................................... 1 

Background and context............................................................................................... 1 

Problem definition........................................................................................................ 1 

Baseline scenario: expected development if no action is taken ................................... 1 

The EU's right to act..................................................................................................... 1 

Objectives..................................................................................................................... 1 

Policy options and analysis of impacts ........................................................................ 1 

Baseline scenario.......................................................................................................... 1 

Launching an information campaign and a voluntary quality charter ......................... 1 

Statute for a "European Foundation" ........................................................................... 1 

Harmonisation of Member States' laws on foundations and the tax treatment of 
foundations and donors ................................................................................................ 1 

Comparing the options and summary of the impacts................................................... 1 

Comparing the policy options on the basis of objectives (taking into account the 
political acceptability of each option) .......................................................................... 1 

Comparing policy options on the basis of impacts on stakeholders (including 
administrative burden) ................................................................................................. 1 

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5.3. 

5.4. 

6.  

Comparison tables........................................................................................................ 1 

Conclusion.................................................................................................................... 1 

Monitoring and evaluation ........................................................................................... 1 

Annex 1: Number of foundations............................................................................................... 1 

Annex 2: Description of national civil and tax laws for foundations in Member States ........... 1 

2.1. Civil law .............................................................................................................................. 1 

2.2 Tax law................................................................................................................................. 1 

Annex 3: Description, analysis and comparison of sub-options, and instruments, for the 

Statute for a European Foundation............................................................................... 1 

3.1. Description, analysis and comparison of sub-options for the Statute ................................. 1 

3.2. Instruments to be used for the Statute ................................................................................. 1 

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Introduction  

Foundations  play  an  important  role  in  the  EU,  particularly  in  civil  society.  Through  their 
various  activities  in  numerous  areas,  they  make  a  major  contribution  to  the  fundamental 
values  and  objectives  of  the  Union,  such  as  respect  for  human  rights,  the  protection  of 
minorities, employment and social progress, protection and improvement of the environment 
or  the  promotion  of  scientific  and  technological  advances.  Their  contribution  to  society's 
public benefit is significant. In this context, they make a substantial contribution to achieving 
the  ambitious  goals  of  smart,  sustainable  and  inclusive  growth  set  by  the  Europe  2020 
strategy1.  They  also  enhance  and  facilitate  a  more  active  involvement  of  citizens  and  civil 
society in the European project.   

Foundations  have  traditionally  been  active  at  national,  regional  or  local  level,  and  the  rules 
and  procedures  to  which  they  are  subjected  are  deeply  rooted  in  the  national  environment. 
Studies  and  consultations  carried  out  by  the  Commission2  show  that  in  recent  years, 
foundations  have  become  more  active  on  a  cross-border  basis  in  the  EU.  Yet  the  variety  of 
national  rules  makes  these  cross-border  operations  costly  and  cumbersome,  and  the  cross-
border channelling of funds to public benefit purposes through foundations is largely under- 
exploited.    
The Single Market Act Communication3 adopted in April 2011 highlighted the need to put an 
end  to  market  fragmentation  and  to  eliminate  barriers  and  obstacles  to  the  movement  of 
services, innovation and creativity in order to deliver growth and employment, and promote 
competitiveness. It stressed the importance of strengthening citizens' confidence in the single 
market  and  of  ensuring  that  its  benefits  are  passed  on  to  citizens.  In  the  context  of 
foundations'  contribution  to  the  social  economy  and  to  financing  innovative  initiatives  of 
public benefit, the Single Market Act called for action to remove obstacles that foundations 
face  in  operating  on  a  cross-border  basis.  The  same  call  was  made  in  the  EU  Citizenship 
report 2010 "Dismantling the obstacles to EU citizens' rights"4, which stressed the importance 
of enhancing the European dimension of the activities of public benefit purpose foundations 
with a view to promoting citizen action at EU level. 

The  Commission  also  underlined  the  importance  of  developing  European  legal  forms  for 
entities in the social economy sector (e.g. foundations, cooperatives or mutuals) in its "Social 
Business Initiative" Communication of 25 October 20115. The Social Business Initiative aims 
to  support  the  development  of  businesses  that  primarily  focus  on  creating  social  impact 
through their activities and its actions also address and benefit those social economy entities 
(including  foundations)  that  meet  the  general  criteria  for  a  "social  business"  in  the 
Communication.  

This  impact  assessment  report  analyses  different  options  for  overcoming  problems 
foundations face when operating in the single market, including the option of the Statute for a 
European Foundation.   

1  
2  

3  
4 
5  

COM (2010)2020. 
An  external  feasibility  study  published  in  2008  and  a  public  consultation  carried  out  in  2009.  See 
section 1.2.  
COM(2011)206.  
COM 603 (2010). 
Add reference when available 

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Procedural issues 

The  formal  work  on  the  Impact  Assessment  (IA)  started  in  autumn  2010,  led  by  the 
Directorate General for Internal Market and Services.6 Data gathering and preparatory work 
had already started in 2008. An Impact Assessment Steering Group (IASG) was set up with 
the participation of the following DGs and Services: Secretariat General, Legal Service, DG 
ECFIN,  DG  ENTR,  DG  COMP,  DG  EMPL,  DG  ENV,  DG  RTD,  DG  TAXUD,  DG  EAC, 
DG  SANCO,  DG  JUST,  DG  HOME,  DG  TRADE  and  DG  DEVCO.  The  IASG  met  four 
times (9 December 2010, 3 March, 15 April and 5 May 2011). Comments provided by DGs 
have  been  taken  into  account  to  a  very  large  extent.  Minutes  of  the  last  meeting  have  been 
submitted to the Impact Assessment Board7 (IAB) of the Commission. 

The draft IA report was discussed with the IAB on 6 July 2011. This updated report reflects 
the IAB's recommendations in the following way: 

- more explanation about the gap between current and required practices was added in section 
2.4, e.g. by clarifying the nature of the "comparability test" and types of costs involved; 

- a description of legal issues and their pracatical implication was further clarified in section 
2.3.1; 

- references to potential indirect impacts of the preferred policy option, and a more detailed 
explanation  of  risk  mitigation  features  (e.g.  of  the  supervisory  powers  which  the  Statute 
would give to national supervisory authorities), were included in section 4.3; 

-  an  effort  was  made  to  explain  the  estimated  costs  and  benefits  more  clearly  and  carefully 
throughout the report (including the introduction of a new section 2.2 on data); 

-  the  conclusion  to  section  5  was  updated  to  summarise  more  clearly  the  rationale  for  the 
preferred policy option; 

- more references to stakeholders' views were added in section 1.2 and in the analysis of the 
preferred policy option in section 4.3;  

- other comments by the IAB were reflected throughout the report. 

1.2. 

External expertise and consultation of interested parties 

In preparing the Impact Assessment, the Commission relied widely on external expertise and 
engaged  comprehensively  with  different  stakeholders.  It  also  based  itself  on  the  reflection 
carried  out  in  the  context  of  the  2003  Commission  Action  Plan  on  Modernising  Company 
Law and Enhancing Corporate Governance8. 

First,  a  feasibility  study  —  by  a  Consortium  consisting  of  the  Max  Planck  Institute  for 
Comparative  and  International  Private  Law  in  Hamburg  and  the  University  of  Heidelberg 

6  
Agenda Planning reference: 2011/MARKT/027. 
7  
The IAB is an independent internal body of the Commission set up to ensure more consistent and higher 
quality  of  impact  assessments  prepared  by  various  Commission  departments.  The  IAB  works  under  the  direct 
authority of the Commission President. Its members are appointed in their personal capacity and on the basis of 
their expert knowledge. 
8  

COM(2003) 284, 21.5.2003. The 2003 Action Plan listed a feasibility study as a medium term measure; 
foundations supported it during the 2005 public consultation (32.7% replies from foundations). 

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(Centre  for  Social  Investment)9  —  was  carried  out  and  published  in  2008.  Out  of  the  five 
policy  options  which  it  considered  (status  quo,  harmonisation  of  national  laws,  bilateral  or 
multilateral treaties, a Statute for a European Foundation  with or without tax exemptions), the 
study  suggested  that  a  Statute  for  a  European  Foundation  (with  or  without  tax  exemptions) 
would be the preferable policy option to address the problems identified.  

Subsequently,  the  Commission  put  the  recommendations  of  the  feasibility  study  to  a  public 
consultation  between  February  and  May  2009.  Among  the  226  replies,  the  biggest  number 
(around 87%) came from the non-profit sector, i.e. foundations, charities, trusts, associations 
involved in social economy or philanthropy, and their networks and umbrella organisations. 
Other  replies  came  from  business  associations,  public  authorities  and  law  firms.  In  their 
contributions, foundations expressed strong support for the idea of a European Statute. They 
argued  that  it  would  facilitate  their  cross-border  activities  and  make  it  easier  for  donors  to 
channel private funds for public benefit purposes within the EU. Most of them perceived the 
civil  and  tax  law  barriers  identified  in  the  feasibility  study  as  real  problems;  although  there 
were also some respondents who reportedly did not experience significant problems in their 
cross-border activities.  

National  authorities  from  six  Member  States10  and,  to  some  extent,  business  organisations 
were more sceptical as to the need for - and feasibility of - such a legal form. They questioned 
the magnitude and relevance of the cross-border problems identified in the feasibility study11 
and the potential problem-solving capacity of a Statute for a European Foundation12.  

Improvements  to  cross-border  activities  of  foundations  were  also  subject  to  another 
consultation, on the Communication "Towards the Single Market Act" between October 2010 
and  February  201113.  According  to  the  overall  online  results,  the  action  calling  for 
improvement of the legal status of entities in the social economy (including foundations) was 
seen by respondents as the second most important of the proposed Single Market Act actions, 
showing strong support for an initiative in this area14. 

In  addition,  the  Commission  gathered  further  information  about  concrete  problems 
encountered through bilateral discussions with foundations, in particular during the "European 
Foundation  Week"  in  June  2010  and  via  contacts  with  the  European  Foundation  Centre 
(EFC)15.  All  interlocutors  consulted  saw  a  need  for  a  Statute  in  the  light  of  the  concrete 
problems  they  faced  when  trying  to  carry  out  activities  and/or  receive  tax  benefits  in  other 
Member States.  

The Commission also collected information on the relevant national legislation from national 
authorities  through  a  questionnaire  and  subsequent  discussions  within  the  Company  Law 

9  

10  

11  

12  

13  
14  
15  

See  http://ec.europa.eu/internal_market/company/docs/eufoundation/feasibilitystudy_en.pdf,  hereafter 
the "feasibility study". 
Replies were submitted by authorities from: Finland, the United Kingdom, Sweden, Estonia, Germany 
and Denmark. 
E.g.  referring  to  the  fact  that  foundations  were  already  internationally  active,  and  asking  whether  the 
problem of recognition was not limited to some Member States only. 
For  more  details,  see  the  summary  report  of  the  2009  consultation  on  the  following  link: 
http://ec.europa.eu/internal_market/consultations/docs/2009/foundation/summary_report_en.pdf. 
25.5% of responses were submitted by non-governmental organisations (including foundations). 
See SEC(2011) 467, 13.4.2011. 
Established  in  1989,  EFC  is  an  international  association  of  foundations  and  corporate  funders.  See: 
http://www.efc.be. 

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Expert Group (CLEG)16 in 2009, 2010 and 2011. Many Member States expressed reservations 
towards  the  Statute,  stating  they  did  not  see  a  need  for  a  new  legal  form  including  for 
foundations, and calling for a careful analysis and consultation before any new initiative was 
proposed.  Some  stressed  that  they  were  not  aware  of  difficulties  related  to  cross-border 
activities  experienced  by  their  national  foundations;  thought  that  national  systems  were 
already flexible enough; or were concerned about potential circumvention of national rules.  

The idea of a Statute for a European Foundation has received strong support from the other 
EU  institutions.  The  European  Parliament  called  for  an  appropriate  legal  framework  for 
foundations (as well as for mutual societies and associations) - to give them a European status 
and prevent legal uncertainty - in its resolution responding to the Commission's Single Market 
Act; argued in favour of introducing Statutes for these legal entities in its written declaration 
84/2010  of  March  2011;  and  urged  the  Commission  to  work  towards  this  objective  in  its 
previous  resolutions  of  2006  and  200917.  The  European  Economic  and  Social  Committee 
advocated a Statute in its 2010 own initiative opinion18, which set out its reflections on how 
such  a  Statute  should  be  developed,  and  the  Committee  of  the  Regions  supported  the 
Commission's announcement of the initiative on foundations in the Single Market Act19.  

2. 

POLICY CONTEXT, PROBLEM DEFINITION AND SUBSIDIARITY 

2.1. 

Scope 

There  is  no  universal  definition  of  a  "foundation"  or  "public  benefit  purpose  foundation" 
across the EU. Definitions in national laws vary considerably.  

The overall definition of a foundation used for the purpose of this report follows the one put 
forward  in  the  feasibility  study.  The  authors  developed  a  definition  based  on  the  lowest 
common  denominator  of  the  legal  definitions  in  the  Member  States.  Accordingly,  a 
foundation:  

• 

• 

• 

• 

• 

16  

17  

18  
19  
20  

is an independent entity (generally with its own legal personality);  
has no formal membership20;  

is supervised by a State supervisory authority;  

serves a specific purpose;  

has a founder who provided an endowment and determined the foundation's purpose 
and statutes21.  

CLEG  brings  together  company  law  experts  from  national  administrations  and  meets  three  times  per 
year, under chairmanship of DG Internal Market and Services. 
EP resolution of 6 April 2011 on a Single Market for Europeans (2010/2278(INI)); Written declaration 
84/2010,  P7_DCL(2010)0084;  EP  resolution  on  recent  developments  and  prospects  in  relation  to 
company  law  (2006/2051(INI));  and  EP  resolution  of  19  February  2009  on  Social  Economy 
(2008/2250(INI)). 
INT/498 - CESE 634/2010 - April 2010. 
Opinion on the Single Market Act, 31 March−1 April 2011, CdR 330/2010 fin.  
A membership based organisation would be either an association or a corporation. However, according 
to  the  information  provided  by  the  EFC,  in  Italy  there  are  foundations  that  have  a  particular  type  of 
"participatory structure" (i.e. they have members whose rights are regulated by their statutes and they 
are gathered in an assembly and may be elected to sit on the Board of Directors).  

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Moreover, there are a number of different typologies of foundations, including classification 
on the basis of the purpose that they pursue or the type of activities that they perform22.  

For  the  following  reasons,  this  report  focuses  on  public  benefit  purpose  foundations.  First, 
such foundations benefit a broadly defined group of recipients - the public at large (compared 
to the private benefit purpose foundations that focus only on the members of a family or on a 
closed  circle  of  beneficiaries)  –  and  therefore,  focusing  EU  action  on  their  activities  would 
benefit  European  citizens  and  the  EU’s  economy  to  a  larger  extent.  Secondly,  such  scope 
seems to respond well to the needs of the foundation sector; a great majority of foundations in 
the EU have public benefit purpose and most of those follow a purely public benefit purpose. 
Finally, public benefit purpose foundations constitute the most common type of foundations 
and they are present and recognised in all Member States (with only half of the jurisdictions 
in the EU recognising private benefit foundations), making such scope of the iniatitive more 
acceptable. 

2.2. 

Data on foundations 

The  data  in  this  report  stems  from  the  feasibility  study,  which,  in  turn,  was  based  on  the 
available figures on foundations in the EU (including the research carried out by the EFC23) 
and a survey conducted by the contractors for the purpose of the feasibility  study. The  data 
from the study is supplemented in this report by, among others, further information from the 
EFC and anecdotal evidence from individual foundations and national authorities. 

All the figures quoted below are intended to provide an impression – rather than a complete 
picture - of the foundation sector in the EU. This is due to the difficulty with obtaining data 
about European foundations, caused by inconsistent definitions and substantial differences in 
how  foundations  are  defined  in  national  laws  across  the  EU,  and  inconsistent  data24.  In 
addition,  many  surveys  -  including  the  EFC  research  and  the  survey  carried  out  for  the 
feasibility  study  -  suffer  from  low  response  rate25  and  lack  representativeness.  For  those 
reasons,  the  data  quoted  below  should  be  seen  as  an  indicator  and  an  estimate  rather  than 
representative and exact figures. The additional individual examples and cases are also used 
for illustrative purposes only.  

The  estimates  for  the  overall  number,  growth  and  economic  weight  (assets,  expenditures) 
should  be  seen  as  referring  to  public  benefit  purpose  foundations  but  should  be  taken  as 

21  

22  

23  

24  

25  

In this context, it is necessary to keep in mind the specific case of the common law countries (Cyprus, 
Ireland,  Malta  and  the  United  Kingdom)  where  there  is  no  special  legal  form  for  a  "foundation"  and 
where  the  focus  is  mainly  on  the  "charitable"  character  of  the  organisation.  Charitable  organisations 
must have exclusively charitable purposes and must be administered for public benefit. For more details 
see the feasibility study, p. 51. The term "foundation" is traditionally used in these Member States when 
referring to grant-making charities.  
See Annex 2 for more detailed information regarding classification of foundations on the basis of their 
purposes and section 2.3 regarding classification on the basis of activities. 
Report of the European Foundation Centre Research Task Force "Foundations in the European Union: 
Facts 
http://www.efc.be/NewsKnowledge/Documents/EFC-
of  May 
RTF_EU%20Foundations-Facts%20and%20Figures_2008.pdf. 
For  instance,  some  data  sources  focus  on  non-profit  sector  as  such  with  limited  information  about 
foundation  sector.  In  others,  information  is  not  easily  comparable,  e.g.  foundations'  expenditures  can 
refer to grant-making and the related costs or to operational expenditures of running a project. 
The latter consisted of 134 cases of foundations in 24 EU Member States (a response rate of 21%). 

Figures" 

2008; 

and 

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indicative because, among others, the dataset used might have also included small numbers of 
other types of foundations26. 

2.3. 

2.3.1. 

Background and context 

Nature and size of the market concerned27 

Foundations are important actors in the EU economy. Although it is difficult to provide exact 
figures,  the  calculations  carried  out  in  the  feasibility  study  estimate  the  assets  of  the  public 
benefit  purpose  foundations  in  the  EU  to  amount  to  about  €350  billion  and  their  annual 
expenditures  to  €83  billion  (lower  end  estimates)28.  On  the  basis  of  further  research  and 
extrapolations,  the  study  suggests  that  upper  end  estimates  could  be  approximately  €1,000 
billion for assets and €153 billion for expenditures. It is worth mentioning that while the size 
of foundations can vary considerably, assets and expenditures tend to be heavily concentrated 
in a number of large foundations29.   

Overall,  the  foundation  sector  in  Europe  consists  of  approximately  110,000  public  benefit 
purpose foundations30. Their distribution varies significantly: there are fairly high numbers of 
foundations  (over  10,000)  in  Hungary,  Germany,  Romania,  Spain  or  Sweden,  while  fewer 
foundations (below 200) are active in Estonia, Ireland, Latvia or Slovenia31. The number of 
public  benefit  purpose  foundations  has  seen  substantial  growth  in  the  recent  years,  e.g. 
between 28% and 40% of all foundations in Member States such as Germany, Finland, France 
and Belgium were founded in the last decade. Similarly, according to the EFC research32, in 
nine countries (Belgium, Estonia, France, Germany, Italy, Luxembourg, Slovakia, Spain and 
Sweden) around 43% of foundations (over 18,000 in absolute numbers) were set up during the 
last two decades33. 

The  foundation  sector  plays  a  significant  role  in  the  EU  labour  market,  both  directly  –  by 
involving  employees  and  volunteers  in  their  projects  –  but  also  by  indirectly  supporting 
employment  and  volunteer  work  in  the  organisations  and  activities  they  fund.  According  to 
EFC research34, in ten and seven EU countries respectively, some 34,400 foundations directly 
employ about 311,600 employees, and some 31,800 foundations engage 231,600 volunteers – 

26  

27  
28  

29  

30  
31  
32 
33  

34  

First,  the  estimates  in  the  feasibility  study  are  based  on  a  dataset  with  a  majority  of  public  benefit 
foundations, which means that it could also include some other types of foundations. This should not 
have a significant impact as the whole foundation sector mainly consists of public benefit foundations 
and data for groups of foundations which are known to be non-public benefit (e.g. Dutch commercial 
foundations) was excluded from calculations. Secondly, foundations in the dataset are public benefit as 
defined  in  national  legal  terms,  which  means  the  dataset  is  not  consistent  and  does  not  only  include 
strictly public benefit foundations (as understood in this report).  
Data, unless otherwise referenced stems from the feasibility study. 
These figures for assets, expenditures and employment are estimates based on the survey carried out for 
the purpose of the study, a secondary analysis of the data and an additional plausibility review. The data 
from the EFC research (see footnote 21) mentioned assets of €237 billion for foundations surveyed in 
15 EU countries and total spending of €46 billion by foundations surveyed in 14 EU countries. 
Report by an expert group: "Giving More for Research in Europe: the role of foundations and the non-
profit sector in boosting R&D investment", September 2005. 
According to the EFC research and other published sources available to the contractors. 
See Annex 1 for more detailed information. 
See footnote 23. 
Data in EFC report looks at different periods varying from 7 to 11 years for different countries, between 
1990 and 2007. 
See footnote 23. 

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amounting  to  an  average  of  about  nine  employees  and  seven  volunteers  per  foundation.  On 
the basis of this research and additional data and extrapolations, the feasibility study suggests 
that  there  are  between  750,000  and  1  million  full  time  employed  staff  working  for  the 
foundation sector across the EU35 and a further 1 million persons involved in their projects as 
volunteers. The numbers could be higher in practice given that the study does not carry out 
analysis  on  part-time  staff,  freelancers or  consultants  also  working  for  foundations36.  Direct 
employment  varies  per  country  (according  to  the  feasibility  study,  the  United  Kingdom, 
Germany,  Spain,  Poland  and  Hungary  account  for  about  80%  of  foundation  employment  in 
Europe). 

Foundations  are  active  in  a  number  of  key  areas  benefiting  European  citizens  and  the  EU 
economy,  but  their  contribution,  as  well  as  their  potential  to  generate  social  and  economic 
added value, is not always easy to quantify and it often risks being underestimated. According 
to the feasibility study, education and research dominate the profile of public benefit purpose 
foundation  activity  in  the  EU,  with  an  average  of  30%  of  activity  focused  in  this  area37. 
Foundations are an important source of funding for some research activities and could be an 
important  element  to  achieve  the  European  Research  Area38.  On  the  basis  of  results  of  the 
FOREMAP  project39,  there  are  likely  to  be  over  10,000  foundations  in  Europe  supporting 
research  activities,  with  the  amount  of  their  support  varying  between  Member  States  (with 
Denmark,  France,  Germany,  Italy,  Sweden  and  the  UK  accounting  for  88%  of  research 
expenditure funded by private non-profit sector). Moreover, foundations have close links with 
universities, the latter seeing foundations as one of the principal sources of their funding and 
many  universities  (31%  of  surveyed  universities  according  to  a  recent  study40)  creating 
foundations to handle fundraising activities.  

