COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Council Regulation on the Statute for a European Foundation (FE)
Date: 2012-02-08
Institutions: European Commission
Subjects: cross-border cooperation, foundation, institution of public utility, simplification of formalities, single market, social economy, tax system

EUROPEAN COMMISSION 

Brussels, 8.2.2012  
SWD(2012) 2 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

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

{COM(2012) 35 final} 
{SWD(2012) 1 final} 

 
 
 
 
 
 
 
 
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.  

1. 

PROBLEM DEFINITION 

Public  benefit  purpose  foundations  —  which  this  impact  assessment  specifically  focuses  on 
— are significant actors in the EU and its economy. Through their activities in key areas, such 
as  education  and  research,  social  and  health  services,  the  arts  and  culture  or  environmental 
protection,  they  make  a  major  contribution  to  the  achievement  of  a  number  of  the  EU’s 
objectives.  There  are  approximately  110 000  public  benefit  purpose  foundations  in  the  EU. 
 83 billion (both lower-
Their assets amount to about €
end  estimates)1.  The  role  of  foundations  in  performing  public  benefit  purpose  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.  

 350 billion and their expenditures to €

One of the main reasons appears to be that foundations cannot channel 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 fulfilling legal and administrative 
requirements  laid  down  by  the  different  national  laws.  This  means  that  less  funding  is 
available for public benefit purpose activities. This was confirmed by the public consultation 
carried  out  by  the  Commission  in  20092,  in  which  respondents  underlined  that  part  of  the 
funds  of  foundations  active  abroad  is  used  to cover  the  costs  of  operations  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 potential and their expansion 
ambitions. 

More  specifically,  foundations  often  face  uncertainty  about  recognition  as  a  public  benefit 
purpose  foundation  in  other  Member  States  (which  leads  to  uncertainty  also  with  respect  to 
the applicable tax treatment); they have to bear unnecessary costs for channelling funds on a 
cross-border  basis  due  to  civil  and  tax  law  barriers;  and  the  cross-border  donations  they 
receive are often limited due to donors’ lack of trust in and knowledge of foreign foundations, 
and the fact that donors are not sure whether they are entitled to tax benefits with respect to 
donations made across borders.  

2. 

ANALYSIS OF SUBSIDIARITY 

EU action is needed to remove existing barriers and restrictions to foundations’ cross-border 
operations across the EU. The current situation demonstrates that the problem is not properly 
addressed at national level and that its cross-border character requires a common solution to 

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2 

Data  stem  from  the  2008  feasibility  study.  The  figures  given  above  are  intended  to  provide  an 
impression  —  rather  than  a  complete  picture  —  of  the  foundation  sector  and  should  be  seen  as 
foundations.  See 
the  difficulty  of  obtaining  data  about  European 
indicative  due 
http://ec.europa.eu/internal_market/company/docs/eufoundation/feasibilitystudy_en.pdf. 
See http://ec.europa.eu/internal_market/consultations/docs/2009/foundation/summary_report_en.pdf. 

to 

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enhance foundations’ mobility. The objectives of the proposed action could be better achieved 
at EU level, which would ensure clear and coherent rules across the EU. The preferred option 
of  the  Statute  for  a  European  Foundation,  with  non-discriminatory  tax  treatment  applied 
automatically  to  European  Foundations  (FE),  is  an  optional  tool  and  would  not  replace 
national  legislation.  It  would  not  go  beyond  what  is  necessary  to  satisfactorily  achieve  the 
objectives, and it therefore complies with the principle of proportionality. 

3. 

OBJECTIVES 

The main objective is to allow foundations to more efficiently channel private funds to public 
benefit purposes on a cross-border basis in the EU, which should – for instance, due to lower 
costs  for  foundations  –  increase  the  amount  of  funding  available  for  public  benefit  purpose 
activities, and in turn benefit European citizens and the EU economy. It translates into several 
specific objectives, including reducing costs and uncertainty for foundations, and increasing 
cross-border donations. 

4. 

POLICY OPTIONS 

The following options are considered in the impact assessment: (1) the baseline scenario; (2) 
an  information  campaign  and  a  voluntary  quality  charter;  (3)  a  Statute  for  a  European 
Foundation (with or without addressing tax issues); and (4) limited harmonisation of laws on 
foundations. Sub-options for the Statute are considered in detail in an Annex. 

The baseline scenario includes ongoing initiatives, which would continue to have impacts on 
foundations’  cross-border  activities:  inter  alia  infringement  cases  and  work  in  the  tax  area, 
ensuring  completeness  of  the  implementation  of  the  Services  Directive,  and  non-legislative 
initiatives in the area of research and to support cross-border giving. 