Social  and  health  services  appear  to  be  the  next  biggest  areas,  with  an  average  of  25%  of 
public benefit purpose foundations activity in the area of social services, and 17%  in the area 
of  health.  In  addition,  according  to  the  EFC  research  in  seven  EU  countries,  surveyed 
foundations appear to spend most on social and health services, e.g. 49% of overall support 
provided by surveyed French foundations goes to health services, and 36% to social services; 
and 31% of all support of surveyed Dutch foundations focuses on social services41. Arts and 
culture  is  the  next  significant  area  of  activity  after  health;  it  is  the  most  important  area  in 
Spain with 44% of Spanish foundations involved in this field; and is relatively prominent in a 
number of other countries (such as Finland, Germany, Italy, Portugal, the Czech Republic and 
Poland).   

35  

36  

37  

38  
39  

40  

41  

This figure only refers to employment in the public benefit section of foundations’ activities (and does 
not include employment in related corporations in which foundations might hold shares). 
In its initial estimation, the feasibility study mentions that there could be approximately 1.5 million full-
time staff, 2.5 million volunteers, half a million part-time staff and almost a million of freelancers and 
consultants but these numbers are scaled down or not analysed further in the analysis, pp. 25-27.  
The interest in this area appears smaller according to the EFC research, where over 10% of surveyed 
foundations were interested in science; see footnote 27. 
See footnote 29.  
The  project  was  co-funded  by  the  Commission  and  coordinated  by  the  EFC;  a  pilot  study  gathered 
comparable  data  on  foundations'  support  for  research  in  Germany,  Portugal,  Slovakia  and  Sweden: 
http://www.efc.be/Networking/InterestGroupsAndFora/Research%20Forum/Documents/Understanding
%20European%20Research%20Foundations_2009_09_FOREMAP.pdf. 
"Giving 
in  European  universities",  2011, 
from  philanthropy 
http://ec.europa.eu/euraxess/pdf/research_policies/Fundraising_from_Philanthropy_in_European_Unive
rsities.pdf. 
See footnote 23. 

in  evidence:  Fundraising 

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Other areas include environmental protection and climate change - from the EFC research in 
six  Member  States  it  appears  that  over  5%  of  foundations  surveyed  support  environmental 
issues42 - but also development and migration issues. Foundations also play an essential role 
in  promoting  active  civil  society  in  Europe  as  many  of  the  areas  in  which  they  engage  are 
closely  linked  to  citizens'  concerns43.  Furthermore,  by  acting  across  borders  and  engaging 
directly with citizens they promote dialogue among different actors and cultures at local level.  

In all these areas foundations are active through making their resources available to citizens or 
organisations  for  a  specified  purpose  (i.e.  grant-making  foundations)  and/or    running  their 
own  operations  and  programmes,  e.g.  some  private  universities,  hospitals,  museums  or 
research  projects  or  institutes  (i.e.  operating  foundations).  Both  grant-making  and  operating 
foundations are present – to a varying degree - across Europe. In some countries – e.g. France 
or  Italy  –  the  foundation  sector  mostly  includes  "operating"  rather  than  "grant-making" 
foundations, and in others, such as the UK, there is a predominant grant-making culture with 
hardly  any  operating  foundations.  Overall,  it  appears  that  many  foundations  in  Europe 
combine both operating and grant-making to pursue their objectives and the number of these 
"mixed"  foundations  is  increasing.  Examples  of  such  foundations  include  the  Gulbenkian 
Foundation in Portugal, the BBV Foundation in Spain or the Bosch Foundation in Germany44. 
For  example,  out  of  232  EFC  members,  73%  (169  members)  both  give  grants  and    operate 
their  own  programmes;  14.6%  (34  members)  do  only  grant-making;  and  12.5%  (29)  only 
operate their own programmes45. 

Foundations also mobilise - through partnerships and by pooling funding - other philanthropic 
actors, business or public sectors to address specific issues (e.g. develop and  support health 
children programmes), which multiplies the impact of their work46. Partnering and co-funding 
with  foundations  can  be  attractive  for  public  bodies  as  foundations  can  complement  the 
actions of governments. 

Foundations have traditionally been more active at national, regional or local level. However, 
the  numbers  of  foundations  and  donors  operating  on  a  cross-border  basis,  or  expressing 
willingness  to  be  engaged  in  such  operations,  have  increased  significantly  during  the  recent 
decade.  

Anecdotal evidence from bilateral discussions with foundations in 201047 suggests there are a 
number  of  foundations  that  see  activities  abroad  as  an  important  part  of  their  activities.  For 
instance,  the  European  Climate  Foundation  explained  that  it  had  donors  all  across  the  EU; 
cross-border  activities  of  the  King  Baudouin  Foundation  amounted  to  about  25%  of  their 
activities,  and  those  of  the  Calouste  Gulbenkian  to  20%;  and  the  Open  Estonia  Foundation 
estimated that more than half of its activities were cross-border. 

42  
43  

44  

45  
46  

47  

See footnote 23. 
"EU  citizenship  report  2010:  dismantling  the  obstacles  to  EU  citizens'  rights",  COM  (2010)603, 
27.10.2010. 
Data  from  the  feasibility  study;  "Foundations  in  Europe:  a  comparative  perspective",  Civil  Society 
Working Paper 18, H. Anheier, 2001; and information from the EFC. 
Internal research carried out by the EFC, June 2011. 
See for example the cooperative scheme between European foundations and the Roma Education Fund 
with  the  objective  of  helping  to  close  the  educational  gap  between  Roma  and  other  children  (see 
“Foundations in the European Union, Facts and figures”, 2008, p. 19). 
Bilateral discussions with representatives of some foundations during the European Foundation Week 
in June 2010. 

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Furthermore, the number of EU-wide projects currently in place provides evidence of growing 
interest among foundations for European level cooperation. These include, among others, the 
creation  of  Donors  and  Foundations’  Networks  in  Europe  (DAFNE)  in  2006,  which  now 
includes  16  networks  across  several  EU  countries,  a  number  of  projects  introduced  by  the 
EFC in specific areas of interest (such as HIV/AIDS, disability, etc.), or other initiatives such 
as the Network of European Foundations (NEF) for innovative cooperation or the European 
Venture Philanthropy Association (EVPA), which aim to develop cooperation and networking 
between philanthropist entities in Europe48. In the survey carried out for the feasibility study, 
46%  of  the  surveyed  foundations  stated  that  they  conducted  international  activities 
"regularly"49;  and  about  half  of  the  surveyed  foundations  which  conduct  international 
activities "at least occasionally" indicated that they planned to expand those activities further. 
These  survey  results  provide  an  example  of  the  growing  interest  of  foundations  in  cross-
border activity in Europe, even if the figures should be considered as indicative50.  

As regards donations, figures for gifts channelled through the "Transnational Giving Europe" 
(TGE) mechanism, which during 2010 grew by 25% and exceeded €4.2 million, indicate that 
there is growing potential for cross-border giving51.  

2.3.2.  Overview of the  legislative framework 

At EU level 

There is no EU legislation in the area of foundations. However, their activities may fall under 
the  provisions  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  relating  to 
freedom of establishment (Article 49 TFEU), freedom to provide services (Article 56 TFEU) 
or free movement of capital (Article 63 TFEU). According to Article 49 TFEU, restrictions on 
the  freedom  of  establishment  of  nationals  of  a  Member  State  in  the  territory  of  another 
Member  State  shall  be  prohibited.  Such  prohibition  shall  also  apply  to  restrictions  on  the 
setting-up of agencies, branches or subsidiaries by nationals of any Member State established 
in the territory of any Member State. According to Article 56 TFEU, restrictions on freedom 
to  provide  services  within  the  Union  shall  be  prohibited  in  respect  of  nationals  of  Member 
States  who  are  established  in  a  Member  State  other  than  that  of  the  person  for  whom  the 
services are intended. 

It should be noted, however, that Article 54 excludes legal persons that are non-profit-making 
from the right of establishment. Nonetheless, in the light of the Court of Justice of EU case-
law52, a non-profit making foundation can invoke freedom of establishment when it engages 
in economic activities.  

Being unremunerated, the awarding of grants (which is the main or exclusive type of activity 
of  certain  foundations)  would  not  be  considered  an  "economic  activity"  under  the  Treaty 
provisions relating to establishment and services or under Directive 2006/123/EC on services 

48  
49  

50  

See footnote 23. 
The survey gave a very high result of 65-67% (of the weighted data) foundations active on international 
level "at least occasionally". 
See feasibility study, p. 149 and p. 153. The survey consisted of 134 cases of foundations in 24 different 
countries  (response  rate  to  the  survey  was  21%).  The  figures  might  be  overestimated,  e.g.  due  to 
overrepresentation of larger foundations in the sample. 
http://www.transnationalgiving.eu/tge/default.aspx?id=219948&LangType=1033.  

51  
52           See for example cases C-172/98, 13/76, C-222/04, 

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in  the  internal  market53  (hereafter  the  Services  Directive)  -  and  would  not  therefore  be 
covered.  As  far  as  funding  in  general  is  concerned,  if  this  is  defined  as  a  payment  of 
contributions for a non-profit purpose, it would not be considered an economic activity either; 
in contrast fund "raising" may well be an economic activity (i.e. renting out property, selling 
handicrafts  or  organising  sports  activities  for  which  participants  or  spectators  are  charged 
entry fees).  

According to Article 63 TFEU all restrictions on the movement of capital between Member 
States  and  between  Member  States  and  third  countries  are  prohibited.  Gifts,  endowments, 
inheritances  and  legacies  are  listed  under  "Personal  Capital  Movements"  in  Annex  I  of 
Directive 88/361/EEC which constitutes an indicative, non-exhaustive list of what is covered 
by  free  movement  of  capital.  Funding,  fund  raising  and  grant-making  in  these  forms  can 
benefit only from the free movement of capital provided that they are cross-border54.   

Secondary  legislation  -  "the  Services  Directive"  -  ensures  that  both  service  providers  and 
recipients benefit more easily from the fundamental freedoms guaranteed in Articles 49 and 
56  TFEU.  The  implementation  of  the  Services  Directive  should  make  the  establishment  of 
foundations  performing  economic  activities  easier  by  eliminating  requirements  governing 
access  to  or  exercise  of  service  activities  that  were  discriminatory,  unjustified  or 
disproportionate.  This  means,  for  example,  that  their  establishment  should  not  be  made 
subject to: discriminatory requirements based directly or indirectly on nationality (i.e. relating 
to  the  registered  office  of  the  foundation  or  nationality  or  residence  requirements  for  the 
staff); restrictions on the freedom to choose between a principal or secondary establishment; 
or  restrictions  on  the  freedom  to  choose  between  establishment  in  the  form  of  an  agency, 
branch or subsidiary.  

In  addition,  foundations  undertaking  economic  activities  should  be  able  to  provide  cross-
border services in other Member States without any national requirements governing access to 
or  exercise  of  that  activity  being  imposed  upon  them,  unless  they  are  non-discriminatory, 
justified  by  reasons  of  public  policy,  public  security,  public  health  or  protection  of 
environment, and proportionate. Requirements such as the obligation to have an establishment 
in  the  Member  State  where  cross-border  services  are  provided  will  not  be  justified  in  most 
cases.  

In  conclusion,  foundations  developing  economic  activities  may  benefit  from  the  freedom  of 
establishment and the freedom to provide services, as guaranteed by Articles 49 and 56 TFEU 
(as  well  as  the  Services  Directive),  while  foundations  carrying  out  non-economic  activites 
(e.g.  grant-making)  may  benefit  the  free  movement  of  capital,  as  guaranteed  by  Article  63 
TFEU. 

At national level 

At national level, civil laws set out requirements which foundations need to fulfil in order to 
be  able  to  operate.  More  detailed  information  about  national  legislation  can  be  found  in 
Annex 2.  

53  
54  

OJ L 376, 27.12.2006, p. 36. 
It  is  to  be  noted  that  grant-making/funding  might  also  be  understood  as  necessary  operations  for  the 
purpose of the capital movements, in particular as part of the related transfers, in the sense of Annex I to 
Council Directive 88/361/EEC, entitled ‘Nomenclature of the capital movements referred to in Article 1 
of the Directive'. 

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Foundations and their donors are also subject to the relevant tax rules of the various Member 
States. Tax law may function both as an incentive and a disincentive for donors (depending on 
whether  or  not  tax  benefits  are  provided  for  donations  made  to  foundations)  and  is  also 
relevant  for  the  investments  of  foundations  (as  tax  benefits  may  be  provided  for  income 
earned by foundations). This is true mainly for income taxation, but it may also be relevant 
for inheritance taxation (i.e. gift, inheritance and/or estate taxes, which may be applied at both 
the level of the foundation and of the donor). In most Member States, in order to qualify for 
tax  benefits,  foundations  have  to  meet  certain  requirements  that  are  additional  to  those 
provided under civil law. 

2.4. 

Problem definition55 

Inefficient use of funds for public benefit purposes through foundations in the EU  

As illustrated in the previous sections, foundations make, through their activities in key areas, 
a  major  contribution  to  the  achievement  of  a  number  of  the  EU's  objectives.  Their  role  in 
performing public benefit activities has always been important, but it has gained even greater 
significance  in  the  aftermath  of  the  recent  economic and financial crisis due to the growing 
expectations  of  citizens.  Yet,  support  from  the  private  sector  to  public  benefit  causes  is  not 
fully exploited across the EU.  

One  of  the  main  reasons  for  this  appears  to  be  that  foundations  –  which  are  important 
sponsors  of  public  benefit  causes  -  cannot  pool  and  distribute  funds  efficiently  on  a  cross-
border  basis  in  the  EU.  When  they  decide  to  operate  across  borders,  foundations  have  to 
spend  part  of  the  resources  they  collect  on  legal  advice  or  on  fulfilling  different  legal  and 
administrative  requirements  laid  down  by  national  laws  (see  section  on  costs  below).  This 
means that less funding is available for public benefit activities. This was  confirmed by the 
public consultation carried out by the Commission in 200956, in which respondents underlined 
that part of the funds of foundations active abroad is used to cover operation costs instead of 
being channelled for public benefit purposes. 

In  addition,  these  legal  and  administrative  requirements  have  a  strong  deterrent  effect  on 
foundations initiating or developing operations across borders, with the result that the scope 
of  their  activity  is  narrower  than  could  be  expected  from  their  full  potential  and  their 
expansion ambitions. 

For instance, the Fondation d'Entreprise du Groupe SEB affirmed that it limited its activities 
abroad  as  a  consequence  of  the  existing  barriers,  and  the  Calouste  Gulbenkian  Foundation 
stated that the civil law obstacles it encountered influenced the  dimension  and  budget  of  its 
EU-wide activities, which could otherwise be larger57.  

The  problems  described  above  can  be  further  divided  into  the  following  sub-problems:  a) 
uncertainty about recognition as a public benefit purpose foundation in other Member States, 

55  

56  
57  

Information  about  national  practices  is  based  on  the  Commission's  understanding  of  the  replies 
submitted  by  national  authorities  to  the  Company  Law  Expert  Group  (CLEG)  questionnaire  during 
2010 and 2011, on information provided by the European Foundation Centre, on the feasibility study, 
and on the 2009 consultation replies. 
See http://ec.europa.eu/internal_market/consultations/docs/2009/foundation/summary_report_en.pdf. 
"European foundations' case studies", April 2010 drawn up by the EFC. 

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b) costs for pooling and distributing funds on a cross-border basis and c) limited cross-border 
donations.  

a) Uncertainty about recognition of foreign foundations as public benefit purpose entities in 
other Member States  

The national definitions of public benefit vary across the EU. Certain Member States have a 
closed list of public benefit purposes, although most of them have either an open one or no 
definition at all.  

In  a  number  of  cases,  Member  States  seem  to  require  foreign  foundations  which  have 
activities in their territory to fulfill the public benefit purposes as foreseen by their legislation.  

In certain cases, in order to be granted the status of public benefit, foundations need to follow 
a specific procedure of recognition or to obtain permission. For instance, a special recognition 
authorisation  (via  a  decree  issued  by  the  Minister  of  the  Interior,  after  having  received  the 
approval of the State Council) is foreseen for foreign foundations which envisage operating as 
"public  benefit  purpose  foundations"  in  France  whereas,  in  Spain,  the  state  supervisory 
authority  determines  whether  the  purposes  of  a  "formal  delegation"  of  a  foreign  foundation 
are in accordance with "general interest". In some other countries e.g. Poland and Slovakia, 
the purposes of a representative office of a foreign foundation need to be in line with national 
law requirements. For example, in Poland, checks are carried out to verify whether purposes 
are in line with the national definition of "public benefit" before permission is granted by the 
competent Minister to set up a representative office.  

Such cases can lead to some legal uncertainty as to whether a foundation will be recognised 
across  borders  as  a  public  benefit  purpose  one.  Similarly,  tax  barriers  and  restrictions58  can 
also cause uncertainty regarding recognition and, consequently, whether a foundation will be 
eligible for the same tax benefits as those available to domestic foundations. Such uncertainty 
might dissuade foundations from operating in other countries.   

b) Costs for channelling funds on a cross-border basis 

The national legal and administrative requirements affect both the setting up and the running 
of  foundations'  activities,  as  foundations  are  obliged  to  dedicate  additional  human  and 
financial resources to tackling these requirements. It is difficult to provide an overall estimate 
of  the  costs  faced  by  foundations,  as  some  of  these  costs  (e.g.  administrative  or  staff  costs) 
will depend on specific cases and are, therefore, difficult to quantify.  

According  to  the  calculations  carried  out  in  the  feasibility  study,  the  overall  costs  of  the 
barriers  foundations  face  in  their  international  activity  could  amount  to  a  minimum  of 
between €90 and €102 million a year. This figure is based on calculations of costs of legal and 
fiscal  counselling  for  setting  up  a  new  entity  abroad  (in  case  this  is  necessary  to  operate 
abroad)  and  for  keeping  abreast  of  changes  in  national  legislations  when  already  running 
operations  abroad.  The  calculations  are  based  on  assumptions  of  one-off  legal  counselling 
costs of €10,000 - 16,000 for setting up a new entity and ongoing legal yearly costs of €3,000 
for  monitoring  changes  in  national  legislations  per  foundation.  In  addition,  assumptions  as 
regards numbers of foundations which might need to establish new entities to operate abroad 
(750 - 1,200 per year) and those that might need counselling when running operations abroad 

58  

Tax related barriers will be assessed more in detail in a separate subsection, please see below. 

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(27,500) are estimates on the basis of a survey of 134 foundations. Due to the data uncertainty 
involved, the figures for costs are to be seen as assumptions only and are used for illustrative 
purposes 59.  

Although this report will use the above figure when talking about overall costs, it is important 
to point out that the overall set-up and running costs abroad might be higher when other costs 
are  also  taken  into  account.  Looking  at  the  EUSTORY  and  Carpathian  Foundation  case 
studies mentioned in sections 2.4.1 and 4.3, setting up an additional entity abroad amounted to 
€40,000 (or even up to $100,000) and running it – to €30,000 (or $25,000) when other costs, 
such  as  registration  fees,  administrative  expenses,  travel  and  accommodation  costs,  costs  of 
internet presence  and of public  relations abroad, were also taken into account.  Furthermore, 
should the establishment of a new entity in other Member States be required, the feasibility 
study suggests that costs could amount to between €138 and €179 million when an average 
amount  of  minimum  founding  assets  currently  required  in  the  EU  is  included  in  the 
calculations.  

c) Limited cross-border donations 

Donors'  lack  of  trust  in,  and  knowledge  of,  foreign  foundations,  and  tax  law  barriers  or 
restrictions are also reported as being a barrier to cross-border donations.  

2.4.1.  Causes and drivers of the problems  

Civil law barriers or restrictions for foreign foundations  

There  are  significant  divergences  in  Member  States'  approaches  towards  the  setting  up  and 
operating  of  foundations.  This  means  that  foundations  are  subject  to  different  requirements 
across  the  EU  in  terms  of,  inter  alia,  minimum  founding  assets,  internal  governance, 
supervision,  activities  allowed,  etc.  For  instance,  certain  Member  States  foresee  strict 
requirements  regarding  minimum  founding  assets  (e.g.  €1  million  in  France  or  €250,000  in 
Portugal)  whereas  in  others,  these  requirements  might  be  lower  (e.g.  over  €30,000  in 
Denmark or €25,000 in Finland) or no founding assets may be required at all (e.g. in Estonia 
or Latvia). This requirement exposes founders to a potential cost because it can oblige them to 
put  up  more  money  than  is  actually  necessary  to  establish.  In  particular,  in  certain  cases  it 
may prove to be difficult, if not impossible, for the founders to establish a small foundation if 
it has to respect, for example, a very high minimum founding assets requirement such asthose 
mentioned above.   

Furthermore, it appears that some Member States only allow specific forms of establishment 
for foundations60 (i.e. Slovakia, Latvia) or that they allow their establishment under conditions 

59  

60  

The  feasibility  study  calculations  of  set-up  costs  are  based  on  the  assumption  that  about  750  -  1,200 
foundations per year might want to start operating abroad via creating a new entity, given that (i) 25,000 
– 30,000 foundations indicated in the survey carried out for the purpose of the feasibility study that they 
would  like  to  expand  their  international  activities  and  that  (ii)  at  least  3-4%  of  those  already  active 
internationally had to establish new entities abroad (as so many reported difficulties with establishing 
those). The calculations of running costs are made for 27,500 foundations (assumingly because 25,000 
–  30,000  foundations  indicated  their  interest  in  expanding  abroad).  For  further  detail,  please  see  the 
feasibility study, pp. 170-174. 
The  foundations  should  be  able  to  choose  between  primary  and  secondary  establishment  or  between 
establishments  in  the  form  of  branches,  agencies,  subsidiaries,  in  another  Member  State.  Imposing  a 
specific form would limit the freedom of establishment of foundations.  

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of reciprocity (i.e. Italy). Moreover, there are also cases where the host Member State requires 
the residence on its territory of a person authorized to act on behalf of the foreign foundation 
(e.g.  in  Malta),  while  some  others  require  evidence  that  the  value  of  assets  corresponds  to 
their national legal requirements when a foreign foundation establishes a branch (e.g. in the 
Czech Republic and Slovakia).  

In  addition,  difficulties  and  costs  when  a  foundation  wants  to  transfer  its  seat  to  another 
Member  State  were  mentioned  in  the  feasibility  study  and  the  responses  to  the  2009  public 
consultation. 

Certain Member States (e.g. Czech Republic) appear to prohibit the cross-border provision of 
services by foundations, thereby making it difficult for foundations to operate on a temporary 
basis across the EU.  

Moreover,  there  are  national  requirements  on  foundations  when  receiving  donations  (e.g.  in 
Lithuania  a  "status  of  a  recipient  of  sponsorship"  from  the  Register  of  Legal  Entities  for 
providing  and  receiving  donations  is  requested  whilst  in  Belgium  and  Luxembourg 
authorisations  are  requested  for  donations  exceeding  certain  amounts).  Provisions  also  exist 
which  require  foreign  foundations  to  reside  on  the  territory  of  a  particular  Member  State  in 
order to perform fund raising and grant making.  

The  example  below  provides  a  specific  illustration  of  the  difficulties  and  costs  encountered 
due to divergences in national (civil and tax) laws for foundations across the EU: 

Example: History Network for Young Europeans EUSTORY61 

EUSTORY was founded in September 2001 on the initiative of the Körber Foundation. It is a 
common platform of non-governmental organisations from civil organisations in 22 European 
countries, which supports teaching history to young people across the EU.  

Since its founding, it has struggled to find the appropriate legal structure for its pan-European 
public interest objective. In order to avoid linking symbolic EU-wide activities with a single 
national law, until 2008 it operated as a non-registered association. However, this became an 
obstacle to its development in an increasing number of EU countries due to the fact that it was 
not contractually capable (e.g. it could not submit an application for EU funding, nor attract 
sponsors). 

The only available option to create an independent entity with legal personality at EU level 
was to establish itself as an international association under Belgian law, which EUSTORY did 
in June 2008. However, the costs of establishing and maintaining the association during 2008-
2010 proved disproportionate for the Körber Foundation, to the extent that a discussion at a 
general  assembly  is  foreseen  in  2011  to  consider  the  dissolution  of  the  association.  The 
examples of such costs include:  

- costs of setting up and providing for a legal seat in Belgium of €40,00062 in 2008, part of 
which would not have been sustained if a foundation under European law could have been set 
up in Germany (where the secretariat of the Körber Foundation is based); 

61  

This example is based on information from "European foundations' case studies", April 2010 drawn up 
by the EFC, and on further contribution on costs provided by EUSTORY to the EFC in the context of 
this report.  

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-  costs  of  around  €30,000  a  year  in  2009  and  2010  for  administrative  expenses  of  the 
EUSTORY association63, part of which were due to the fact that the Körber Foundation had to 
operate with the association in the context of foreign (civil and tax) law. These would have 
been avoided, had it been possible to set up a European Foundation in Germany. 

Tax law barriers or restrictions for foreign foundations and their donors 

Member States enjoy broad freedom to design their tax systems and allocate taxation powers 
between themselves. Thus, it is for each Member State to determine whether it will provide 
for tax incentives for public benefit purpose foundations and their donors and, if so, what kind 
of general interests it wishes to promote by such tax incentives. According to the case law of 
the Court of Justice of the EU, once a Member State decides to provide such tax incentives, it 
should  provide  for  non-discriminatory  tax  treatment  of  comparable  foreign  foundations  and 
their donors, as required under the fundamental freedoms enshrined in the TFEU. 

In  the  past,  in  many  Member  States,  foreign  foundations  were  not  able  to  benefit  from  the 
same  advantages  with  respect  to  income  taxes  which  were  granted  to  domestic  foundations 
(even if they fulfilled the relevant requirements provided by the national tax law). Similarly, 
in many cases, domestic donors could not benefit from tax deductions which were available 
for  donations  made  to  domestic  foundations  when  they  made  a  donation  to  a  comparable 
foreign  foundation.  Discriminatory  tax  treatment  of  foreign  foundations  and  donors  also 
occurred  with  respect  to  inheritance,  estate  and gift  taxes.  This  situation  resulted  in  tax  law 
barriers to foundations operating across borders. This is confirmed by the results of the 2009 
public  consultation.  On  the  question  of  tax  law  barriers  encountered  by  foundations  in 
carrying out cross-border activities, a majority of respondents indicated "income taxation of 
foreign foundations and of domestic foundations operating abroad" followed by "inheritance 
taxation"  and  "tax  treatment  of  donors"  as  the  most  important  tax  law  barriers.  Asked  for 
concrete examples, most respondents referred to the fact that foreign foundations were taxed 
at a higher level than local entities in most Member States, to the fact that foundations found 
it difficult to attract foreign donors due to lack of tax advantages for cross-border donations, 
and to the less favourable gift and inheritance tax treatment.  

The Court has ruled on cases which correspond to the situations identified as representing the 
most  significant  tax  law  barriers  to  cross-border  activities  of  foundations.  In  the  Stauffer 
case64,  the  Court  affirmed  that  where  a  Member  State  gives  tax  exemptions  to  domestic 
foundations,  it  should  extend  these  advantages  to  comparable  foundations  in  other  Member 
States  which  meet  the  same  conditions  as  domestic  ones.  In  the  Persche  case65,  the  Court 
stated  that  where  a  Member  State  grants  tax  incentives  for  donations  to  certain  domestic 
foundations, the conditions for these tax incentives must apply in a comparable way to cross-
border  donations  to  foreign  foundations.  In  the  very  recent  Missionswerk  Werner  case66, 
which  concerned  the  applicability  of  reduced  rates  for  succession  duties,  the  Court  decided 
that a Member State granting certain tax advantages to domestic foundations had to apply the 

62  

63  

64  
65  
66  

Start  up  costs  (legal  advice,  notary,  registration  fees;  travel  and  accommodation  costs  for  journeys 
related  to  the  establishment  process;  administrative  expenses  related  to  setting  up  a  legal  seat  in 
Belgium). 
Including, costs of accounting, legal advice, internet presence, PR materials with details of presence in 
Belgium, travel costs, etc. 
C-386/04 Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften 
C-318/07  Hein Persche v Finanzamt Lüdenscheid 
C-25/10 Missionswerk Werner Heukelbach eV v État belge 

EN 

17 

   EN 

 
                                                                                                                                                         
same  tax  treatment  to  foreign  foundations  that  satisfied  the  conditions  laid  down  by  that 
Member State concerning the types of domestic foundations entitled to the tax advantages.  

Following  the  above-mentioned  judgments  in  the  Stauffer  and  the  Persche  cases  and  a 
systematic  examination  of  national  laws  in  this  field  by  the  European  Commission, 
infringement  proceedings  have  been  opened  against  a  number  of  Member  States  whose  tax 
legislation  discriminated  against  foreign  foundations  by  not  granting  them  or  their  donors 
certain  tax  advantages  which  were  available  to  comparable  domestic  foundations  and  their 
donors. As a consequence, many Member States amended their tax rules in this area with a 
view to bringing them into line with the TFEU. Some Member States are still in the process of 
doing  so,  and  it  still  remains  to  be  seen  how  these  rules  will  be  applied  in  practice.  The 
example  below  illustrates  the  problems  regarding  tax  issues  encountered  in  practice  by  a 
specific foundation. 

Example: the Fondation INSEAD (Institut européen d'administration des affaires)67  

The  Fondation  INSEAD  was  established  in  France  as  a  "fondation  reconnue  d'utilité 
publique" in order to collect donations from the network of alumni, recruiters and friends of 
INSEAD Business School and use them to fund scholarships and research. INSEAD Business 
School has a European (and now a global) focus, and therefore, the alumni network is very 
international with a strong European basis68. 

The Fondation INSEAD believes that, over the years, it has lost potential donors due to the 
fact that prospective foreign donors are often discouraged from making donations to foreign 
foundations because of unfavourable tax treatment. It also states that it often has to seek legal 
advice on the tax treatment of donations from donors who are resident in other EU Member 
States  (e.g.  recently  in  the  case  of  Italy  and  the  Netherlands),  and  such  consultations  can 
amount to between €10,000 - €15,000. 

As a consequence, the Fondation INSEAD has had to create domestic foundations or trusts in 
other countries as "collecting agents" with local alumni, and this has incurred costs (variable 
per  country  and  context).  Because  of  these  costs,  the  Fondation  INSEAD  is  likely  to  create 
domestic  foundations  only  in  countries  with  high  fund  raising  potential,  thus  excluding 
potential donors from other countries.  

Even in cases where the same tax advantages are provided for in the relevant tax law and are 
therefore available to foreign foundations and their donors, benefiting from them might still 
prove costly and difficult. Foreign foundations and their donors need to prove that they pursue 
a public benefit purpose and meet the other requirements imposed in the domestic legislation 
of  the  host  Member  State.  The  example  below  illustrates  how  such  a  "comparability  test" 
works  in  practice  and  what  obligations  foreign  foundations  and  their  donors  may  have  to 
meet.  

How the "comparability test" works in practice 

A donor who is tax resident in the UK and makes a donation to a foundation established in 
Spain (which does not have a secondary establishment in the UK) needs to prove to his tax 

67  
68  

This example is based on the information received directly by the Commission from INSEAD. 
With 55% of members of the alumni network coming from the EU countries. 

EN 

18 

   EN 

 
 
                                                 
administration  that  the  foundation  is  "comparable"  to  a  foundation  established  in  the  UK  in 
order to obtain tax relief for this donation. This could involve the following steps and related 
costs: 

- the donor might first need to find out about the conditions under which a UK foundation is 
considered  as  a  charity  (and  therefore  donations  made  to  it  are  subject  to  beneficial  tax 
treatment), which might involve costs for legal advice; 

-  the  donor  will  need  to  provide  documentary  evidence  that  the  foreign  foundation  satisfies 
the  above-mentioned  conditions,  which  could  lead  to  translation  costs  and  notary  costs  for 
certifying  documents.  In  most  cases,  he  will  have  to  ask  the  foreign  foundation  for  the 
relevant documents, with evident logistic and linguistic difficulties. For example69, the King 
Baudouin  Foundation  made  a  request  to  the  French  authorities  to  be  exonerated  from 
inheritance  taxes  on  a  legacy  received  from  a  testator  having  property  in  France  (which  is 
possible according to the legislation in force if a foundation is deemed comparable to a French 
one). In this particular case it took more than a year to pass the "comparability test" and be 
recognized  as  comparable  to  a  French  foundation.  In  addition  to  the  lengthy  procedure,  the 
estimated cost for the services of a lawyer and notary amounted to €3000-4000. 

-  the  donor's  national  tax  administration  will  need  to  check  the  submitted  documents  and, 
should it not consider them sufficient, may need to ask the tax authority of the Member State 
where the foundation is established for more information (via the administrative cooperation 
channels), which could lead to administrative costs for national authorities. 

The procedure for passing the "comparability test" may prove to be particularly difficult for 
foundations  wishing  to  operate  in  several  Member  States  and  having  to  undergo  the 
"comparability test" in all of them. In addition, should the national authority decide that the 
beneficiary  foreign  foundation  is  not  comparable  to  domestic  ones,  the  foundation  may 
encounter  further  administrative  and  legal  costs  for  adapting  to  the  requirements  (e.g.  by 
changing statutes).   

According  to  one  foundation,  the  "comparability  test"  is  seen  as  a  lengthy  and  costly 
procedure amounting to a barrier – in particular for smaller foundations; this is also the case 
for  bigger  foundations  with  only  a  few  foreign  donors  in  a  particular  Member  State70.  For 
instance, some foundations will only undergo the "comparability test" procedures if they are 
sure they will receive sufficient donations from donors in a certain Member State; otherwise, 
many continue to use other solutions such as the Transnational Giving Europe network when 
receiving foreign donations.   

Lack of trust by donors in foreign foundations  

One  of  the  problems  foundations  are  confronted  with  when  raising  funds  for  public  benefit 
purpose  activities  is  the  insufficient  knowledge  and  lack  of  trust  by  foreign  donors.  Some 
donors find it easier to donate money to domestic foundations, whose purposes they can find 
out about more easily and whose legal form is well known to them. Others, for instance those 
interested  in  donating  to  EU-wide  purposes,  might  lack  assurance  that  their  donations  to 

69  
70  

Information provided by the EFC. 
Information received from an EFC member. 

EN 

19 

   EN 

 
                                                 
foreign  foundations  will  effectively  benefit  such  purposes.  In  both  cases,  they  might  donate 
less or not at all to foreign foundations.  

EN 

20 

   EN 

 
  Inefficient cross-border channelling of private funds to public 
benefit purposes through foundations in the EU  

Limited cross-border 
donations 

Higher costs for foundations to channel 
private funds cross-border in the EU for 
public benefit purposes  

Uncertainty as to whether a 
foreign foundation will be 
recognised as a public benefit 
purpose entity in other Member 
States 

Lack of trust and knowledge of 
donors about foreign foundations 

Tax law barriers or restrictions for 
foreign foundations and their 
donors  

Civil law barriers or restrictions for 
foreign foundations

Burden of proof to meet 
the comparability test in 
order to receive the same 
tax benefits as domestic 
foundations and donors can 
be difficult and costly

Possible remaining 
discrimination of 
foreign foundations 
and their donors 
even after ECJ cases 
and infringements 

Barriers or 
restrictions when 
foundations operate 
on a temporary basis 
across the EU 

Barriers or restrictions when 
foundations operate on long 
term basis across the EU 

Different rules regarding tax exemptions 
and other tax benefits for foundations and 
their donors across the EU 

Different civil law rules on foundations across the 
EU

EN 

21 

EN 

 
  
 
2.5. 

Baseline scenario: expected development if no action is taken  

Whether an action is proposed at EU level or not, a number of initiatives will continue, with 
different impacts on the legal framework relevant for foundations.  

•  Ongoing infringement cases and work in the tax area, and related changes to national 

tax  legislation 

In the area of taxation, the Commission will continue its infringement actions against Member 
States  discriminating  against  foreign  foundations  and  their  donors;  Member  States  should, 
therefore, amend their legislation in compliance with EU law71. In this regard, it can already 
be  assumed  that  this  process  will  have  considerable  impact  on  the  tax  treatment  of  foreign 
foundations and will allow them and their donors to benefit from tax benefits given to national 
public benefit purpose foundations.  

However, the pace and scope of change is difficult to predict. It remains to be seen how easy 
it  will  be  in  practice  for  foreign  foundations  and  their  donors  to  prove  and  pass  the 
"comparability test" (as described in section 2.4) with a view to obtaining tax benefits.   

The  implementation  of  the  new  Directive  2011/16/EU  on  administrative  cooperation  in  the 
field  of  taxation72  is  likely  to  strengthen  the  cooperation  between  national  authorities  in  the 
area  of  direct  taxation  and  therefore  provide  Member  States  with  an  efficient  tool  to  check 
whether foreign foundations can be considered as "comparable" to domestic ones.  However, 
it is likely that improved cooperation would not be sufficient to simplify the "comparability 
test" for foreign foundations. 

•  Implementation of the Services Directive 

The implementation of the Services Directive constitutes an important step forward in terms 
of  the  lifting  of  barriers  to  establishment  and  services  within  the  single  market.  Numerous 
discriminatory, unjustified or disproportionate requirements for established and cross-border 
service providers have been abolished throughout the EU. In addition, several Member States 
have  set  up  specific  mechanisms  to  prevent  the  creation  of  new  barriers  in  the  future  (i.e. 
internal  notification  obligations,  guidelines  for  future  legislation  or  "Single  Market  tests"  in 
the  impact  assessment  of  new  requirements73).  The  Services  Directive  also  strengthens  the 
rights of recipients of services, both consumers and businesses. 

However, it is important to recall that benefits related to the implementation of the Services 
Directive  will  normally  only  affect  foundations  when  they  carry  out  economic  activities. 
Rules that do not govern access to or exercise of a service activity (such as grant-making and 
part of fund-raising) will not fall under the Directive's scope.  

71  
72  
73  

22 infringement cases have already been closed following the changes brought to the national laws. 
OJ L 64/1, 11.3.2011. 
See for more details the Commission Communication "Towards a better functioning Single Market for 
services  –  building  on  the  results  of  the  mutual  evaluation  process  of  the  Services  Directive"  (COM 
(2011)0020 final). 

EN 

22 

   EN 

 
 
 
 
                                                 
•  Ongoing  foundation  sector  and  Commission  initiatives  in  the  area  of  research  and 

development  

Efforts  will  continue  to  facilitate  transnational  cooperation  and  information  exchange 
regarding philanthropic support for research, e.g. through the work of the European Forum on 
Philanthropy  and  Research  Funding74,  following  comprehensive  discussions  and  analysis 
which have been taking place since 2005 in order to encourage support from the philanthropy 
sector  to  research  within  the  EU75.  Mapping  of  the  activities  of  research  foundations  across 
the EU – so far via the 2009 FOREMAP project - is in the process of being extended to the 
rest  of  the  EU  Member  States,  bringing  a  better  overview  to  those  concerned.  Such  efforts 
might  alleviate  certain  obstacles  to  operating  cross-border  by  facilitating  networking  and 
making more data available, but they will not tackle the main obstacles.  

•  Ongoing foundation sector initiatives to support cross-border giving 

The  ongoing  private  sector  initiatives  aiming  to  encourage  cross-border  giving  are  likely  to 
become  better  known  and  to  cover  more  countries.  The  "Transnational  Giving  Europe" 
network, which currently brings together a number of prominent grant-making entities in 13 
Member States  and Switzerland,76 allows  donors from the  participating countries to provide 
cross-border  donations  to  public  interest  entities  while  benefiting  from  the  tax  advantages 
available  in  their  country  of  residence  for  a  fee  of  5%  of  the  donation's  value.  The  current 
members want to extend the network further in the near future, which would potentially lead 
to  an  increased  amount  of  cross-border  donations.  So  far,  the  gifts  channelled  through  the 
network  exceeded  €4.2  million  in  2010  (an  increase  of  25%).  However,  it  is  difficult  to 
predict  whether  and  how  quickly  new  foundations  will  join  and  to  what  extent  new  donors 
will make use of the network.  

The "Giving in Europe" website run by the King Baudouin Foundation77, which provides free 
practical  information  for  donors,  intermediaries  and  beneficiaries  regarding  legal  and  fiscal 
aspects of cross-border philanthropic transactions, and covers 23 countries, might also make it 
easier for donors or foundations to engage in cross-border giving.  

Nonetheless,  both  sector  initiatives  are  geographically  limited  to  only  some  Member  States 
and  the  services  are  not  a  substitute  for  legal  advice;  they  might  not  therefore  lead  to  a 
substantial decrease in costs for donors and foundations.  

2.6. 

The EU's right to act  

An action at EU level is needed in order to ensure the functioning of the single market. 

The  legal  base  for  a  Regulation  on  the  Statute  for  a  European  Foundation  would  be  Article 
352 TFEU, which provides the appropriate legal base when no other provision in the Treaty 
gives the necessary powers for EU institutions to adopt a measure.  

74http://www.efc.be/Networking/InterestGroupsAndFora/Research%20Forum/Pages/EuropeanForumPhilanthrop

75  
76  

77  

yandResearchFunding(Default).aspx.   
Including workshops organised by the Commission and foundation sector in 2006 and 2010. 
See  http://www.transnationalgiving.eu/tge/.  Partner  organisations  include,  among  others,  the  Charities 
Aid  Foundation,  the  King  Baudouin  Foundation,  the  Fondation  de  France,  the  Oranje  Fonds.  The 
countries covered are: Belgium, Bulgaria, France, Germany, Hungary, Ireland, Italy, Luxembourg, the 
Netherlands, Poland, Romania, Slovakia, Switzerland and the United Kingdom. 
http://www.givingineurope.org.  

EN 

23 

   EN 

 
                                                 
Article 352 is the legal base of the existing European legal forms, i.e. the European Company, 
the European Economic Interest Grouping and European Cooperative Society. The Court of 
Justice  of  the  EU  confirmed  in  a  case78  relating  to  the  European  Cooperative  Society  that 
Article 352 was the correct legal base.  

Should  the  chosen  option  be  to  harmonise  Member  States’  laws  in  the  field,  Article  114 
TFEU would be the appropriate legal basis.  

The  proposed  action  fully  complies  with  the  principle  of  subsidiarity.  An  EU  action  is 
needed  in  order  to  remove  the  current  national  barriers  and  restrictions  encountered  by 
foundations  when  operating  across  the  EU.  The  current  situation  demonstrates  that  the 
problem  is  not  properly  addressed  at  national  level  and  its  cross-border  character  requires  a 
common solution to enhance foundations’ mobility. 

The  objectives  of  the  proposed  action  are  better  achieved  by  action  from  the  Union,  which 
will ensure clear and coherent rules for foundations across the EU.  

The  respect  of  the  proportionality  principle  will  be  addressed  in  the  context  of  the 
comparison of options. 

3. 

OBJECTIVES  

The policy objectives for the initiative in the area of foundations are presented in the figure 
below.  The  main  objective  of  the  future  initiative  would  be  to  allow  foundations  to  more 
efficiently channel private funds to public benefit purposes on a cross-border basis across the 
EU, which should increase the amount of funding available for public benefit activities, and in 
turn  benefit  European  citizens  and  the  EU  economy.  This  objective  translates  into  several 
specific objectives, responding to the specific problems and drivers described in the problem 
definition section (2.4) and presented in the problem tree. 

78   

C-436/03 European Parliament v Council of the European Union.  

EN 

24 

   EN 

 
                                                 
Ensure efficient cross-border channelling of private funds to 
public benefit purposes through foundations in the EU 

Increase trust 
and 
knowledge of 
donors about 
foreign 
foundations  

Increase cross-border 
donations

Reduce costs for foundations of 
channelling private funds cross-
border in the EU for public 
benefit purposes  

Reduce uncertainty as to whether a 
foreign foundation would be 
recognised as a public benefit 
purpose entity in other Member 
States 

Remove the tax law barriers or 
restrictions for foreign foundations 
and their donors 

Remove  the  civil  law  barriers  and 
restrictions for foreign foundations 

Remove 
unnecessary 
barriers 
imposed by the 
comparability 
test

Remove the 
possible 
remaining 
discrimination of 
foreign 
foundations and 
their donors 

Remove obstacles on 
temporary and long term 
operations of foundations, 
stemming from the 
divergence of rules across 
the EU 

EN 

25 

EN 

 
  
 
4. 

POLICY OPTIONS AND ANALYSIS OF IMPACTS  

4.1. 

 Baseline scenario  

Description  

In  this  option  no  new  initiative  would  be  proposed  at  EU  level  and  impacts  would  only  be 
those of already ongoing initiatives as described in section 2.5.  