An information campaign would seek to improve foundations’ knowledge of their rights and 
obligations  under  national  laws  when  operating  across  borders.  The  campaign  could  be 
conducted  through  a  Europe-wide  website  or  specific  publications;  it  could  be  run  and 
financed 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, to ensure the quality and trustworthiness of their activities. 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  (e.g.  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  a  public  benefit  purpose  foundation.  In  order  to 
improve public awareness of the charter and the visibility of the foundations complying with 
it, these foundations could be awarded a ‘European quality label’. 

A Statute for  a European Foundation without addressing tax issues would be an alternative 
legal form for foundations; it would not call for any changes to the existing national forms of 
foundations  and  its  use  would  be  voluntary.  The  Statute  would  lay  down  the  main 
requirements for the European Foundation, which would have 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 

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Member  States.  Each  foundation  wanting  to  use  the  Statute  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  pursue  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.  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  benefit  purposes.  However,  economic  activities  unrelated  to  the 
FE’s  public  benefit  purpose  would  only  be  permitted  up  to  a  threshold,  which  would  be 
determined  in  the  Statute.  To  ensure  high  standards  of  transparency  and  accountability,  the 
FE’s  annual  accounts  would  need  to  be  audited  and  disclosed  to  the  public.  Finally, 
supervision would be carried out by designated national supervisory authorities, for which the 
Statute would stipulate proportionate but robust powers. 

Under  the  Statute  for  a  European  Foundation  addressing  tax  issues  European  Foundations 
would,  in  addition,  be  automatically  granted  the  same  tax  benefits  as  are  provided  for 
domestic  public  benefit  purpose  foundations,  without  any  need  to  check  whether  they  were 
‘comparable’ to domestic ones. The same solution would apply with respect to donors to and 
beneficiaries of the European Foundation.  

Limited  harmonisation  of  laws  on  foundations  would  mean  harmonising  those  requirements 
that  foundations  need  to  meet  to  be  able  to  register  and  operate  abroad,  i.e.  the  acceptable 
purposes  of  a  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  any  additional 
requirements. The options of more extensive harmonisation of national laws on foundations, 
and harmonisation of the tax treatment of foundations and their donors were also considered. 

5. 

ASSESSMENT OF IMPACTS AND COMPARISON OF OPTIONS 

The policy options considered are expected to have the following impacts: 

The  baseline  scenario  would  have  a  positive  but  limited  impact  on  foundations  and  cross-
border  donations  to  the  extent  that  the  current  infringement  proceedings  would  remove  tax 
discrimination against foreign public benefit purpose foundations and their donors. However, 
infringement  proceedings  may  not  resolve  discrimination  problems  quickly.  Moreover,  the 
simple  application  of  the  non-discrimination  principle  would  not  sufficiently  facilitate  the 
activities  of  foundations  or  encourage  cross-border  donations  because  there  would  still  be  a 
degree  of  uncertainty  about  whether  a  foreign  public  benefit  purpose  foundation  would  be 
recognised as comparable to a domestic one by tax authorities. 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  carrying  out  non-economic 
activities  (e.g.  grant-making  foundations).  Therefore,  the  uncertainty  concerning  the  public 
benefit status of a foreign foundation would hardly be reduced. For those reasons, this option 
would not achieve the chosen policy objectives. 

The  effectiveness  of  an  information  campaign  and  a  voluntary  quality  charter  would  be 
marginal.  An  information  campaign  would  facilitate  to  some  extent  cross-border  donations 
and  foundations’  activities  by  providing  more  information  on  Member  States’  rules  and 
procedures.  However,  it  would  require  a  comprehensive  information-gathering  effort  and 

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therefore  generate  costs,  and  would  not  replace  specific  legal  advice.  The  quality  charter, 
through voluntary common rules across the EU and granting a European label, could increase 
donors’  willingness  to  give  to  foundations  that  have  signed  up  to  the  charter,  as  well  as 
national  authorities’  trust  in  them.  It  would  nonetheless,  as  a  soft  law  instrument,  have  a 
limited impact as it would not address the national civil and tax law barriers in place and as 
authorities would be free to decide whether or not to recognise the label.  

These  two  options  would  not  lead  to  additional  administrative  burdens  for  the  national 
authorities, and might enjoy a high level of political acceptability. As the barriers and costs 
would remain largely unchanged for foundations, they might not be willing to develop many 
new cross-border projects and, consequently, to employ additional employees or volunteers. 
This  could,  in  turn,  deprive  direct  beneficiaries  and  EU  citizens  as  a  whole  of  some  social, 
environmental or economic benefits. 