Assessment 

The  ongoing  initiatives  would,  to  a  certain  extent,  respond  to  the  problems  foundations  are 
confronted with but will not be sufficient to meet the policy objectives as described in section 
3.  

The implementation of the Services Directive has removed numerous barriers and restrictions 
to establishment and cross-border provision of services and therefore substantially decreased 
civil law related costs. Nonetheless, it will not address non-economic activities carried out by 
foundations79.  

Infringements  in  the  tax  area  should  substantially  remove  discriminatory  tax  treatment  of 
foreign foundations and their donors, but the cross-border activity could still continue to be 
costly,  in  particular  due  to  the  need  to  satisfy  the  "comparability  test".  Foundations  may 
therefore continue to have difficulty being recognised as public benefit purpose foundations in 
other countries and might still be required to set up a secondary establishment abroad, which 
is usually costly. 

In addition, infringement proceedings take place on a case-by-case basis and they only result 
in the removal of the discriminatory tax provisions of the Member States concerned. They are 
therefore not able to provide an EU-wide solution that is applicable in all Member States. It 
may  also  take  time  to  deliver  solutions,  depending  on  the  length  of  the  infringement 
proceedings and/or the time needed for the ruling by the Court.  

Non-legislative  initiatives  focused  on  improving  the  available  information  on  the  relevant 
national  regimes  will  indeed  alleviate  some  of  the  problems  foundations  and  donors  are 
confronted  with.  Nonetheless,  such  initiatives  will  not  impact  on  the  national  requirements 
themselves  and  will  not  eliminate  the  need  and  costs  of  legal  advice.  They  will  not  be  a 
substitute  for  a  trustworthy  label  which  could  increase  donors'  trust  and  give  a  European 
image  to  foundations  with  EU-wide  activities.  In  addition,  it  is  important  to  underline  that 
those initiatives are geographically limited to some Member States, therefore not covering the 
whole EU.  

79  

See section 2.3.1. 

EN 

26 

   EN 

 
 
 
                                                 
4.2. 

 Launching an information campaign and a voluntary quality charter 

Description  

This option would first seek to improve foundations’ and founders' knowledge of their rights 
and obligations under relevant national laws when operating across borders and, secondly, to 
encourage  foundations  to  ensure  the  quality  and  trustworthiness  of  their  activities  on  a 
voluntary basis.   

An  information  campaign  on  the  civil  and  tax  requirements  and  on  opportunities  for 
foundations  to  operate  across  the  EU  could,  therefore,  be  launched.  It  could  be  conducted 
through a Europe-wide website or through specific publications. It could be run and financed 
either by the Commission,  by  the  foundation sector, or by the latter with  the  Commission’s 
support.   

In addition, foundations could be encouraged to sign up to a quality charter, on a voluntary 
basis.  Such  a  charter,  to  be  drawn  up  by  the  foundation  sector  with  the  support  of  the 
Commission,  would  establish  a  set  of  common  rules  and  criteria  to  be  complied  with  by 
foundations  (for  instance,  on  reporting,  transparency  and  disclosure).  Compliance  with  the 
charter  could  be  subject  to  independent,  objective  scrutiny  by  a  third  party.  Moreover,  the 
sector  could  be  encouraged  to  broaden  the  scope  of  the  charter  by  agreeing  on  a  common 
definition  of  what  a  public  benefit  purpose  foundation  is.  In  order  to  improve  public 
awareness  of  the  quality  charter  and  the  visibility  of  the  foundations  complying  with  its 
standards, these foundations could be awarded a "European quality label". 

Assessment  

The  measures  described  above  would  only  remove  some  of  the  difficulties  in  foundations' 
cross-border  activities.  In  particular  the  information  campaign  would  help  to  address  the 
problems  relating  to  the  lack  of  knowledge  of  Member  States'  rules  and  administrative 
procedures on foundations. The more topics of interest it covered and the more backing from 
the EU institutions ithad, the more added value it would be able to bring as compared with the 
initiatives  in  place  (e.g.  the  existing  "Giving  in  Europe"  website80).  At  the  same  time,  an 
information  campaign  would  call  for  a  comprehensive  information  gathering  effort  and 
would,  therefore,  involve  costs  (i.e.  to  present  a  complete  overview  and  to  keep  the 
information up-to-date). For example, establishing the "Giving in Europe" website cost about 
€90,000 and keeping it up-to-date amounts to about €15.000 per year81. The costs would be 
higher  for  the  proposed  information  campaign  given  its  wider  scope  (involving  civil  law 
issues and foundations' activities), although the exact amount would depend on the extent to 
which  it  would  be  linked  with  the  existing  initiatives.  Although  it  could  help  to  cut  down 
some  of  the  costs  of  legal  advice  for  the  foundations,  it  would  not  lead  to  a  substantial 
decrease because – as it can be seen on the basis of the experience of "Giving in Europe" - 
this information would not fully replace specific legal advice.  

A voluntary quality charter would facilitate, through voluntary common rules across the EU, 
an integrated perception of how foundations operate, thereby enhancing to a certain extent the 

80  
81  

See section 2.5.  
Costs  of  establishing  the  website  included  developing  its  structure  and  content  in  cooperation  with 
experts, and about 1 day per country to introduce the content on the website. Information received from 
King Baudouin Foundation. 

EN 

27 

   EN 

 
                                                 
confidence  of  public  authorities  and  donors  (be  it  donors  from  the  EU  or  from  third 
countries). It could thus increase donors' willingness to donate to foundations signed up to the 
charter  as  well  as  national  authorities’  trust  in  those  foreign  foundations.  This  may  have  an 
indirect  effect  on  tax  authorities  who  might  be  less  strict  in  performing  the  "comparability 
test" with a view to granting tax benefit to foreign foundations which have signed up to the 
charter.  The  better  known  foundations  become  through  the  information  campaign  and  the 
voluntary charter, the easier their operating should be in – and outside of - the EU.  

However,  as  a  soft  law  instrument  it  would  not  bring  uniform  effects  across  the  Member 
States, as national authorities would be free to decide whether or not to recognise the label. 
Despite potential marginal changes, national laws would overall remain as currently in place. 
The  uncertainty  as  to  which  treatment  chartered  foundations  would  find  in  which  Member 
State would still leave substantial uncertainty as to whether foundations would be recognised 
as  public  benefit  purpose  entities  abroad.  For  the  same  reason,  potential  cost  reductions  for 
foundations  are  difficult  to  estimate.  In  the  replies  to  the  2009  public  consultation  most 
respondents  did  not  think  this  solution  would  reduce  the  costs  foundations  face,  nor  that  it 
would bring sufficient legal certainty. All in all the measures would not be sufficient to solve 
the problems currently faced by foundations and donors.  

4.3. 

Statute for a "European Foundation" 

Description  

A. Statute without tax elements 

Under  this  option,  a  new  European  legal  form,  the  "European  Foundation"  (FE),  would  be 
created. It would be an alternative and additional legal form for foundations; it would not call 
for  changes  to  the  existing  national  foundation  forms  and  its  use  would  be  voluntary  for 
foundations.  The  choice  as  to  whether  to  include  tax  elements  in  the  Statute  or  not  is 
developed  below.  The  other  sub-options  relating  to  the  cross-border  dimension,  minimum 
founding  assets,  employees'  involvement,  supervision  and  economic  activities  are  described 
and assessed in Annex 3 and only the preferred sub-options are presented below.   

In  order  for  the  European  Foundation  to  be  trustworthy  in  the  eyes  of  the  donors  and  the 
public  authorities and to prevent circumvention  of  national  laws  on  foundations, the Statute 
needs  to  introduce  high  standards  not  only  for  accountability  and  transparency  but  also  as 
regards  other  main  characteristics  of  the  FE,  including  what  is  recognised  as  public  benefit 
purpose. The Statute would lay down the main requirements for the FE, which would have a 
legal  personality  across  the  EU.  For  the  sake  of  trustworthiness  and  accountability,  the  FE 
would  have  to  have  founding  assets  equivalent  to  at  least  €25  000.  Its  assets  would  be 
dedicated to a public benefit purpose, as defined in the Statute through an exhaustive list of 
commonly  accepted  purposes  in  most  Member  States.  Each  foundation  wanting  to  use  this 
legal form would need to prove its cross-border dimension in terms of activities or intentions 
thereof in at least two Member States. The FE would be free to act in pursuit of its purposes in 
any lawful manner allowed in its statutes, consistent with its public benefit purpose and in line 
with the Regulation on the Statute for a European Foundation. It would have the capacity to 
carry out activities within any Member State and outside the EU. It would be free to engage in 
economic activities provided  that any profit  was exclusively  used in pursuance of  its public 

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benefit purposes. However, economic activities unrelated82 to the FE’s public benefit purpose 
would only be permitted up to a threshold, which would be determined in the Statute. In order 
to distinguish the income arising from related and unrelated activities, the latter would need to 
be presented separately in the accounts. 

An FE could be created from scratch, by conversion or by merger between two public benefit 
purpose  entities,  meaning  public  benefit  purpose  foundations  and/or  similar  public  benefit 
corporate  bodies  without  membership  formed  in  accordance  with  the  law  of  one  of  the 
Member States. The Statute would stipulate which documents or particulars could be required 
for  the  applications  for  registration  by  the  national  registration  authority.  Furthermore  the 
Statute would include rules regarding disclosure, internal organisation, dissolution as well as 
rules regarding information and consultation of employees. FEs would be able to transfer their 
registered  office  to  another  Member  State.  To  ensure  high  standards  regarding  transparency 
and  accountability,  the  FE  would  need  to  keep  records  of  its  financial  transactions,  and  its 
annual accounts would need to be audited and disclosed to the public.  

Supervision  would  be  carried  out  by  designated  national  supervisory  authorities  in  the 
Member State in which an FE has its registered office. The Statute would define the powers of 
supervisory authorities. These powers would  have to be proportionate, yet robust enough to 
enable the supervisory authorities to also effectively oversee the cross-border activities of the 
FEs they are responsible for. Supervisory authorities would have the duty to ensure that the 
governing board acts in accordance with the FE's statutes, the Regulation of the Statute for a 
European Foundation and applicable national laws. They would have the necessary powers to 
ensure this, including the power to inquire into the affairs of the FE, appoint an independent 
expert to do so, and if evidence of misconduct was found – to issue warnings. In the case of 
continued  violation  of  the  FE's  statutes,  the  Regulation  on  the  Statute  or  the  applicable 
national laws, the supervisory authority could dismiss governing board members or decide to 
wind  up  the  FE.  The  Statute  would  also  include  an  obligation  for  supervisory  authorities  to 
cooperate and exchange information with one another.  

An important choice to be made is whether or not to include tax elements in the Statute for a 
European  Foundation.  If  left  out,  the  Statute  would  only  focus  on  civil  law  issues  (such  as 
recognition,  registration,  disclosure  and  internal  organisation),  with  the  main  characteristics 
and legal capacity described above.  

B.  Statute with tax elements  

If tax elements were included, this could be done in the following ways:   

1)  a  separate  tax  regime  for  the  European  Foundations  provided  in  the  Statute  itself. 
According to this option, the European Foundation would be subject to the same tax treatment 
in all 27 Member States. Its impact would, of course, depend on how the regime was designed 
in terms of conferring tax benefits as compared to the existing tax regimes;  

2)  a  non-discriminatory  treatment  granted  automatically  to  European  Foundations. 
According to this option, European Foundations would be automatically granted the same tax 
benefits and to the same extent as those provided for domestic foundations, without any need 

82  

Independent delivery of goods or services which do not directly serve the public benefit purpose of the 
foundation, i.e. a museum running a petrol station next door, foundations organising concerts to raise 
funds (see Annex 3 for more details on related and unrelated economic activities). 

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to  check  whether  they  can  be  regarded  as  "comparable"  to  domestic  foundations.  The 
justification would be that the European Foundation can be assumed to carry out activities of 
public  benefit  purpose  and  respect  certain  requirements  that  have  been  agreed  upon  by  all 
Member States and should therefore automatically qualify for tax relief in all Member States 
(provided  that  they  grant  tax  benefits  to  domestic  foundations  and  their  donors).  All  the 
above-mentioned  solutions  would  also  apply  with  respect  to  beneficiaries  of  and  donors  to 
European Foundations.   

Assessment 

A. Statute without tax elements 

The Statute for a European Foundation would allow individual foundations to establish and to 
perform activities in the EU Member States by using a single legal form, substantially similar 
in  all  Member  States.  It  would  remove  the  obstacles  and  administrative  burden  experienced 
today  with  regard  to  recognition  of  foreign  foundations  and  different  civil  registration 
requirements. It would unify the concept of "public benefit purpose".  

The uniformity of this legal form would translate into cost savings on legal advice currently 
needed when a foundation  wants to operate abroad (e.g including setting  up  new  entities or 
secondary  establishments  in  other  Member  States  than  the  country  of  registration,  and 
monitoring  changes  in  national  legislation  of  the  host  countries  when  it  already  runs 
operations abroad). The costs for legal counselling on both civil and tax law issues for setting 
up  a  new  entity  abroad  and  for  its  ongoing  operations  can  currently  be  assumed  to  amount 
overall to at least €90 - €102 million a year for EU foundations, according to the feasibility 
study. The Statute without tax elements could be expected to result in a significant reduction 
of part of those costs – i.e. costs spent on civil law advice. It could also help foundations to 
save on some other administrative costs of being active cross-border as mentioned in section 
2.4 and as illustrated in the specific example of the Carpathian Foundation below:  

Example: the Carpathian Foundation83 

The  Carpathian  Foundation  focuses  primarily  on  inter-regional  and  cross-border  activities, 
and  economic  and  community  development  in  the  bordering  regions  of  Hungary,  Poland, 
Romania,  Slovakia  and  Ukraine.  It  was  set  up  in  1995  as  a  network  of  national  entities 
established in the above-mentioned countries.  

Establishing  separate  offices  in  different  countries  involved  considerable  costs,  due  among 
others to the need to find out about the legal environment of foundations in each country, and 
the  fact  that  it  was  not  possible  to  set  up  identical  entities  in  each  country,  as  national 
requirements differed (regarding, for example,governance or supervisory arrangements). A lot 
of  time  was  also  reportedly  spent  on  keeping  up-to-date  with  the  relevant  changes  for 
foundations  in  national  laws,  which  made  operations  more  costly.  Examples  of  the  costs 
involved were as follows: 

- set-up costs for the five affiliate entities between 1995 and 1999 amounted to approximately 
$500,000 ($100,000 annually with on average one affiliate entity established each year); 

83  

This example is based on information received from the Carpathian Foundation (through the EFC). 

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- operational  maintenance  costs  for  the  cross-border  activities  of  the  five  affiliate  entities 
between  2000  and  2010  amounted  to  approximately  $1,375,000  (an  average  of  around 
$25,000 per entity per year);  

both adding up to $1,875,000 between 1995 and 2010. 

However,  as  pointed  out  in  the  2009  public  consultation,  the  Statute  would  not  address  all 
issues,  which  may  pose  problems  to  foundations  in  their  cross-border  activities,  and  FEs 
would need to adjust to different national laws in some areas. For instance, legal advice with 
regard to social, administrative and labour matters in the host country, which fall outside the 
scope  of  the  Statute,  would  still  be  required  when  the  European  Foundation  is  active  in  a 
foreign  legal  environment.  Since  European  Foundations  would  have  to  be  registered  in  the 
Member State in which they will have their registered office, the Statute would not result in 
the removal of all registration and publication fees.   

A uniform Statute, setting out the same requirements throughout the EU, would render cross-
border operations for foundations easier, and would make them more trustworthy for both the 
public authorities and the potential donors. In particular, a reliable and recognised label – and 
a European image - offered by the Statute would have an important impact on the knowledge 
and  trust  of  donors  and  could  lead  to  an  increased  amount  of  cross-border  donations  (see 
below  for  the  expected  impact  of  the  Statute  on  the  number  of  FEs  and  donations).  The 
Statute would also help foundations to develop more efficiently their European-wide activities 
on  cross-cutting  issues  such  as  the  environment  or  research.  The  expected  impact  of  the 
Statute  on  those  issues  was  also  underlined  by  some  respondents  to  the  consultation  on  the 
Single Market Act Communication; in their view the Statute would offer an innovative tool 
for  new  European  initiatives,  a  new  means  for  citizens’  action  and  participation  in  various 
fields of interest, and would serve as a benchmark for political recognition of the sector84. 

As regards tax aspects, Member States should grant the European Foundation (and its donors) 
the same tax benefits that are provided under its tax law for domestic foundations (and their 
donors),  to  the  extent  that  the  European  Foundation  can  be  considered  as  "comparable"  to 
domestic  foundations.  This  obligation  for  Member  States  comes  directly  from  the  TFEU  as 
interpreted by the Court in the above-mentioned case-law. However, the burden created by the 
procedures for checking whether the "comparability test" is satisfied would not be removed. 
On the other hand, it can be assumed that the existence of a uniform legal form recognised in 
all  27  Member  States,  which  would  make  the European Foundation  a trustworthy entity for 
public  authorities,  could  result  in  a  situation  where  tax  administrations  might  become  more 
used to dealing with FEs and therefore less strict in performing the "comparability test". The 
Statute  without  tax  elements  could,  therefore,  still  provide  an  indirect  tax  benefit  for 
foundations and their donors.      

B. Statute with tax elements  

A  Statute  with  tax  elements  would  have  the  same  impacts  on  the  civil  treatment  of  FEs  as 
described above. In addition, following the comparison of the sub-options presented in detail 
in  Annex  3,  the  automatic  application  of  a  non-discriminatory  treatment  to  European 
Foundations (2nd option in the description of the Statute with tax elements above) would bring 
most  added-value  to  foundations  and  their  donors  and  would  meet  the  objectives  set  in  an 

84  

See http://ec.europa.eu/internal_market/smact/consultations/2011/debate/index_en.htm. 

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optimal way. As Member States would need to grant European Foundations and their donors 
the  same  tax  benefits  as  provided  for  domestic  foundations  and  their  donors,  this  solution 
would  ensure  equal  treatment  of  European  Foundations  and  domestic  ones.  Moreover,  it 
would apply automatically i.e. without any need for the European Foundation and its donors 
to  go  through  the  procedures  aimed  at  assessing  whether  the  European  Foundation  can  be 
considered  as  "comparable"  to  domestic  foundations,  removing  the  related  administrative 
burdens  and  costs  as  described  in  section  2.4.1.  Moreover,  the  solution  would  remove 
uncertainty as to whether FEs would be recognised as public benefit purpose foundations for 
tax purposes.   

The above would lead to a significant decrease in costs for tax legal advice, even if some legal 
advice might still be necessary. The costs for EU foundations could be expected to decrease 
by overall between €90 and €102 million a year (as estimated in the feasibility study). This is 
an  indicative  estimate  and  is  based  on  an  assumption  of  costs  of  ongoing  legal  advice  of 
€3,000 a year per foundation. The reductions in individual costs per foundation could vary on 
a  case-by-case  basis  and  bigger  reductions  could  potentially  be  expected  where  costs  of 
ongoing  legal  advice  were  higher  than  €3,000  (e.g.  €10,000  –  15,000  for  advice  on  tax 
treatment  of  donations  from  foreign  donors  in  the  case  of  INSEAD,  or  €3000-4000  for  the 
costs of going through a "comparability test" in the case of the King Baudouin Foundation; 
both described in section 2.4.1). With the above-mentioned cost reductions, the Statute with 
tax elements would be likely to encourage foundations to operate across borders to a greater 
degree than the Statute without tax elements. Foundations' fewer needs for legal advice could 
translate into some reduced revenues for other actors such as legal firms, although the latter 
should see increased demand for their services from entities looking to create or convert into 
FEs. 

to  ascertain.  However,  figures  for  gifts  recently  channelled 

The  Statute  with  tax  elements  could  also  lead  to  a  greater  increase  in  the  amount  of  cross-
border  donations  (as  compared  to  the  Statute  without  tax  elements).  The  exact  impact  is 
difficult 
the 
"Transnational Giving Europe" (TGE) mechanism85 seem to show that when easier means of 
making donations are available, donations increase in number. There is not enough evidence 
to predict whether the overall amount of donations would increase or remain the same. There 
could,  for  example,  be  some  cases  –  thanks  to  the  Statute  -  of  donors  being  able  to  give 
money to a specific purpose abroad to which they could not previously donate due to existing 
barriers.  This  might  result  in  additional  donations.  The  likelihood  of  overall  donations 
remaining the same is, however, more realistic. An increase in cross-border donations could 
have an impact on amounts being available for donations domestically in that, should overall 
donations remain the same, more money spent abroad would result in a reduction in donations 
to  national  foundations.  This  could  be  avoided  if  overall  donations  increase  but  cannot  be 
excluded. 

through 

The impact of this policy option will, however, depend on a number of issues. One of those 
would be the tax treatment available to foundations at national level. As there have been some 
cases where a Member State, following the Court of Justice ruling on the non-discriminatory 
treatment of foreign foundations and their donors, restricted its domestic rules (e.g. regarding 
conditions according to which a foundation is recognised as having a public benefit purpose), 
the risk that some Member States might make their tax rules less beneficial for both domestic 
and foreign foundations cannot be excluded. 

85  

See section 2.3.1. 

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The Statute's impact would also depend on the number of foundations that decided to use it, 
with interest expected to be higher for the Statute including tax elements. Although the exact 
number is difficult to estimate, one could assume that - provided that the rules governing the 
FE are precise and uniform and the FE is easy to set up -  many of those foundations which 
are  keen  to  expand  their  existing  EU-wide  activities  could  be  interested  in  the  FE.  As  an 
example, according to the feasibility study, between 25,000 and 30,000 foundations already 
carrying  out  international  acitivites  plan  to  expand  them  further86  -  and  a  number  of  those 
foundations could choose to do so via the Statute. Those not planning to expand further might 
still  benefit  from  the  Statute in  terms  of  their  cross-border  donations.  In  addition,  given  the 
recent  positive  growth  trends  in  the  foundation  sector  and  their  increasing  interest  in  cross-
border work87, both new foundations and those only active at national level but interested in 
activities  abroad,  might  be  interested  in  the  Statute.  In  the  2009  public  consultation,  most 
foundations  were  positive  about  converting  into  the  European  Foundation  provided  that  the 
new legal form would bring them added value.  

Another  important  issue  in  relation  to  the  take-up  –  as  pointed  out  during  the  public 
consultation  -  is  also  whether  and  to  what  extent  national  legislations  could  make  it  more 
difficult  to  convert  into  or  create  the  FE.  Some  respondents  to  the  2009  public  consultation 
also questioned to what extent the Statute would be used by foundations, quoting a relatively 
low take-up of previous European legal forms. In this context, in order to ensure its optimal 
use,  efforts  would  be  needed  by  the  European  institutions,  national  authorities  and  the 
foundation sector to make this new legal form and its benefits known to foundations. 

Although the Statute would make cross-border operations easier, it would also impose some 
costs on the European Foundations, which - depending on the Member State - might be higher 
or lower  compared  to  the  current  costs of operating under a national foundation legal form. 
For instance, under the Statute all FEs would need to draw up an annual statement of accounts 
and an annual activity report and send them to the competent national registry and supervisory 
aurthority;  both  the  accounts  and  the  report  would  need  to  be  disclosed  and  the  accounts 
would also need to be audited regardless the size of the FE concerned. Providing accounts and 
reports to the authorities should not lead to additional costs for most FEs as this is already a 
domestic  requirement  in  almost  all  Member  States;  in  addition,  18  Member  States  already 
require some disclosure of documents to the public88.  

However, the requirement to have the accounts audited would results in higher costs for FEs 
in those Member States in which only larger foundations need to be audited and in particular 
in 8 Member States where no auditing requirements are in place89. The information regarding 

86  

87  
88  

89  

These figures were calculated in the feasibility study on the basis of the survey data carried out for the 
purpose of the feasibility study. See footnote 55. 
See section 2.3.1. 
Member States which do not require that annual reports and/or accounts are made publically available: 
Austria,  Cyprus,  Germany,  Ireland,  Italy,  Latvia  and  Slovenia.  In  addition,  Denmark  and  the 
Netherlands impose this requirement only on commercial foundations. Among Member States requiring 
disclosure, in a few cases this requirement focuses on specific foundations (e.g. tax-exempt ones) or on 
specific documents (e.g. annual accounts only). 
In  some  Member  States  an  external  auditor  is  generally  necessary  (Greece,  Czech  Republic,  Cyprus, 
Finland, France, Lithuania, Sweden and Slovakia); in others an audit is necessary only for larger foundations 
(Belgium, Bulgaria, Spain, Hungary, the Netherlands, Poland (medium or large entities), United Kingdom) or for 
certain  kinds  of  foundations  (Austria  for  private  foundations,  Denmark  for  commercial  foundations,  Estonia  for 
larger  private  foundations,  Ireland  for  incorporated  foundations).  In  8  Member  States  an  auditor  is  not 
required. 

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the cost of an external audit below illustrates the type of costs which could be involved. It is 
based  on  the  experiences  of  a  limited  number  of  foundations  or  accounting  companies  in 
some Member States which have been contacted on this issue90. The costs vary from €500 to 
over  €53,000  depending  on  the  Member  State  (with,  in  general,  lower  costs  in  the  EU-12 
countries)  and  increase  with  size  of  the  foundation.  The  costs  focus  on  audit  costs  for 
foundations with national activities only, and costs for those with activities in other Member 
States would usually be higher91.   

Costs of external audit for public benefit purpose foundations in the EU 

- Czech Republic  

- €1,000 - €4,000  

- Hungary  

- €2,500 - €6,500 

- The Netherlands 

-  €  14.800  (cost  for  a  medium-size  foundation  with  expenses  of 
€2,450,000;  this  amount  consists  of  basic  fixed  costs  of  €5,000  for  a 
medium-sized  foundation  and  a  multiplier  related  to  the  amount  of 
expenses, and excludes VAT) 

- Poland  

- €1,700 - €14,000 

- Slovakia  

- €500 - €1,000 

- Sweden  

-  €53,417  (2010  audit  costs  of  an  EFC  Swedish  member,  which 
amounted to 487,000 Swedish krone) 

- United Kingdom  

-  €10,300  (the  average  audit  fee  for  a  medium-sized  foundation  with 
income  audited  between  £1  –  3  million,  which  amounted  to  £9,000 
according  to  the  League  table  of  top  charity  auditors  2009/10  from 
Caritasdata92). 

At the same time, the Statute could lead to savings for those foundations which are currently 
required to submit separate audit reports for the accounts of their offices abroad to authorities 
in those Member States – as they would be only obliged to file  one  set  of audited accounts 
under the Statute. 

C. Administrative impacts of the Statute on national authorities  

The  relevant  national  (registration,  supervisory,  tax)  authorities  would  need  to  adapt  their 
systems  to  be  able  to  deal  with  the  new  legal  form  of  FE  at  national  level.  For  instance,  as 
European Foundations would have to be registered in a national registry, this would require 
adjustments  (including  in  IT  systems)  in  the  relevant  registries  in  order  to  include  the 
European  Foundation  as  a  category  of  foundation  and  training  of  staff  regarding  the 
registration  requirements  related  to  the  FEs.  The  example  of  cost  estimates  below  for  one 
national registration authority related to the implementation of the European Company (SE) 
Statute illustrates the type of registration costs which could be involved. 

90  

91  

92  

This  information  has  been  gathered  for  the  purpose  of  this  report  by  the  EFC  through  its  network  of 
national associations of foundations and donors, and its network of national foundation law experts.  
At  the  same  time,  a  couple  of  contributions  with  information  quoted  in  the  box  mentioned  that  costs 
would not change if a foundation carried out activities in more than one Member State. 
http://www.charitiesdirect.com/images/cms/file/Top%20charity%20audtiors%202010.pdf. 

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Example: Estimated costs of implementing the SE Statute in Denmark93 

The adaptations and related costs were estimated as follows: 

- changing the IT system in the Danish registration authority with one-off costs of 3.7 million 
Danish krone (2003 value; amounting to about €500,000); 

- recurrent annual costs as a registration authority of approx. 0.4 million DKK (2003 value; 
amounting to about €53,500).  

Other costs involved costs of  training of staff and of preparation of guidance documents for 
companies (including an additional guidance on the employee involvement regime in SEs). 

In  addition,  in  Member  States  which  currently  do  not  have  a  registry  for  foundations94,  a 
system of registration would need to be created or the existing system updated, and this may 
entail further costs. However, existing registries could most likely be adapted and used instead 
of creating new ones, thus limiting the costs involved. The Statute would not lay down rules 
on  the  registration  fees.  The  Statute  would  also  require  Member  States  to  notify  the 
Commission  about  newly  registered  FEs;  this  requirement  should  not,  however,  add  much 
additional  burden  on  national  authorities  as  this  information  is  also  required  for  internal 
purposes.  

European  Foundations  would  also  need  to  be  supervised  by  a  State  supervisory  authority. 
According  to  the  feasibility  study,  there  is  already  a  State  supervisory  authority  for 
foundations  in  all  Member  States.  Consequently,  there  would  be  a  need  to  adjust  these 
systems  to  cater  for  European  Foundations  and  to  train  the  responsible  officials  but  there 
would be no costs associated with the creation of new authorities.  

In the case of the Statute with tax elements, training and adaptation of the current procedures 
would  be  also  required  within  the  national  taxation  authorities,  and  cooperation  would  be 
needed between registries, supervisory and tax authorities, leading to some additional costs as 
compared to the Statute without tax elements.  

The extent of costs for retraining and carrying out additional duties (and therefore, employing 
extra staff) in all authorities concerned would depend on how many foundations took on the 
FE status, and how quickly, and on the registration and supervisory duties introduced by the 
Statute  as  compared  to  the  national  rules  in  place.  The  exact  number  of  FEs  is  difficult  to 
determine (see above) and would be likely to vary per country, depending on the role played 
by foundations, their  current number in that country and the national requirements in place. 
The  Statute's  take-up  would  likely  be  gradual,  with  some  time  needed  for  the  foundation 
sector to become familiar with the new rules (as was, for instance, the case with the European 
Company  (SE)  Statute).  As  regards  new  registration  and  supervisory  duties,  costs  would  be 
likely  to  vary  across  Member  States,  e.g.  with  changes  being  smaller  for  countries  with 
authorities  which  already  have  extensive  supervisory  powers  (e.g.  Austria  or  France)  and 
bigger for those where there are currently fewer supervisory requirements (e.g. Cyprus)95.  

93  

94  
95  

Information  from  the  Danish  Commerce  and  Companies  Agency.  The  estimation  was  carried  out  in 
2003 in preparation of the law implementing the Member State options in the SE Statute and does not 
prejudge this authority's views as regards specific costs for EFs as such.  
According to the information provided by the EFC, central registry is not kept by France and Greece.  
See Annex 2. 

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Finally, it should be noted that the option of the Statute with or without tax elements would 
not go beyond that which is necessary to satisfactorily achieve the objectives that have been 
set,  therefore  respecting  the  principle  of  proportionality.  As  an  optional  tool,  it  would  not 
replace  national  legislation  and  would  leave  Member  States  the  choice  and  possibility  to 
uphold and develop their national legal forms.      

4.4. 

Harmonisation of Member States' laws on foundations and the tax treatment of 
foundations and donors  

4.4.1.  Harmonisation of laws on foundations through a Directive 

Description 

This  option  would  seek  to  align  national  laws  on  foundations  either  in  respect  of  all  issues 
relating to the establishment and operation of a public benefit purpose foundation or only in 
respect  of  those  aspects  which  are  most  relevant  and  problematic  for  the  cross-border 
establishment  and  operation  of  foundations.  The  latter  would  mean  covering  in  particular 
those requirements that foreign foundations need to meet in line with the host national law to 
be able to register and operate in that country, i.e. the acceptable purposes of public benefit 
purpose foundation, minimum assets, registration requirements and some aspects of internal 
governance. Member States would have to allow foundations fulfilling harmonised criteria to 
operate in their country without imposing additional requirements for their entry.  

Assessment  

An  extensive  harmonisation  would  effectively  remove  all  the  relevant  differences  between 
national laws on foundations and ensure a high level of uniformity, thus increasing the trust in 
foreign foundations and reducing the costs of cross-border activities. New short- and medium-
term  administrative  costs  might  arise  that  are  associated  with  legal  changes  and  with 
compliance to what could be new bodies of laws. Such costs can be assumed to be transitory 
and,  in  the  long  run,  significant  cost  reductions  could  be  expected.  With  harmonised  rules, 
uncertainty as to whether a foreign foundation is recognised as a public benefit purpose entity 
in other Member States would be removed.  

However, given that so far there has not been any harmonisation of laws on foundations and 
the  fact  that  there  are  important  differences  between  different  legal  systems,  extensive 
harmonisation  would  be  technically  challenging.  As  extensive  harmonisation  would  also 
require  significant  changes  to  national  legislation,  reaching  an  agreement  would  also  be 
politically  very  difficult.  One  specific  question  that  would  need  to  be  taken  into  account  is 
how  the  harmonisation  would  apply  to  the  common  law  systems:  e.g.  the  UK  distinguishes 
between charitable trusts, charitable companies and charitable incorporated organisations all 
with  some  similarities  and  some  differences  from  a  public  benefit  purpose  foundation,  but 
does  not  have  a  special  legal  form  for  a  “foundation”  as  such.  As  the  purpose  of  any  EU 
action in this field is to tackle cross-border barriers of foundations, extensive harmonisation of 
laws  on  foundations  would  not  meet 
the  proportionality  requirements.  Extensive 
harmonisation could lead to an impoverishing of foundation traditions in Member States and 
possibly even to the relinquishing some of the currently accepted ways in which foundations 
operate.  This  is  not  a  desired  outcome  of  the  EU  action.  For  these  reasons  extensive 
harmonisation should be discarded.  

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   EN 

 
Harmonisation of limited aspects of Member States' laws on foundations would offer a higher 
degree of uniformity among national legislations as compared to the baseline scenario. As the 
key  element  of  what  constitutes  a  public  benefit  purpose  foundation  would  be  harmonised, 
along with some other more problematic aspects, this approach could  facilitate cross-border 
establishment  and  operations  of  foundations  in  all  their  areas  of  activities  and  reduce  costs 
thereof, although to a more limited extent than extensive harmonisation. For the same reason, 
it  could  also  provide  foundations  with  more  legal  certainty  that  they  will  be  recognised  in 
other countries as public benefit purpose entities. 

However,  even  a  limited  harmonisation  approach  would  be  likely  to  run  into  technical  and 
political difficulties. Firstly, the law on foundations has developed differently across Member 
States,  for  different  reasons  and  with  different  outcomes.  As  explained  above  no  aspects  of 
the laws on foundations are harmonised in the EU and even partial harmonisation could face 
resistance and be difficult to agree upon. Secondly, existing rules on foundations can be seen 
as  a  consistent  set  of  rules.  Harmonising  only  certain  parts  of  the  rules  could  be  seen  as 
changing the overall balance for foundations and donors, necessitating more legal advice and 
therefore, higher costs. Also, altering only some parts of the national laws on foundations and 
leaving  some  untouched  could  create  legal  uncertainty.  The  more  diverse  and  complex  the 
rules, the less likely they would be to increase donors’ trust and their donations. 

4.4.2.  Harmonisation of tax treatment of foundations and donors through a Directive 

Description 

This option would seek to harmonise the tax treatment – and in particular the tax benefits - of 
public benefit purpose foundations and their donors across the EU by replacing the existing 
Member States' tax laws in this area with a uniform set of tax laws for foundations and their 
donors.  

Assessment 

Granting the same tax treatment to public benefit purpose foundations in all Member States 
would  obviously  reduce  the  costs  of  legal  advice  and  increase  legal  certainty,  as  the  rules 
would  be  the  same  everywhere.  This  would  encourage  cross-border  activity  for  foundations 
and  donations.  However,  this  solution  seems  to  be  difficult  to  achieve.  In  fact,  as  already 
explained, Member States are free to determine which general interests they wish to promote 
and  to  design,  to  that  end,  tax  advantages  for  foundations  (and  their  donors)  that  pursue 
objectives  linked  to  such  interests.  Moreover,  national  tax  rules  on  foundations  reflect  the 
history  and  traditions  of  each  of  the  Member  States  and  can  therefore  still  be  very  diverse. 
Trying to harmonise the tax treatment of foundations would go beyond what is necessary to 
attain  the  objective  pursued.  It  could  in  addition  be  perceived  by  Member  States  as  an 
unacceptable attempt to limit their tax sovereignty in an area which is particularly sensitive to 
them. As this option does not seem to be proportionate, it should be discarded.  

Following the above analysis, the remaining solution under the overall harmonisation policy 
option would be a limited harmonisation of national laws on foundations.  

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5. 

COMPARING THE OPTIONS AND SUMMARY OF THE IMPACTS 

5.1. 

Comparing the policy options on the basis of objectives (taking into account the 
political acceptability of each option) 

Following  a  preliminary  assessment,  two  policy  options  have  so  far  been  ruled  out  as  not 
feasible: extensive harmonisation of laws on foundations and harmonisation of tax treatment 
of  foundations  and  donors.  Further  policy  options  are  compared  below  on  the  basis  of  their 
fulfilment  of  the  chosen  policy  objectives.  These  options  are:  baseline  scenario,  an 
information  campaign  and  a  quality  charter,  the  Statute  for  a  European  Foundation  with  or 
without tax elements (i.e. non-discriminatory tax treatment applied automatically), as well as 
the limited harmonisation of national laws on foundations. 

•  No policy change/baseline scenario 

infringement  proceedings  against  some  Member  States  would  remove 

In  general,  this  option  would  not  achieve  all  the  chosen  policy  objectives.  It  would  have  a 
positive, but limited impact on foundations and cross-border donations. On the one hand the 
current 
the 
discrimination against foreign public benefit purpose foundations and their donors in the field 
of tax. On the other, the outcome may take some time and may not affect all Member States, 
therefore not sufficiently facilitating foundations' activities or encouraging donors to donate. 
This  would  have  a  limited  impact  on  the  funds  foundations  can  allocate  to  public  benefit 
activities.  

Moreover, implementation of the Services Directive is having a positive impact on reducing 
obstacles  and  costs  for  the  establishment  of,  and  the  cross-border  provision  of,  services  by 
foundations  engaging  in  economic  activities,  but  would  not  bring  changes  for  those 
foundations carrying out non-economic activities (e.g. grant-making foundations). Therefore, 
the  objective  of  reducing  uncertainty  concerning  the  public  benefit  status  of  a  foreign 
foundation would hardly be achieved.  

Given that this policy option does not bring any fundamental legal or administrative changes, 
its political acceptability appears to be high. 

•  Launching an information campaign and a quality charter 

The effectiveness of this option would be marginal. It would facilitate cross- border donations 
to some extent by providing more information on the requirements that need to be fulfilled. In 
addition, drawing up common rules for foundations across the EU in the charter and granting 
a European label could also enhance the  public authorities' and donors' trust in foundations' 
operations  (to  a  limited  extent  as  these  are  voluntary).  It  would  nonetheless  have  a  limited 
impact on national laws as it would not address the civil and tax barriers currently in place. 
Therefore, the barriers and costs encountered by foundations when  channelling funds cross-
border  would  remain  largely  unchanged.  It  would  shed  some  light  on  the  conditions  to  be 
fulfilled  in  order  to  be  recognised  as  public  benefit  purpose  foundations  in  other  Member 
States,  but  without  bringing  about  any  practical  solution  as  regards  uncertainty.  In  terms  of 
costs of running this policy option, they would be borne by whoever financed the information 
campaign.  

EN 

38 

   EN 

 
 
 
 
 
 
 
 
 
Such  an  option  may  enjoy  a  high  level  of  political  acceptability  for  the  above-mentioned 
reasons. 

•  Statute for a European Foundation without tax elements 

This option would address the policy objectives set to a considerable extent. By introducing a 
single legal form across the EU, the Statute would offer more uniform conditions regarding 
recognition as a public benefit purpose foundation, thereby reducing legal uncertainty across 
the Member States. It would cut costs currently due to obstacles created by the civil laws of 
the Member States. It would encourage cross-border donations and foundations' cross-border 
activities  alike,  as  the  European  label  that  the  Statute  offered  would  make  FEs  easily 
recognisable  and,  due  to  its  legislative  character  and  uniformity  across  the  EU,  it  would 
inspire more trust for donors as compared to the voluntary quality label.   

However, this policy option would not address the tax treatment of foreign foundations and 
donors,  nor  their  related  costs  and,  in  particular,  the  uncertainty  of  being  recognised  as  a 
public benefit purpose entity for tax purposes in another Member State. It might have some 
indirect positive effect if tax authorities were less strict in performing the "comparability test" 
due to higher trustworthiness of the European legal form. 

The  Statute  being  an  alternative  European  legal  form  and  not  leading  to  any  changes  in 
national  laws  on  foundations  would  be  more  politically  acceptable  than  the  harmonisation 
option. At the same time, reaching a unanimous agreement among 27 Member States on the 
provisions  of  the  Statute  may  prove  challenging.  In  fact  in  their  replies  to  the  2009  public 
consultation  and  in  CLEG  discussions,  some  Member  States  underlined  the  potential 
difficulties to reach an agreement (and in particular on a definition of a public benefit purpose 
foundation)  given  the  wide  variety  of  national  rules,  quoting  also  the  difficult  negotiation 
experience with the previous Statutes. 

•  Statute  for  a  European  Foundation  with  non-discriminatory  tax  treatment  applied 

automatically  

This option appears to be the most appropriate one as it would best achieve all the three policy 
objectives  set  by  clarifying  the  relevant  national  requirements  for  foundations  and  their 
donors and by removing both the civil and tax law related barriers and costs.  

This  policy  option  would  provide  the  same  benefits  as  mentioned  above  for  the  Statute 
without  tax  elements.  In  addition,  by  including  tax  rules  and,  in  particular,  applying  non-
discriminatory tax treatment without any need of an additional "comparability" test for foreign 
foundations  and  their  donors,  this  policy  option  should  lead  to  a  bigger  reduction  in 
compliance and tax related legal advice costs . It would further diminish legal uncertainty, in 
particular for being recognised as a public benefit purpose entity across Member States for tax 
purposes. As a result, it would have a more positive impact on the cross-border activities of 
foundations,  while  giving  a  stronger  incentive  to  donate  as  compared  to  the  Statute  without 
tax elements.  

Like the Statute without tax elements, this policy option would be technically and politically 
more acceptable than harmonisation as it would not lead to changes in national laws.  

EN 

39 

   EN 

 
 
 
 
 
 
 
 
 
 
 
•  Limited harmonisation of national laws on foundations 

This  option  would  harmonise  those  aspects  of  national  laws  on  foundations  which  are  most 
relevant for foundations' cross-border operations, and in particular the definition of a public 
benefit  purpose.  Therefore  it  would  score  well  as  far  as  reducing  uncertainty  about  being 
recognised as a public benefit purpose foundation for civil law purposes in another Member 
States  and  as  far  as  civil  law  related  costs  encountered  by  foundations  are  concerned. 
However, this solution, by not including tax elements, would not bring any direct benefit in 
this  area,  although  it  may  be  argued  that  it  could  bring  indirect  benefits  by  leading  to  a 
situation where tax administration might be less strict in performing the "comparability test". 
For  the  same  reason,  even  if  donors'  knowledge  and  trust  in  foundations  were  likely  to 
increase due to the important aspects of laws on foundations being harmonised, the impact on 
cross-border  donations  would  still  be  more  limited  as  compared  to  the  Statute  with  tax 
elements, due to remaining concerns regarding the tax treatment. To this extent, it would have 
a similar impact to the Statute without tax elements, although in contrast to the latter, it would 
not offer foundations a recognisable European label. 

This option – requiring 27 Member States to reach a compromise on harmonised definitions, 
which  in  turn  will  affect  national  laws  -  is  likely  to  be  technically  and  politically  difficult. 
Updating  national  laws  on  foundations  could  also  potentially  lead  to  uncertainty  for 
foundations, given the need to comply simultaneously with partly harmonised rules and with 
national rules.   

5.2. 

Comparing  policy  options  on  the  basis  of  impacts  on  stakeholders  (including 
administrative burden) 

This  section  is  based  on  the  assumption  that  since  activities  of  public  benefit  purpose 
foundations focus on the areas which are important for society (e.g. research and education, 
social  and  health  services,  arts,  culture  or  environment96),  the  option  which  best  facilitates 
both the expansion of foundations and donations in general will also bring the highest benefits 
for  direct  beneficiaries  and  EU  citizens  in  terms  of  social,  economic  and  environmental 
impacts. 

•  No policy change/baseline scenario or launching an information campaign and a quality 

charter 

With  no  policy  change  or  in  the  case  of  launching  an  information  campaign  and  a  quality 
charter, foundations and their donors would still encounter, as explained in the sections above, 
many of the current barriers to their cross-border activities and donations. This would mean 
that  foundations  may  not  be  willing  to  develop  many  new  cross-border  projects  and 
consequently, to employ additional employees or volunteers. This may, in turn, deprive direct 
beneficiaries  and  EU  citizens  as  a  whole  of  numerous  social,  environmental  or  economic 
benefits.  

The  above-mentioned  options  would  have  a  marginal  impact  on  national  legislation  (apart 
from the impact of infringement proceedings in the field of tax), therefore not leading to any 
additional compliance costs or administrative burden for the national authorities.  

96  

See section 2.3.1 for more detailed information on foundations' activities. 

EN 

40 

   EN 

 
 
 
 
 
 
                                                 
•  Statute for a European Foundation without tax elements 

This policy option would significantly improve the situation for foundations as regards costs 
and  uncertainty  related  to  national  civil  law  requirements  –  and  therefore  should  facilitate 
foundations' activities. By providing foundations with a European label, it would be expected 
to  make  foundations  more  trustworthy  for  donors,  therefore  incentivising  donations. 
Depending  on  the  Statute's  exact  take-up  and  the  number  of  new  foundations  and  projects 
created as a result (see section 4.3 above), it should result in more activities and more positive 
impacts on direct beneficiaries and EU citizens as compared to both the non-legislative option 
and the legislative option of harmonisation.  

However, its impact would be limited to the extent it would have hardly any – or potentially 
only some indirect impact – on costs and uncertainties related to tax treatment. 

As regards impacts on national authorities, these would benefit from an efficient cross-border 
distribution of funds of foundations by collaborating more with them on certain projects for 
public  benefit  (see  for  instance  the  EFC  League  of  Historical  Accessible  Cities  project, 
aiming,  through  a  partnership  of  nine  foundations  and  six  cities  from  five  countries,  to 
improve the accessibility of historical towns and promote sustainable tourism development). 
Member States will need to adapt their systems and train responsible staff to be able to deal 
with  the  new  legal  form  of  FE  but  this  should  not  impose  major  administrative  burdens,  as 
illustrated in section 4.2.   

•  Statute  for  a  European  Foundation  with  non-discriminatory  tax  treatment  applied 

automatically 

The Statute with tax elements, as argued in section 5.1 above, should offer the best conditions 
–  as  compared  to  the  other  options,  including  the  Statute  without  tax  elements  -  for 
foundations to develop their cross-border activities and could best incentivise donations. To 
this  extent,  and  depending  on  the  interest  in  the  Statute  and  to  what  extent  it  increased 
foundations'  cross-border  projects  (see  section  4.3  above),  it  can  also  be  assumed  that  its 
impact  on  other  stakeholders  -  direct  beneficiaries  and  EU  citizens  -  in  terms  of  social, 
economic or environmental benefits would be likely to be higher than those under the other 
policy options. 

For  example,  some  potential  beneficial  impacts  for  EU  citizens  and  society  are  likely  to 
include: 

- higher overall social benefit due to more funds being channelled to public benefit purposes 
(rather than being spent on administrative procedures); the exact benefit would depend on the 
amount  by  which  the  Statute  with  tax  elements  reduced  administrative  and  legal  costs  for 
foundations  (assumed  in  this  report  to  amount  to  about  €90  and  €102  million  a  year,  as 
explained above). 

-  beneficial  social  impact  thanks  to  this  Statute  option  encouraging  and  promoting  more 
activities in the social area (which is likely given that social and health services are the second 
biggest  area  of  public  benefit  purpose  foundations'  activities);  and  offering  foundations 
opportunities  to  exchange  experiences  across  the  EU  and  to  address  more  specifically  EU-
wide  social  issues.  By  increasing  foundations'  work  in  a  number  of  areas  of  concern  for 
citizens, the Statute with tax elements would also have a positive impact on protecting some 

EN 

41 

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of the  fundamental rights as defined by the  Charter  of Fundamental Rights of the European 
Union97. 

- positive social impact in terms of creating new employee and volunteer posts, in the latter 
case contributing to the development of volunteering at European level (which is one of the 
objectives of the European Year of Volunteering 2011). On the assumption that, for instance, 
half  of  foundations  which  want  to  expand  their  cross-border  activities  (between  25,000  and 
30,000 according to the feasibility study) would do so through the Statute with tax elements 
and would need at least one extra employee and volunteer, one could estimate that there could 
be up to 15,000 new employment and 15,000 new volunteer posts. This is a ballpark figure 
only  and  other  considerations  would  need  to  be  taken  into  account  (e.g.  number  of  new 
projects; type of European Foundations, with more employees usually employed in operating 
foundations,  and  more  volunteers  in  fund-raising  ones).  Apart  from  a  direct  impact,  this 
Statute option would also have an indirect impact on the number of employees and volunteers 
in organisations and projects that FEs would support through funding. All such social impacts 
would be in line with - and contribute to achieving - the "inclusive growth" objectives under 
the EU2020 strategy.  

-  increased  interest  from  foundations  in  developing  cross-border  activities  in  the  areas  of 
research  and  the  environment.  This  would  be  likely  due  to  the  cross-cutting  and  EU-wide 
character of these issues, and – specifically in the research area – due to the currently fairly 
low  level  of  cross-border  foundation  research  activity  despite  interest  among  research 
foundations  (as  e.g.  shown  by  the  setting  up  of  a  European  Forum  on  Philanthropy  and 
Research  Funding  by  the  EFC).  The  more  obstacles  to  these  activities  the  Statute  with  tax 
elements  would  remove,  the  more  it  could  contribute  to  increasing  the  overall  level  of 
research, development and investment in the EU, and, in turn, to higher economic growth. In 
the  research  area, 
the 
recommendations  of  the  2005  expert  group  report98  and  the  recent  discussions  between 
Member State representatives and foundations99 (both calling for a more conducive EU-wide 
legal,  fiscal  and  regulatory  environment  for  the  operation  of  foundations,  including  the 
introduction of a Statute for a European Foundation).  

tax  elements  would  directly  respond 

the  Statute  with 

to 

This  policy  option  could  lead  to  some  additional  costs,  for  instance,  in  terms  of  adapting 
systems and training responsible staff in the national taxation authorities but the bulk of the 
costs would be the same as under the Statute without tax elements. 

•  Limited harmonisation of national laws on foundations 

Like  the  Statute  without  the  tax  elements,  the  option  on  limited  harmonisation  would  have 
hardly any impact on costs related to the "comparability test" and uncertainty related to being 
recognised as a public benefit purpose foundation for tax treatment purposes. This would lead 
to a smaller reduction in costs for foundations and would give fewer incentives to donors, as 
compared to the Statute with tax elements. Giving fewer incentives to foundations to develop 
cross-border  activities,  this  option  would  have  a  smaller  social  impact  (in  terms  of  new 

97  
98  
99  

OJ C 83, 30.3.2010, p.389. 
See footnote 29. 
Meeting report of the first workshop with Member State representatives and foundations on "The Role 
of Philanthropy in supporting Research and Innovation in Europe: Brussels, 13 October 2010". 

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employees  and  volunteers)  and  would  result  in  more  limited  social,  environmental  or 
economic benefits for EU citizens than in the case of the Statute without tax elements.  

Updating  national  laws  on  foundations  following  harmonisation  would  lead  to  short-  to 
the  national  authorities  and 
medium-term  administrative  and  compliance  costs  on 
stakeholders concerned, even in the case of a limited scope of harmonisation.  

5.3. 

Comparison tables 

Objectives 

Increase cross-border 
donations 

Policy option  

No policy change 

Launching an 
information campaign 
and a quality label  

Statute for a European 
Foundation without tax 
elements 

Statute for a European 
Foundation with non-
discriminatory tax 
treatment applied 
automatically 

Limited harmonisation of 
national laws on 
foundations 

0 

+ 

+ 

++ 

+/≈ 

Reduce costs for 
foundations of pooling 
and distributing funds 
cross-border for public 
benefit purposes  

Reduce uncertainty 
as to whether a 
foreign foundation 
would be recognised 
as a public benefit 
purpose entity in 
other Member States 

0 

≈ 

+ 

++ 

+ 

0 

≈ 

+ 

++ 

+ 

EN 

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   EN 

 
 
 
 
 
 
 
 
  
Policy option 

Foundations 

Donors  

Impacts on stakeholders 

Beneficiaries 
and EU citizens  
at large/ 
taxpayers 

National authorities 

(administrative 
burden) 

 No policy 
change 

Launching an 
information 
campaign and 
quality label 

Statute for a 
European 
Foundation 
without tax 
elements 

Statute for a 
European 
Foundation 
with non-
discriminatory 
tax treatment 
applied 
automatically 

Limited 
harmonisation 
of national 
laws on 
foundations 

0 

 +/≈ 

+ 

0 

+ 

+ 

0 

≈ 

+ 

++ 

++ 

++ 

+/≈ 

+/≈ 

+/≈ 

0 

0 

≈ 

≈ 

– 

Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly 
positive; + positive; +/≈ still positive but weaker impact; – – strongly negative; – negative; ≈ marginal/neutral; 
? uncertain; n.a. not applicable 

5.4. 

Conclusion 

In the light of the above, it appears that the most appropriate option would be a Statute for a 
European Foundation with non-discriminatory tax treatment applied automatically. Compared 
to  the  other  policy  options,  it  would  be  more  effective  in  terms  of  achieving  the  three 
objectives set.  

EN 

44 

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Like  the  Statute  without  tax  elements,  it  would  not  replace  or  harmonise  national  laws,  but 
take the form of an alternative tool that leaves the Member States the opportunity to uphold 
and  develop  their  own  legislation,  which  makes  both  of  these  options  preferable  to  the 
harmonisation policy option. At the same time, it would bring a clear and uniform tool that 
would reduce the current legal and administrative obstacles related to both civil and tax law 
matters and therefore enhance foundations' cross-border activities and cross-border donations 
to a larger extent than the Statute without tax elements.  

As a result, it would bring more added-value for direct beneficiaries and EU citizens in terms 
of social, economic and environmental impacts as compared to the other options. 

The  administrative  costs,  although  higher  as  compared  to  the  baseline  scenario  or  the 
information  campaign  and  the  quality  charter,  would  not  impose  an  unnecessary  burden  on 
national  authorities  (  as  would  also  be  the  case  for  the  Statute  without  tax  elements),  when 
compared in particular to the limited harmonisation option.  

The  chosen  Statute  option  would  therefore  be  more  suitable  for  achieving  the  objectives 
pursued and would not go beyond that which is necessary to attain  them.  Moreover,  it  may 
also  prove  to  be  more  acceptable  politically  than  the  limited  harmonisation  of  laws  on 
foundations across the EU.  

6.   MONITORING AND EVALUATION  

The  Commission  will  monitor  implementation  of  the  chosen  policy  option  and  assess  the 
results  and  the  progress  achieved  according  to  the  objectives  set.  In  doing  this,  the 
Commission will be assisted by Member State company law experts (i.e. the Company Law 
Expert  Group,  CLEG).  In  particular,  data  will  be  gathered  in  collaboration  with  national 
authorities (through CLEG), the foundation sector (through the EFC) and any other relevant 
stakeholders such as academics active in this field. The provision of such information should 
not impose any unnecessary administrative burden either on the national authorities or on the 
foundation sector.  

Monitoring 

If the chosen policy option is the Statute, the Commission could focus on issues such as: the 
number of European Foundations established; areas of activities of established FEs; number 
of  employees  and  volunteers  in  FEs;  trends  in  the  cross-border  donations  given  to  national 
foundations  compared  to  those  given  to  FEs;  and  variation  in  the  cross-border  activities  of 
foundations.  

If  the  preferred  option  is  limited  harmonisation,  the  monitoring  would  initially  focus  on 
implementation  of  the  proposal  (i.e.  amendments  of  national  rules),  where  the  Commission 
may  provide  assistance  (e.g.  in  the  form  of  implementation  workshops).  Furthermore,  the 
Commission would also gather data (e.g. numbers of new foundations established or trends in 
foundations'  cross-border  activities)  in  view  of  evaluating  the  impact  of  this  legislative 
measure. 

Evaluation 

The evaluation process will aim at assessing the progress that has been made in applying the 
chosen  policy  option  and  will  provide  indications  as  to  whether  the  desired  objectives  have 

EN 

45 

   EN 

 
been  successfully  achieved.  In  this  regard,  an  evaluation  report  would  be  undertaken  seven 
years  after  the  entry  into  force  of  the  chosen  policy  option  and  it  would  be  based  on  the 
information gathered during the monitoring exercise, and on additional input collected from 
the foundation sector, national authorities or other stakeholders concerned, as necessary.  

In  general,  the  evaluation  could  look  at  issues  such  as:  (i)  how  many  domestic  foundations 
have  decided  to  undertake  cross-border  operations  following  the  implementation  of  the 
chosen policy option; (ii) what the remaining practical problems are for cross-border activities 
of foundations that have not been removed by the chosen policy option; (iii) to what extent 
the  above-mentioned  changes  (positive  or  negative)  are  attributable  to  the  chosen  policy 
option; (iv) what the parallel changes were in the national foundation legislation and taxation 
rules related to foundations; and (v) whether there were any unexpected impacts of the chosen 
policy option. 

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46 

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ANNEX 1: NUMBER OF FOUNDATIONS 

Country100 

Number of foundations 
(2005) 

Public benefit purpose 
foundations (2005) 

Foundations per 1m inhabitants (2005)

Austria 

Belgium 

Cyprus 

3390101 
665 

35 

Czech Republic  1503 
Denmark 
Estonia 

14,000102 
638 

Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Malta 

Netherlands 
Poland 
Portugal 
Romania 
Slovakia 

Slovenia 

Spain 

Sweden 

2,600 

1,226 

12,940 

489 

22,255 

107 

4,720 

584 
1300103 
57104 
163000105, 106 
6,000 
485 
16 785108 
338 

143 

10,835 

14,495 
8,800109 

n/a 

400 

35 

1503 
14,000 
183 

2,600 

1,226 

12,000 

489 

16,707 

107 

4,720 

145 

1300 

50 
n/a107 
6,000 
485 
16 785 
338 

143 

10,835 

11,501 

63.14 

44.9 

145.9 
2556.7 
61.9 

490.6 

19.1 

156.9 

43.8 

2,213.8 

25.2 

79.9 

172.5 

n/a 
157.4 
44.3 

62.6 

70.8 

240.2 

1,579.1 

UK 
Source:  the  feasibility  study,  with  additional  information  from  national  experts  cooperating  with  the  EFC  from  Denmark, 
Lithuania, Malta and Romania. 

8,800 

145.2 

100  
101  

102  

103  

104  

105  

106  
107  

108  

109  

No information for Bulgaria was included in the study due to lack of reliable data. 
This  figure  includes  2,843  private  foundations  plus  550  public  foundations.  See  Doralt-Kalss,  Stiftungen  im 
Österreichischen Recht (2001). In: Hopt, Reuter (Eds.) Stiftungsrecht in Europa. 
As  of  April  2011  there  were  1.346  registered  enterprise  foundations.  It  is  difficult  to  provide  precise  figures  for 
non-enterprise foundations as they are not registered in a national registry. Furthermore, it is difficult to give exact 
figures for public benefit purpose foundations, as most enterprise foundations have a public benefit purpose which 
is often combined with the purpose to own the shares of a specific company, and non-enterprise foundations may 
exist without a public benefit purpose (e.g. family foundations). 
1300 charity/sponsorship funds  were registered in Lithuania by the end of 2010 according to Non-Governmental 
Organisation Information and Support Centre (NISC). 
According to the Public Registry in Malta, there are (as of March 2011) 57 registered foundations, of which 7 are 
private foundations.  
Because  of  the  special  character  of  Dutch  foundations,  this  number  is  excluded  from  the  calculation  of  the  total 
number of foundations. 
See "The Politics of Foundations - a Comparative Analysis", Gouwenberg (page 242). 
Although  the  exact  number  of  public  benefit  foundations  is  unknown,  according  to  country  experts  many  Dutch 
foundations  have  no  public  benefit  purpose  but  instead  have  a  business  one,  mostly  in  the  area  of  providing 
services.  
A 
21: 
http://www.fdsc.ro/library/conferinta%20vio%207%20oct/Romania%202010_Sectorul%20neguvernam
ental1.pdf  
Not  included  are  80,000  to  90,000  charities.  These  represent  a  special  case  because  they  are  small  and  not 
incorporated and therefore cannot be regarded as equivalent to what would be a foundation with legal personality in 
civil law (irrespective of whether it is in the form of a limited not-for-profit corporation or a civil law foundation). 
For this argument see also Greyham Dawes on p. 21. 

Romanian, 

non-profit 

recent 

sector 

study 

the 

of 

in 

p. 

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47 

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ANNEX 2: DESCRIPTION OF NATIONAL CIVIL AND TAX LAWS FOR FOUNDATIONS IN MEMBER 
STATES

110 

2.1. Civil law 

Acceptable purposes  

There  are  a  number  of  different  typologies  used  to  classify  foundations.  Based  on  the 
purposes foundations pursue, the main types of foundations include:  

Public  benefit  purpose  foundations:  these  constitute  the  most  predominant  type  of 
foundations  and  are  present  and  recognised  in  all  Member  States.  They  are  the  only 
recognised foundation type in 13 Member States and the dominant one even in those Member 
States  where  other  types  are  also  accepted111.  According  to  the  definition  elaborated  in  the 
feasibility  study,  a  foundation  which  serves  a  public  benefit  purpose  needs  to  benefit  a 
broadly defined group of recipients (rather than just members of a family or a closed circle of 
beneficiaries). The distribution of profits to private parties (e.g. founders, directors or trustees) 
is not allowed112.  

In some Member States, specific types of public benefit purpose foundations exist, including 
university foundations (e.g. in France or Italy), endowment funds (e.g. in Czech Republic or 
France), or banking foundations (specifically in Italy).  

Private  benefit  purpose  foundations:    in  contrast  to  public  benefit  purpose  foundations, 
thesebenefit a narrow group of recipients. This type of foundation is recognised in 14 Member 
States113 and in most of these countries their number is relatively low (with the exception of 
Dutch  foundations).  Examples  of  private  benefit  foundations  include,  for  example,  family 
foundations  (which  promote  the  benefit  of  the  family  of  the  founder  and  are  present  in  a 
number of Member States), foundations for the founder (which allow private distribution to 
the founder; this type of foundation is generally not accepted in most Member States except 
for Austria), pension funds, or enterprise foundations which aim to preserve and maintain an 
enterprise such as, for instance, in the Netherlands, Sweden or Denmark114. Dutch commercial 
foundations are an exception to the rule as they do not promote public benefit purpose, yet are 
numerous. They are non-profit service providing foundations and carry out functions which in 
other less liberal Member States would be fulfilled by other legal entities, e.g. cooperatives115.  

In  addition,  there  are  also  mixed-purpose  foundations  that  benefit  both  public  and  private 
purposes.  Danish  law  provides  a  special  legal  form  for  foundations  wishing  to  engage  in 
major commercial activities by direct means or by holding controlling interest in commercial 

110  

111  

112  
113  

114  
115  

Information is based on the 2008 feasibility study and the EFC Comparative Highlights of Foundation Laws 2011 
and EFC country profiles of 2011. In case of discrepancies, the most recent information has been used. 
Member States which only recognise public benefit foundations are as follows: Czech Republic, France, Hungary, 
Ireland,  Lithuania,  Luxembourg,  Poland,  Portugal,  Romania,  Slovakia,  Slovenia,  Spain  and  United  Kingdom.  9 
Member  States  recognise  foundations  with  "any  lawful"  purposes:  Cyprus,  Denmark,  Estonia,  Germany,  Italy, 
Latvia, Malta, the Netherlands and Sweden; and Finland recognises foundations with "useful purposes". 4 Member 
States  have  different  categories  for  "public  benefit"  and  "private"  foundations:  Austria,  Belgium,  Bulgaria  and 
Greece. Data from the feasibility study, pp. 52-53. 
See Annex G "Definition of foundations" of the feasibility study for more detailed information. 
Austria,  Belgium,  Bulgaria,  Cyprus,  Denmark,  Estonia,  Finland,  Germany,  Greece,  Italy,  Latvia,  Malta,  the 
Netherlands and Sweden. 
See feasibility study, pp. 58-59.  
See feasibility study, p. 14. 

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entities.  The  law  also  allows  Danish  commercial  foundations  to  combine  commercial  and 
public benefit purposes and requires the charters of such foundations to include a regulation 
of distribution of profits. A number of Austrian private purpose foundations – which hold a 
substantial share of equity in Austrian corporations - are also hybrid entities, pursuing public 
benefit in line with other purposes.  

Overall,  the  foundations  with  activities  for  private  purposes  represent  a  small  proportion  as 
compared  to  the  overall  size  of  the  foundation  sector.  Even  if  they  have  an  economic 
importance  in  their  national  economies,  they  are  concentrated  in  only  a  number  of  Member 
States. 

Internal governance 

Concerning  internal  governance,  all  Member  States  accept  as  a  rule  that  the  founder  has  a 
wide  scope  of  freedom  concerning  the  content  of  the  statutes.  There  are,  however,  certain 
mandatory  requirements  in  Member  States'  legislations.  For  instance,  as  far  as  the  board  is 
concerned, in about half of the Member States116, one board member is sufficient; the other 
half requires at least 3 board members117. In some Member States118 only natural persons are 
allowed to become board members for public benefit purpose foundations, while most of the 
Member  States119  also  accept  legal  persons  as  board  members.  Other  mandatory  personal 
requirements  for  board  members  are  seldom  explicitly  stated  in  statutory  law.  As  a  general 
rule,  in  all  Member  States  the  founder  is  free  to  determine  in  the  statutes  how  the  board 
members are appointed. The duty of care and the duty of loyalty are recognised in all Member 
States  and  are  part  of  each  country's  legal  provisions.  Some  national  laws  provide  special 
rules about self-dealing transactions which specify the duty of loyalty. On remuneration, some 
Member States120 allow a reasonable level of financial compensation, some Member States121 
prohibit remuneration, and in the other Member States122 there are no explicit restrictions in 
civil or tax law. In one Member State123, the State supervisory authority may check whether 
the  remuneration  is  appropriate  and  can  reduce  any  remuneration  deemed  excessive. 
Generally,  the  founder  is  free  to  determine  in  the  statutes  in  what  circumstances  a  board 
member may be dismissed. Explicit restrictions of that rule are rare124. Normally in civil law 
countries,  foundations  do  not  have  a  membership.  There  is,  however,  one  country125  where 
foundations can have some membership structure; assets may not, however, revert back to the 
ownership  of  the  said  members.  Participatory  elements  (several  founders  forming  the 
board/advisory  council)  are  also  known  in  the  growing  sector  of  community  foundations  in 
several EU Member States.  

116  

117  

118  
119  

120  

121  
122  
123  
124  
125  

Austria  (for  public  foundations),  Estonia,  Germany,  Greece,  Hungary,  Italy,  the  Netherlands,  Poland,  Portugal, 
Sweden, United Kingdom (for private incorporated companies). 
Austria  (for  private  foundations),  Belgium,  Czech  Republic,  Denmark,  Spain,  Finland,  France,  Ireland,  Latvia, 
Malta, Romania, Slovakia and Slovenia.  
Austria (for public foundations), Czech Republic, Denmark, Finland, Hungary and Latvia. 
Austria  (for  private  foundations),  Belgium,  Bulgaria,  Cyprus,  France,  Germany,  Greece,  Hungary,  Ireland, 
Luxembourg, Malta, the Netherlands, Sweden and United Kingdom.  
Austria  (for  public  foundations),  Belgium,  Denmark,  Estonia,  Finland,  Germany,  Latvia,  Poland,  Sweden  and 
United Kingdom. 
FR (for traditional foundations), Greece, Spain, Ireland, Luxembourg, Lithuania, Romania and Slovenia. 
Austria (for private foundations), Bulgaria, Cyprus, Hungary, Italy, Lithuania, and the Netherlands. 
Denmark. 
In the Netherlands and Denmark a special reason is required.  
In Italy there can be member-like participants in participatory foundations and banking foundations. In the first one 
an  assembly  of  participants  can  have  the  right  to  elect  a  minority  of  the  members  of  the  governing  body  of  the 
foundation. The latter ones have often originally been organised as associations and they are allowed to retain the 
assembly of "members" with restricted powers.  

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Supervision 

With  regard  to  supervision,  a  supervisory  board  is  mandatory  for  all  foundations  in  three 
Member  States126,  only  for  larger  foundations  in  four  Member  States127,  and  for  banking 
foundations in one Member State128.  

In  all  Member  States  there  is  a  State  supervisory  authority  for  foundations.  The  State 
supervision is carried out by public administrative bodies, public independent bodies129 or by 
a combination of a public administrative body and the court, where the administrative body 
monitors  but  the  court  takes  any  decisions  on  preventive  supervision  and  enforcement. 
Supervision of foundations established for public benefit purposes is generally more extensive 
than for other types of foundations. Usually the State supervisory authority is only allowed to 
check  whether  the  duties  imposed  by  national  applicable  law  and/or  the  statutes  are  being 
fulfilled  and  the  extent  of  supervision  depends  on  the  extent  of  these  duties.  There  are, 
however, differences in the extent of the supervision: in Austria the supervisory authority can 
inspect  the  administration  of  the  assets  of  public  benefit  purpose  foundations  at  any  time 
while  in  France  the  authority  has  full  jurisdiction  to  audit  the  reports  and  accounts  of  the 
foundations, as well as their use of the funds raised from the public or derived from legacies 
and  gifts  made  to  them.  At  the  other  extreme,  in  Cyprus  there  are  no  requirements  for 
regulatory  or  supervisory  control,  foundations  simply  having  to  meet  the  annual  filing  and 
regulatory requirements. As a means of preventive supervision, the Board of foundation must 
send  annual  reports  and  annual  accounts  to  the  State  supervisory  authority  in  all  Member 
States but the Netherlands, where the financial information is given to fiscal authorities.  

Reporting, transparency and disclosure 

Almost  all  Member  States  require  each  foundation  to  prepare  an  annual  report  and  annual 
accounts on its activities. Most Member States require them to be disclosed to the public. In 
some  Member  States  an  external  auditor  is  generally  necessary130,  in  others  an  audit  is 
necessary  only  for  larger  foundations131  or  for  certain  kinds  of  foundations132.  In  eight 
Member States an auditor is not required.  

Formation of a foundation 

Regarding the formation of a foundation, there are different approaches as to how to establish 
a foundation, and in some Member States there are different procedures for different types of 
foundation133.  Usually  three  requirements  have  to  be  fulfilled  in  all  Member  States:  the 
creation of a foundation deed, the creation of a draft of the foundation's statutes and founding 
assets.  In  order  to  establish  the  foundation  as  a  separate  legal  entity,  a  certain  public  act  is 
usually required. In many Member States the foundation will be registered. If the foundation 
is  established  inter  vivos,  several  Member  States  require  the  foundation  deed  in  a  specific 

126  
127  
128  
129  
130  
131  
132  

133  

Estonia, Poland and Portugal. 
Austria for larger private foundations, Czech Republic, Hungary and Slovakia. 
Italy. 
England and Wales. 
Greece, Czech Republic, Cyprus, Finland, France, Lithuania, Sweden and Slovakia.  
Belgium, Bulgaria, Spain, Hungary, the Netherlands, Poland (medium or large entities), United Kingdom.  
Austria  (private  foundations),  Denmark  (commercial  foundations),  Estonia  (larger  private  foundations),  Ireland 
(incorporated foundations).  
E.g. in Austria and Belgium. 

EN 

50 

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form, either a public deed by a public notary134 or by a written declaration. If the foundation is 
established  mortis  causa,  the  legally  required  form  for  a  last  will  and  testament  is  usually 
accepted in all Member States except for two135, who only accept a testament in the form of a 
public  deed.  In  England,  Wales  and  Ireland  making the declaration in writing is not always 
required in order to create a charitable trust. 

There are differences regarding the question of whether a certain minimum of founding assets 
is necessary. In a few Member States136, the law imposes a specific amount. In some others 
the law does not require a specific initial amount, but requires the capital to be adequate for 
the fulfilment of the purpose137. In a third group of Member States138, founding assets are not 
required, but a foundation may be dissolved by court order if it lacks the means to achieve its 
purpose  and  there  are  no  prospects  of  means  in  the  future.  Several  Member  States139  have 
different rules for different types of foundations.  

In  all  Member  States,  the  amendment  of  the  purpose  of  a  foundation,  and  of  its  statutes  in 
other  respects,  is  possible  only  under  prescribed  conditions.  In  many  Member  States140, 
amendment or modification of the statutes is possible if a majority of the board of directors of 
the  foundation  votes  for  it  and  the  State  supervisory  authority  approves  the  modification  as 
being in line with the founder's intentions.  In some Member States141, an amendment of the 
purpose  is  permitted  only  under  qualified  conditions.  Some  Member  States142  allow  an 
amendment  in  some  cases  by  the  board  of  directors  without  an  approval  of  the  State 
supervisory  authority.  A  few  Member  States143  permit  the  founder  him/herself  to  be 
authorised in the statutes to amend those statutes without public intervention. Where there is 
fundamental  reason  for  doing  so,  some  Member  States144  empower  the  State  supervisory 
authority to amend the purpose or administrative statutes of a foundation without the consent 
of  the  governing  body,  although  sometimes  the  intervention  of  the  court  is  required. 
Regarding the particularity of the purpose, some Member States145leave it to the founder to 
decide  whether the  foundation should have a broad purpose or  a narrow purpose. In certain 
others146, the law requires a more particular description as too broad a discretion given to the 
board  of  directors  would  conflict  with  the  concept  of  the  foundation  as  fulfiller  of  the 
founder's will.  

134  

135  
136  

137  

138  
139  
140  

141  

142  
143  

144  

145  
146  

Belgium, Bulgaria, Czech Republic, Estonia, Greece, Italy, Latvia, Luxembourg, Malta, the Netherlands, Slovakia 
and Spain. 
The Netherlands and Belgium. 
Austria for private foundations, Czech Republic for traditional foundations, Denmark, Finland, Malta, Romania and 
Slovakia. In Spain the law presumes that an endowment of 30 000€ is sufficient to fulfil the foundation's purpose.  
Austria  for  public  foundations,  Belgium  for  public  foundations,  France  for  traditional  foundations,  Germany, 
Greece, Hungary, Italy, Luxembourg, Portugal, Sweden except for fundraising foundations. 
Bulgaria, Cyprus, Estonia, France for endowment funds, Ireland, Latvia, the Netherlands and United Kingdom. 
Austria, Belgium, Czech Republic, Denmark, France, Hungary, Malta  Romania,  Sweden. 
Cyprus,  Denmark,  and  Finland;  for  public  foundations:  Germany,  Latvia,  Luxembourg,  Austria,  Belgium;  and 
France for traditional foundations.   
In Portugal the purpose cannot be amended substantially; in Finland the amendment of the purpose is possible only 
if the statutory purpose is impossible, very difficult, totally or essentially useless because of the low value of the 
assets or another reason, or is against the law or good practice.  
Bulgaria, Italy, Malta, the Netherlands and Poland. 
Austria    for  private  foundations,  Hungary  in  some  cases,  Ireland,  and  UK  with  a  prior  consent  of  the  Charity 
Commission for the change of purpose, the rules on the application of assets on the dissolution and the provision of 
benefit to any trustees or members.  
Austria,  Belgium,  Bulgaria,  Cyprus,  Denmark,  Estonia,  Germany,  Greece,  Ireland,  Italy  and  Poland.  Not 
empowered in Finland, France, Hungary, and Luxemburg.   
E.g. United Kingdom. 
E.g. Denmark. 

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Liquidation 

Concerning liquidation, some Member States147 require the assets of the liquidated foundation 
to  be  transferred  to  a  foundation  with  similar  purpose  in  compliance  with  the  original 
intentions  of  the  founder.  In  some,148  the  remaining  assets  must  be  transferred  to  another 
public  benefit  purpose  entity.  In  a  third  group  of  countries149  it  is  left  to  the  founder  to 
determine in the statutes what is to be done with the residual assets. In these Member States 
tax-exemption will generally only be granted if the statutes provide that on termination of the 
foundation  the  remaining  assets  will  be  used  for  another  tax-exempt  purpose  and  that  the 
transfer may be taxed according to gift tax laws.  

Adequate and timely distribution for public benefit activities 

Concerning the adequate and timely distribution for public benefit activities, the question is 
usually  regarded  as  a  matter  of  tax  law.  Civil  law  rules  governing  foundations  are  rarely 
explicit on distribution rules150. In tax law there are different approaches but even then only in 
a few Member States151 are there explicit limits for what is deemed an adequate distribution.  
Most  Member  States  do  not  have  explicit  rules,  but  unreasonable  excessive  accumulations 
may  be  regarded  as  an  infringement of  the general  rule that  a  tax-exempt foundation has to 
promote its public benefit purpose. No Member State requires a foundation to spend a certain 
percentage of its overall assets. Some Member States have rules concerning the administration 
of the foundation's assets, notably on capital maintenance152 and investments153. 

Permitted economic activities 

The  question  of  permitted  economic  activities  is  resolved  in  different  ways.  As  regards  the 
scope of permitted economic activities in civil law, some Member States allow foundations to 
carry  out  economic  activities  without  special  restriction154,  whereas  other  Member  States 
restrict their economic activities in one way or another for reasons of creditor protection or the 
protection of the assets of the foundation. Those countries who restrict foundations' economic 
activities often subordinate any trading to the foundation's public benefit purpose in the sense 
that  trade  is  allowed  only  when  it  directly  furthers  or  facilitates  that  purpose  and  when  any 
profit  is  not  the  foundation's  main  aim  in  undertaking  the  activity.  Three  Member  States155 
only allow some very specific economic activities listed in law. As regards tax law, the profits 
of unrelated economic activities are usually subject to income tax in order to avoid an unfair 

147  

148  
149  

150  

151  

152  

153  

154  
155  

Czech  Republic,  Luxemburg,  Portugal,  Slovenia;  Austria,  Belgium,  Bulgaria  for  the  public  benefit  foundations; 
Cyprus, United Kingdom. 
Denmark, France, Lithuania, Slovakia, Spain  
Austria  for  private  foundations;  Bulgaria,  Finland,  Germany,  Greece,  Hungary,  Italy,  Latvia  for  private 
foundations; the Netherlands, Poland, Portugal. 
With  the  exception  of  Spain  where  a  foundation  must  pay  out  at  least  70%  of  its  net  annual  income  for  the 
furtherance of the foundation's public benefit purpose. In Czech Republic, the Court will wind up a foundation in 
case no grants have been distributed for two consecutive years.   
In Finland, Germany and Spain, generally 70% of the annual net income has to be distributed. In Portugal 50% of 
all  net  income  must  be  allocated  within  four  years,  in  the  United  Kingdom  income  should  be  spent  within  three 
years. In Lithuania donations should be spent during period of three years, otherwise they will be treated as taxable 
income. In Sweden, a foundation must use approximately 80% of its income to pursue its public benefit purpose 
within a period of 5 years.  
In Austria for public foundations, Czech Republic for traditional foundations and in Slovakia there is a requirement 
in law to maintain a prescribed minimum capital.   
In Germany and Finland the law states that there should be a secure and profitable investment of the foundation's 
assets.  
E.g. the Netherlands. 
Czech Republic, Malta, Slovakia. 

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advantage in competition with taxable enterprises156. Most Member States allow a foundation 
to establish a separate trading company.  

2.2 Tax law  

National regimes 

The most visible difference in the taxation of foundations is the level of corporate income tax 
which varies significantly among the 27 Member States. There are also big differences with 
regard to tax benefits, even in purely domestic situations. The most comprehensive tax benefit 
granted  to  public  benefit  purpose  foundations  is  its  full  exemption  from  corporate  income 
taxation.  This  is  found  in  the  vast  majority  of  Member  States.  An  alternative  is  partial 
exemptions  for  those  items  of  income  which  are  effectively  connected  to  the  public  benefit 
purpose. Often there are ceilings for non-taxation. Either there is a non-taxation of the entire 
foundation  if  its  income  remains  within  the  limits  in  the  respective  provision  or  a  fixed 
amount of the income is tax free, even if the income is high. To the extent that states do not 
grant  exemptions  on  the  level  of  the  tax  base,  they  may  offer  reduced  tax  rates  for  all  or 
certain items of income.  

In  all  European  jurisdictions,  a  crucial  precondition  for  tax  benefits  is  the  type  of  purpose 
which  the  foundation  pursues.  In  addition,  the  different  national  tax  regimes  contain 
additional requirements that are related to the running activities, and to the use of the funds 
and  the  remaining  income/assets  when  the  foundation  is  dissolved  (so  called  asset  lock). 
Regarding  the  purpose  of  the  foundation,  the  scopes  of  national  non-profit  definitions  are 
hardly  comparable  given  that  some  Member  States157  use  blanket  clauses  and  leave  the 
determination up to the tax authorities and the courts, while other countries have introduced 
clear-cut  catalogues  into  their  legislation.  However,  in  substance  most  countries  favour  all 
types of third-sector foundations. Regarding a foundation's activities, some countries make a 
distinction  in  their  tax  legislation  between  endowment  contributions  and  other  contributions 
such as donations or gifts. If foundation retains the latter ones rather than spending them, it 
may forfeit its tax benefits. Many domestic tax systems require proper corporate governance 
of  the  foundation  including  efficient  measures  against  fraud,  bribery  and  corruption. 
Moreover,  there  are  a  number  of  formal  requirements  including  certain  notification 
requirements, book-keeping duties and other documentation requirements.  

As to the treatment of donors, most Member States offer a deduction of qualifying donations 
from the tax base. In some Member States a certain percentage is treated like a pre-payment 
on  income  tax,  i.e.  it  can  be  credited  against  the  income  tax.  Most  Member  States  offer 
deductions  from  both  endowment  contributions  and  donations.  However,  the  percentage 
amounts, as well as the maximum deductions, differ in many countries. Many Member States 
have  gift,  inheritance  and/or  estate  taxes,  imposing  a  burden  on  the  recipient  or  the 
donor/estate of the deceased. In general these types of taxes are currently in decline since a 
considerable  number  of  Member  States  have  abolished,  or  are  considering  abolishing  them. 
Where inheritance, estate and gift taxes exist, tax benefits are often available in cases where 
the recipient is a non-profit foundation. As regards donors, almost all Member States provide 
tax benefits for donations to public benefit purpose foundations as regards inheritance, estate 
and gift tax.  

156  
157  

There is no taxation in Latvia or in Lithuania up to 300 000€ annual profit. 
France, United Kingdom. 

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ANNEX 3: DESCRIPTION, ANALYSIS AND COMPARISON OF SUB-OPTIONS, AND INSTRUMENTS, 
FOR THE STATUTE FOR A EUROPEAN FOUNDATION 

3.1. Description, analysis and comparison of sub-options for the Statute 

This  section  analyses  in  detail  the  main  issues  to  be  covered  by  a  potential  Statute  for  a  
European  Foundation.  Possible  solutions  under  each  aspect  are  analysed  according  to  the 
objectives defined in section 3. 

3.1.1. Tax treatment of foundations and donors  

Option A: European Foundations without tax elements 

Description 

Under this option the Statute for a European Foundation would only focus on civil law issues 
and leave the tax aspects uncovered.  

Assessment 

Almost two thirds of the respondents to the 2009 consultation were of the view that a Statute 
for a European Foundation without any tax elements would still be a useful instrument. The 
most common supporting argument for this view was that it would facilitate the cross-border 
work of foundations by reducing red tape irrespective of whether the Statute included any tax 
elements or not. Another approach was that taxation should be decided at national level, the 
natural consequence being that only an instrument without tax elements would be attractive. 
Furthermore,  leaving  the  tax  treatment  of  foundation  out  of  the  scope  of  the  Statute  would 
certainly  increase  the  political  acceptability  of  the  European  Foundation  (with  a  couple  of 
Member States having expressed reservations on this issue in the 2009 public consultation), 
while providing a legal tool which would remain useful for foundations.  

If  tax  elements  were  not  included  in  the  Statute,  the  European  Foundation  (and  its  donors) 
would be entitled to the same tax benefits as those granted to domestic foundations (and their 
donors)  by  the  Member  Statein  which  it  is  registered  and  operates,  provided  that  it  can  be 
considered  as  "comparable"  to  them.  This  non-discrimination  principle  comes  directly  from 
the  TFEU.  However,  this  would  leave  unsolved  problems  identified  as  hindering  the  cross-
border  operations  of  foundations  (e.g.  the  "comparability  test"  would  still  be  required).  In 
contrast to the views expressed above, some of the other respondents to the 2009 consultation 
stated that tax matters would be a key driver for the introduction of a new legal vehicle and 
not including tax elements would limit its demand and potential take-up.  

Option B: Statute for a European Foundation with tax elements  

Option B1: Separate tax regime for European Foundations 

Description 

This  option  would  mean  that  one  single  set  of  harmonised  rules  on  the  tax  treatment  of  the 
European Foundations and their donors would be established and included in the Statute. This 
regime would be applicable in all 27 Member States regardless of the tax treatment they apply 
to domestic foundations and their donors. 

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Assessment  

This solution would be the simplest for foundations (and their donors) as the applicable tax 
regime would be clear from the outset and would be the same in all 27 Member States. How 
beneficial it would be from an economic point of view would, of course, depend on how the 
regime were designed in terms of conferring tax benefits. Therefore, it might be more or less 
beneficial than the existing tax regime provided by a particular Member State with respect to 
their domestic foundations and these foundations' donors. 

It  would,  however,  remove  all  the  uncertainties  linked  to  the  tax  treatment  of  European 
Foundations  and  their  donors  and  considerably  reduce  costs  relating  to  the  necessary  legal 
counsel and information gathering on the different tax regimes across the EU.   

Nonetheless,  the  political  acceptance  for  this  option  is  likely  to  be  very  low,  as  it  would 
interfere  with  Member  States'  fiscal  sovereignty  which  is  particularly  sensitive  for  Member 
States, especially in this sector, and would offer FEs a different treatment to the one available 
to national foundations.  

Option B2: Non-discriminatory tax treatment applied automatically (without a "comparability 
test") 

Description  

This option would mean that a Member State would have to automatically grant the European 
Foundation  the  same  tax  treatment  granted  to  domestic  public  benefit  purpose  foundations, 
without  any  need  for  the  European  Foundation  to  prove  that  it  satisfies  the  "comparability 
test". The justification would be that the European Foundation is a trustworthy entity, which 
carries  out  activities  that  have  been  recognised  as  pursuing  public  benefit  purposes  by  all 
Member States and which are subject to certain requirements and regulations which are public 
and have been approved by all Member States. Similarly, donors to any European Foundation 
would automatically obtain a tax deduction, if provided by their Member States of residence 
for domestic foundations, once the European Foundation is registered. 

Assessment  

This  option  would  go  beyond  the  mere  application  by  Member  States  of  the  non-
discrimination principle to which they are compelled by the TFEU. It would require Member 
States to apply the same tax treatment to the European Foundation (and its donors) as granted 
to domestic foundations without applying the "comparability test". It would therefore remove 
a  burden  which  may  be  costly  and  time-consuming  for  both  foundations  and  national 
authorities. It would not step into the area of tax harmonisation (politically unacceptable for 
Member States).  

Comparison of the options 

Option  B  would  bring  more  added-value  to  the  foundations  than  option  A  and  should 
therefore  be  chosen  even  though  the  inclusion  of  tax  elements  may  prove  to  be  politically 
sensitive and challenging. As for the two sub-options on how to include tax elements, a non-
discriminatory solution in option B2 should be chosen in order to avoid interfering with the 
Member States' fiscal sovereignty. It would remove the burden of the "comparability test" and 
it  would  represent  a  step  forward  compared  to  the  current  situation,  thereby  bringing  most 
benefits to foundations.  

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3.1.2 Cross-border dimension 

Option A: No cross-border dimension 

Description 

The FE could be created without any need to prove its cross-border dimension.  

Assessment 

This option would make the Statute accessible to all foundations, including those with purely 
domestic purposes and activities, and could therefore increase its use. Due to its wide scope, it 
could theoretically reduce costs and uncertainty for all these foundations and encourage cross-
border donations (e.g. from migrants donating to a particular national cause).  

However  introducing  a  European  legal  form  for  purely  domestic  foundations  could  be 
challenged  on  the  grounds  of  subsidiarity  and  might  make  it  more  difficult  to  convince 
Member States to include tax elements in the Statute. Putting the Statute in direct competition 
with national forms might not be acceptable to Member States due to concerns that it could be 
used  to  circumvent  stricter  domestic  requirements.  In  addition,  it  is  questionable  to  what 
extent  purely  domestic  foundations  would  be  interested  in  a  European  legal  form  –  and 
therefore benefit from cost reductions and less uncertainty. These foundations would focus on 
activities  in  a  particular  Member  State,  and  most  often  therefore  they  would  neither  face 
cross-border problems nor need a label to be recognised abroad.  

Option B: Cross-border dimension requirement included in the Statute  

Description 

Foundations would need to prove cross-border dimension of their work in order to be able to 
opt  for  the  Statute.  In  particular,  foundations  would  need  to  have  activities  (e.g.  economic 
activities, investments, donors or beneficiaries) in at least two Member States or would need 
to have an intention (stated in their statutes) of carrying out such activities in a Member State 
other than the country of registration.  

Assessment 

This option would focus on cross-border issues and would be in line with the main purpose of 
the initiative, i.e. to facilitate the cross-border operations of foundations. As the Statute would 
focus on foundations with cross-border activities (or the intention of such activities), it should 
be more acceptable to Member States (i.e. it would not be questioned from the point of view 
of  subsidiarity  and  would  not  come  in  so  much  direct  competition  with  national  foundation 
forms).  

Under this option, the Statute would  help  to diminish  costs  and increase legal certainty, not 
only for foundations which already carry out Europe-wide activities and experience problems 
in that context, but also for those who are active in one Member State but have the intention 
of carrying out activities abroad written into their statutes. Its impact on reducing uncertainty 
might  in  particular  be  relevant  for  the  latter,  as  they  are  likely  to  be  the  ones  who  were 
discouraged from expanding across the EU due to uncertainties about rules in other countries.  
In  contrast,  the  Statute  under  this  option  would  not  include  domestic  foundations  with  a 

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European public benefit purpose and active only in one country, which could potentially stand 
to benefit from this legal form.  

However, the cross-border requirement based on European activities of foundations would be 
easier  to  define  and  interpret  compared  to  a  definition  based  on  European  public  benefit 
purpose  of  foundations;  for  instance,  in  the  latter  case  it  might  be  difficult  to  make  clear 
distinctions as to which purposes are European and which not, leading to lack of legal clarity. 
Under this option, monitoring and reporting might be necessary to a certain extent to ensure 
that the requirement of a "European dimension" is met, which could add some administrative 
obligations on FEs. 

Comparison of the options 

Option A would be more open than option B and could theoretically have bigger impacts in 
terms  of  reducing  costs,  uncertainty  and  cross-border  donations,  although  it  is  uncertain  to 
what  extent  purely  domestic  foundations  would  actually  benefit.  Option  B  –  by  including  a 
requirement of a cross-border dimension – would respond to the main aspect of the problem at 
stake:  foundations'  cross-border  operations.  It  would,  in  addition,  be  more  acceptable 
politically,  and  at  the  same  time,  due  to  being  flexible,  would  still  open  up  the  Statute  to  a 
large number of potentially interested foundations. Therefore, option B is the preferred one. 

3.1.3. Minimum founding assets 

Option A: No minimum founding assets 

Description  

The Statute would allow foundations to be established under this legal form without the need 
for any minimum founding assets.  

Assessment 

This option would make the legal form flexible and accessible to all foundations, in particular 
the small ones, and would reduce the costs of establishment for them. It would be in line with 
the laws in a number of Member States, who do not require any minimum founding assets or 
keep them at a symbolic level (£1 in common law Member States)158. At the same time, this 
option might not be acceptable to Member States requiring minimum founding assets, due to 
concerns that the new legal form could be used to circumvent national legislation or that the 
Statute could be more easily misused. Including provisions in the Statute according to which a 
foundation would be dissolved in case it lacked resources to achieve its purpose might not be 
seen  as  sufficient  to  provide  legal  certainty.  The  difficult  negotiations  on  this  issue  in  the 
context  of  the  European  Private  Company  (SPE)  Statute  show  the  potential  difficulties 
involved.  Similarly,  the  FE  without  any  requirement  of  minimum  founding  assets  may  not 
contribute to the trustworthiness of such a type of foundation. 

158  

For instance, Bulgaria, Cyprus, Estonia, Ireland, Latvia, Lithuania, the Netherlands, Slovenia or United Kingdom. 

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Option B: Specific founding assets equivalent to at least  €25,000  

Description  

The Statute would define a specific amount of founding assets equivalent to at least€25,000159 

Assessment 

By requiring FEs to have minimum assets, this option should make them more trustworthy in 
the  eyes  of  donors  and  public  authorities  as  the  assets  would  be  seen  as  proving  the 
seriousness  of  the  foundations'  purpose.  For  instance,  one  of  the  reasons  which  affects 
philanthropic giving to university research appears to be the donors' belief in the financial and 
fiduciary  integrity  of  the  institution160;  and  requiring  minimum  founding  assets  could 
contribute to addressing this issue. Such a minimum requirement could also be seen as a way 
of  ensuring  that  the  new  legal  form  is  not  easily  misused.  This  would  be  particularly 
important given that the Statute should provide a model of a foundation with high standards 
on accountability. This option would also be in line with the views received during the 2009 
public  consultation  where  most  of  the  respondents  mentioned  that  some  initial  endowment 
should be required (with specific amounts quoted varying between €5,000 and €300,000).  

At the same time, this amount of minimum founding assets would not make the FE too costly 
to  establish  and  should  keep  this  legal  form  accessible  to  smaller  foundations,  which  was 
underlined as important in the replies to the 2009 public consultation, and which could prove 
important  in  practice,  as  small  foundation  projects  can  now  be  easily  set  up  thanks  to 
technological developments. This option would be in line with requirements in the majority of 
Member  States,  which  require  minimum  assets  below  €50,000161  or  no  assets  at  all.  In 
particular, this would be important for the EU-12 Member States where in most cases there 
are no requirements or these are much lower than in the rest of the EU (one of the highest EU-
12 requirements being €20,000 in the Czech Republic and lower ones including up to €2,000 
in Hungary or up to €1,200 in Malta). In contrast, Member States with higher requirements 
(i.e.  between  €50,000  and  €250,000162,  or  as  much  as  €1  million  in  the  case  of  French 
traditional  foundations)  could  question  whether  this  amount  of  assets  would  be  sufficient. 
Nevertheless, these countries might prove to some extent flexible regarding a proposed lower 
amount, as some of them also have lower (or no) minimum asset requirements for alternative 
legal forms to foundations in place at national level (e.g. "fonds de donations" in France for 
which no minimum assets are necessary).   

Comparison of the options 

Both  options  A  and  B  would  provide  a  uniform  rule  (no  or  specific  amount  of  minimum 
assets)  giving  legal  clarity  and  certainty.  Although  option  A  would  be  less  costly  and  more 
flexible,  introducing  a  specific  requirement  for  minimum  founding  assets  under  option  B 

159  

160  
161  

162  

A calculation on the basis of the data gathered in the feasibility study (on pp. 79-80), shows that this amount could 
be seen as approximately an average of what is required by Member States across the EU (including all countries 
regardless whether they have any requirements in place or not). It needs to be noted, however, that the calculation 
did  not  include  highest  (€1  million  in  France)  and  lowest  (below  €5,000)  requirements,  and  that  specific 
requirements were not available for all countries – therefore the calculation should be used as a ballpark example 
only. 
Expert group "Engaging philanthropy for university research", 2008. 
For  instance,  €25,000  in  Finland,  €30,000  in  Spain,  €33,500  in  Denmark  for  non-commercial  foundations  or 
€25,000 required in practice in Belgium. 
For instance, €50,000 required in practice in Germany, €100,000 in Italy or €250,000 in Portugal. 

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would be essential for the trustworthiness of FEs vis-à-vis donors and public authorities, and 
would be more easily acceptable for Member States. The proposed amount of €25,000 should 
provide a balanced option given the differences in approaches across the EU and should keep 
the Statute accessible to smaller foundations. 

3.1.4 Employee involvement163 in European foundations 

Option A: Rules on employee involvement defined in the Statute 

Description  

The  Statute  would  include  an  employee  involvement  regime  designed  specifically  for 
European Foundations, including rules on the participation of employees. 

Assessment 

This  option  would  follow  the  approach  adopted  for  the  European  Company  (SE)  and 
European  Cooperative  Society  (SCE)  Statutes  and  would  focus  in  particular  on  worker 
participation  (board  level  participation  or  rights  to  influence  the  choice  of  members  of  the 
board).  However,  this  approach  would  be  disproportionate  to  the  situation  as  regards 
employee involvement in national foundations and it would be inappropriate for FEs. Worker 
participation  is  much  less  frequent  for  foundations  than  is  the  case  for  companies.  On  the 
basis of the research carried out by the Commission164, full board level participation in public 
benefit  purpose  foundations  only  exists  in  two  countries  (in  the  Netherlands  through  a 
recommendation mechanism, and in Norway), whereas it is present in twelve Member States 
for  most  private  companies  and  in  an  additional  nine  countries  for  state-owned  or  other 
specific companies. The addition of a new procedure could be perceived as burdensome and 
make this legal form less popular.  

Moreover,  the  issue  of  worker  participation  proved  to  be  highly  contentious  during  the 
negotiations  on  the  SE  Statute,  Cross-Border  Merger  Directive  and  most  recently,  the 
European  Private  Company  (SPE)  Statute.  In  all  these  cases  this  matter  had  to  be  carefully 
balanced with the existing situation at national level. Reopening this debate in the context of 
the Statute for a European Foundation does not seem justified.  

Option B: Rules on information and consultation of employees defined in the Statute 

Description  

The  Statute  would  include  provisions  to  ensure  that  employees  and  volunteers  working  for 
European  Foundations  are  consulted  and  informed  at  the  appropriate  level,  but  would  not 
include any provisions regarding board-level participation.  

163  

164  

Employee  involvement  encompasses  information,  consultation  and  board-level  participation.  As  defined  in  the 
directives  associated  to  European  Statutes  (Directives  2011/86/EC  and  2003/72/EC),  “involvement  of  employees 
means  any  mechanism  including  information,  consultation  and  participation,  through  which  employees’ 
representative may exercise an influence on decisions to be taken within the company”. Participation is defined as 
“the influence of the body representative of the employees and/or the employees’ representatives in the affairs of a 
company  by  way  of  the  right  to  elect  or  appoint  some  of  the  members  of  the  company’s  supervisory  or 
administrative organ, or the right to recommend and/or oppose the appointment of some or all of the members of 
the company’s supervisory or administrative organ”. 
Research  carried  out  by  DG  Employment  and  Social  Affairs  on  the  basis  of  answers  of  European  Labour  Law 
Network in December 2010 – January 2011. 

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Assessment 

This  option  would  be  in  line  with  the  existing  general  framework  for  informing  and 
consulting employees within the  EU165, which  applies to undertakings under  all legal forms 
including  foundations.  It  would  provide  legal  certainty  by  clarifying  that  transnational 
information  and  consultation  rights  are  applicable  to  employees  in  European  Foundations 
having a significant number of employees in different Member States, yet it would be a light 
and flexible solution to ensure that the rules do not impose unnecessary burdens and costs on 
foundations.  

The Statute provisions related to this option would take into account that although in most EU 
countries  there  are  no  special  national  rules  on  employee  information  and  consultation  for 
foundations, there are special rules for entities with specific purposes (non-profit, charitable, 
religious)  in  a  few  Member  States,  according  to  which,  employees  are  not  consulted  or 
informed as regards decisions about the purposes and objectives of the entities' activities166. In 
order  to  ensure  that  the  rules  are  adapted  to the  specific  situation  of  every  FE,  the  concrete 
arrangements  for  the  transnational  information  and  consultation  of  employees  would  be 
defined  primarily  by  means  of  an  agreement  between  the  parties  in  the  FE.  In  view  of  the 
importance  of  volunteering  in  foundations,  long  term  volunteers  would  be  involved  in  the 
process of information and consultation in the FE. 

Comparison of the options 

Option  B  is  chosen  as  it  would  be  better  suited  to  FEs  than  option  A.  Without  being 
burdensome  for  foundations,  it  would  help  employees  and  volunteers  to  contribute  more 
effectively to foundations' activities and support building their European dimension. It would 
be politically more acceptable as well, for the reasons illustrated above. 

3.1.5 Supervision  

Option A: Supervision at European level 

Description 

Given the specific characteristics of foundations – i.e. that their assets can only be used for the 
purposes stipulated in the statutes and that oversight mechanisms are weaker as compared to 
companies, with no equivalent of shareholders in foundations to supervise the management – 
supervision by state supervisory authorities is mandatory for foundations in all Member Sates 
and it is therefore important to include provisions regarding supervision in the Statute. In this 
case,  European  Foundations  would  be  supervised  by  a  new  European  supervisory  and 
registration authority.  

Assessment 

The  European  level  supervision  would  ensure  a  uniform  approach  across  the  EU  and 
therefore, could be less costly for FEs, and increase the trust of public authorities and donors 
in  European  Foundations.  This  would  certainly  be  helpful  in  trying  to  persuade  Member 
States  to  automatically  grant  tax  benefits  to  European  Foundations  (and  their  donors).  This 

165  
166  

Directive 2002/14/EC, OJ L 80, 23.3.2002, p. 29; Directive 2009/38/EC, OJ L 122, 16.5.2009, p. 28.  
Finland, Germany, Slovakia and Sweden. 

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option was supported by the majority of respondents (mainly from the foundation sector) who 
replied to the 2009 public consultation.  

At the same time, this option would involve potentially high costs for setting up and running a 
new European organisation/structure, difficult to justify before first checking how the national 
supervision mechanisms would work in this context. This option would also move the control 
over  the  foundations'  activities  away  from  the  national  level  and  for  that  reason  it  could 
encounter opposition from certain Member States as was indicated in the replies to the 2009 
public consultation. 

Option B: Supervision at national level 

Description 

Supervision  of  European  Foundations  would  be  carried  out  at  national  level  by  the  national 
supervisory authorities, currently responsible for overseeing national foundations. 

Assessment 

This  option  would  avoid  a  number  of  costs  related  to  the  European  level  supervision,  as  it 
would  rely  on  the  existing  national  authorities  and  well  developed  procedures.  Another 
advantage would be that supervision would be carried out close to foundations by authorities 
who  have  easier  access  to  oversee  their  activity,  which  should  lead  to  more  effective 
supervision.  Although  a  dominant  view  in  replies  to  the  2009  public  consultation  was  in 
favour of EU level supervision, there was no strong opposition to the national level solution - 
a majority of the same respondents agreed that oversight could alternatively be delegated to 
national level too. In order to ensure that this option allowed for efficient supervision of FEs, 
it  would  be  necessary  to  ensure  good  cooperation  between  responsible  national  authorities 
across the EU. At the same time, the minimum but robust supervisory powers would be set 
out in the Statute, which would limit divergences between national supervisory requirements 
and any related burdens on FEs.  

The situation  would be  reviewed during the overall evaluation of the Statute in a few years 
time, when more information regarding the number of foundations having adopted the Statute 
would be available. The need and justification for European level supervision could then be 
analysed on the basis of practical experience with the Statute. 

Comparison of the options 

Although  option  A  would  be  likely  to  score  higher  on  the  objectives  of  keeping  the  costs 
down  and  increasing  certainty  for  FEs  -  and  trust  of  donors  -  it  would  be  politically  more 
difficult and much more costly to set up. Therefore, option B, relying on the existing national 
supervision authorities, is preferred, with a possibility of revision in the future. 

3.1.6 Economic activities  

Option A: Only purpose related economic activities are allowed 

Description 

A  European  Foundation  would  be  allowed  to  carry  out  only  economic  activities  that  are 
related  to  the  public  benefit  purposes  (directly  contributing  to  the  furthering  of  the  public 

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benefit  purpose,  i.e.  a  museum  running  a  bookshop  or  a  foundation  in  the  health  sector 
running a hospital).  

Assessment 

This  option  would  limit  numerous  economic  activities  currently  carried  out  by  foundations. 
This  would  be  the  case  for  unrelated  economic  activities  (independent  delivery  of  goods  or 
services  which  do  not  directly  serve  the  public  benefit  purpose  of  the  foundation,  i.e.  a 
museum  running  a  petrol  station  next  door,  foundations  organising  concerts  to  raise  funds). 
Allowing  only  public  purpose  related  activities  would  deprive  foundations  of  an  important 
source of income that could be channelled back to the public benefit activities.  

In contrast, this option would respond to potential concerns that Member States with stricter 
provisions  may  have.  For  instance,  according  to  the  available  information167,  three  Member 
States168 prohibit as a rule foundations from direct trading. Restrictions imposed may relate to 
creditor  protection  concerns,  protection  of  assets  or  economic  activities  being  sometimes 
perceived as risky. Moreover this option would facilitate the application of tax benefits to the 
FE, as most Member States allow national public benefit purpose entities to carry out related 
economic activities without losing their beneficial status, and exempt the income from these 
activities.  

Nonetheless,  this  option  would  be  more  restrictive  than  that  currently  allowed  in  several 
Member States (Belgium, Cyprus, Estonia, Germany, Poland or Portugal169) and it therefore 
may also be questionable in terms of political acceptability.  

Option B: Related and unrelated economic activities allowed as long as any profit is used in 
pursuance of the foundation's public benefit purpose and unrelated economic activites are 
limited 

Description 

A European Foundation would be allowed to carry out economic activities, both related and 
unrelated  to  the  public  benefit  purposes,  provided  that  any  profit  was  exclusively  used  in 
pursuance  of  its  public  benefit  purposes  and  that  unrelated  activities  of  the  FE  were  only 
permitted up to a threshold, which would be defined in the Statute.  

Assessment 

This option would give European Foundations more choice in the types of activities they can 
carry out, by allowing them to benefit from more ways of increasing their funds. They would 
thus  be  able  to  engage  in  economic  activities  directly  contributing  to  the  furthering  of  the 
public  benefit  purpose,  but  also  in  non-related  economic  activities  (not  directly  serving  the 
public  benefit)  as  long  as  the  profits  were  used  in  pursuance  of  the  public  benefit  purpose. 
This  would  also  be  in  line  with  the  views  expressed  by  respondents  to  the  2009  public 
consultation.  Nonetheless,  it  would  go  slightly  further  than  that  which  is  in  place  in  certain 

167  
168  

169  

Feasibility study and information provided by the EFC.  
In  Czech  Republic  neither  a  foundation  nor  an  endowment  fund  are  allowed  to  carry  out  direct  trading.  Malta 
allows  only  a  few  trading  activities  in  the  context  of  fundraising.  Slovakia  allows  limited  exercise  of  economic 
activities.  
These are the countries that also allow unrelated activities, see for more details feasibility study, page 88. 

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Member  States170  as  it  would  also  allow  activities  unrelated  to  the  public  benefit  purpose. 
However, it would be in line with the rules in many other Member States which allow both 
related and unrelated economic activities, provided that the profit is used for the public benefit 
purposes  of  the  foundation,  and/or  that  the  unrelated  economic  activities  are  ancillary  to 
foundation's work171.  

The  economic  activities  of  the  FE  would  have  to  respect  a  threshold  to  be  defined  in  the 
Statute.    By  requiring  that  any  profit  from  economic  activities  be  channelled  to  the  public 
benefit  purpose  and  by  restricting  unrelated  economic  activities  through  a  threshold,  this 
option should provide a sufficient guarantee to donors and all other parties concerned that the 
profits  of  European  Foundations  will  be  spent  on  public  benefit  purpose  objectives.  These 
requirements, also in the light of the non-distribution provisions of the public benefit purpose 
foundation, should respond to concerns relating to misuse of the Statute.  

It should be noted that the choice of whether to allow a European Foundation to carry out only 
economic activities that are related to the public benefit purposes it pursues or to allow also 
unrelated  economic  activities  (subject  to  certain  conditions)  has  important  tax  law 
implications.  In  fact,  if  the  Member  State  concerned  grants  tax  benefits  only  to  domestic 
foundations that carry out only related economic activities whilst the European Foundation is 
allowed by its Statute to carry out also unrelated economic activities, the consequence in some 
Member  States  could  be  that  all  income  that  the  European  Foundation  derived  from  the 
unrelated  economic  activities  would  be  subject  to  taxation  according  to  the  general  rules  of 
the  Member  States  concerned  (i.e.  tax  benefits  would  not  be  applicable  to  this  income).  In 
order to distinguish the income arising from related and unrelated activities, the latter would 
need to be presented separately in the accounts. In other Member States with stricter laws, the 
consequence could be even more severe and could result in the refusal of the Member State 
concerned  to  grant  tax  benefits  at  all  to  the  European  Foundation.  In  other  words  the 
European Foundation could lose all the tax benefits that would normally be granted to it.  

Comparison of the options 

Option B is to be preferred to option A as it provides a good balance between flexibility for 
FEs on the one hand and addressing the concerns of public authorities and third parties on the 
other.  Option  A  is  unlikely  to  be  politically acceptable  and  is  a  disproportionate  solution  to 
the problem. 

170  
171  

For instance, Bulgaria, Finland, Greece, Hungary, Romania.  
Belgium  allows  even  unrelated  activities  if  they  have  a  non  profit  purpose;  Cyprus,  Germany,  Latvia,  Poland, 
Portugal allow unrelated activities; UK allows unrelated economic activities at a small scale, etc. For further details 
see feasibility study, page 88. 

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3.1.7 Summary of the suggested suboptions for the content of the Statute 

Sub-options for the content of the Statute 

Chosen sub-option 

1. Tax issues 

2. Cross-border dimension 

Option B2: Non-discriminatory treatment applied 
automatically (without comparability test) 

Option B: Cross-border dimension requirement 
included in the Statute 

3. Minimum founding assets 

Option B: Specific founding assets equal to €25,000 

4. Employee involvement in European 
Foundations 

Option B: Rules on information and consultation of 
employees defined in the Statute 

5. Supervision 

6. Economic activities 

Option B: Supervision at national level 

Option B: Related and unrelated economic activities 
allowed, as long as the income is channelled into 
public benefit purpose, and unrelated econmic 
activites are ancillary 

3.2. Instruments to be used for the Statute 

Recommendation 

A recommendation would render uncertain the achievement of the objectives being pursued, 
as it gives large flexibility to Member States in taking on board and enforcing the provisions 
proposed.  It  would  therefore  have  a  smaller  impact  in  terms  of  reducing  barriers  and 
restrictions  to  foundations'  cross-border  operations  (in  particular  on  tax  aspects)  and  would 
not ensure a sufficient level of legal certainty. More importantly, it would not set up a uniform 
set of rules in all Member States.  

Directive 

The  directive  would  not  guarantee  a  uniform  application  of  the  provisions  across  the  EU, 
leaving  the  choice  of  form  and  methods  to  national  authorities.  It  would  not  result  in  the 
introduction  of  a  European  legal  form.  Consequently,  such  an  instrument  would  not  be 
attractive for foundations and its effectiveness may be limited.  

Regulation 

A  European  legal  form  requires  uniform  and  direct  application  of  rules  across  the  EU.  The 
Regulation would be the most appropriate means to ensure the uniformity of the Statute in all 
Member  States.  All  the  existing  European  legal  forms  i.e.  the  European  Company,  the 
European  Economic  Interest  Grouping  and  European  Cooperative  Society  have  been 
introduced by a Regulation.  

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