A Statute for a European Foundation without addressing tax issues would offer more uniform 
conditions  regarding  recognition  as  a  public  benefit  purpose  foundation,  thereby  reducing 
legal uncertainty across the Member States. It would also cut costs currently due to obstacles 
created by national civil laws. Cross-border donations would be substantially encouraged by 
the European label and the Statute’s European image could also encourage more foundations' 
activities on EU-wide issues such as research or the environment. However, this policy option 
would not address the tax treatment of foreign foundations and donors, and its related costs, 
and  in  particular  the  uncertainty  of  being  recognised  as  a  public  benefit  purpose  foundation 
for tax purposes abroad. 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. 

A  Statute  for  a  European  Foundation  with  automatically  applied  non-discriminatory  tax 
treatment  appears  to  be  the  most  appropriate  policy  option  as  it  would  achieve  all  of  the 
objectives by removing to a large extent both the civil and tax law-related barriers and costs. 
It would provide the same benefits as mentioned above for the Statute without addressing tax 
issues.  In  addition,  by  introducing  non-discriminatory  tax  treatment  without  ‘comparability 
test’,  it  would  further  reduce  compliance  and  legal  advice  costs  and  further  diminish  legal 
uncertainty — in particular of being recognised as a public benefit purpose foundation across 
Member States for tax purposes.  

Overall, the Statute addressing tax issues could be expected to result in a reduction of most of 
the legal counselling costs, which  are currently (for civil and tax law) estimated at between 
 102 million a year. As it should offer the best conditions, as compared to the other 
 90 and €
options, for foundations to develop their cross-border activities in areas which are important 
for  society  (e.g.  research  and  education,  social  and  health  services,  the  arts,  culture  or  the 
environment) and should best incentivise donations, its impacts on direct beneficiaries and EU 
citizens in terms of social, economic or environmental benefits should also be higher than for 
the other policy options. 

The Statute’s impact would depend on the number of foundations that decided to use it and 
the number of resulting donations. Provided that the rules governing the FE are precise and 
uniform,  it  could  be  assumed  that  a  number  of  foundations  which  are  keen  to  expand  their 
existing  EU-wide  activities  (between  25 000  and  30 0003)  may  be  interested  in  doing  so 

3 

Data from the feasibility study. 

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€
                                                 
through this legal form. In addition, foundations currently only active in one national market 
or those yet to be established might also be interested in the Statute. As regards the impact on 
cross-border  donations,  figures  for  gifts  channelled  through  the  ‘Transnational  Giving 
Europe’  mechanism,  which  in  2010  grew  by  25 %  and  exceeded  €
 4.2  million,  indicate  that 
there is growing potential for cross-border giving that could be tapped by the Statute. 

Member  States  would  need  to  adapt  their  national  systems  and  train  staff  in  the  relevant 
national registration, supervisory and tax authorities to be able to deal with the new legal form 
of  the  FE  but  this  should  not  impose  major  administrative  burdens.  Most  countries  already 
have a registry for foundations and there is also a state supervisory authority for foundations 
in  all  Member  States,  so  the  Statute  would  not  lead  to  significant  costs  associated  with  the 
creation of new authorities. Given that the Statute would not lead to any changes in national 
laws, it should also be more politically acceptable than the harmonisation option. 

Limited  harmonisation  of  laws  on  foundations  would  offer  a  higher  degree  of  uniformity 
among national legislations on this topic. As it would harmonise the most relevant rules for 
foundations’  cross-border  operations,  and  in  particular  the  definition  of  a  public  benefit 
purpose, it could facilitate their activities, reduce their costs and provide them with more legal 
certainty  of  being  recognised  as  a  public  benefit  purpose  foundation  for  civil  law  purposes 
abroad. However, it would be challenging to reach a compromise on harmonised definitions 
among all Member States due to the diversity of national laws. 

Limited  harmonisation  would  not  bring  any  direct  benefit  with  regard  to  tax  restrictions 
either,  although  it  could  be  argued  that  it  might  bring  indirect  benefits  and  a  less  strict 
approach by tax administrations in performing the ‘comparability test’. Therefore, this option 
would lead to cost reductions and impacts on donations potentially comparable to those under 
the Statute without tax issues, although in contrast to the latter, it would not offer foundations 
a recognisable European label.  Updating  national laws on foundations due to  harmonisation 
would  lead  to  some  administrative  and  compliance  costs  for  national  authorities  and 
stakeholders. 

The options of extensive harmonisation of national laws on foundations and the introduction 
of a uniform set of tax laws for foundations and their donors were discarded. Although they 
could lead to substantial benefits by effectively removing all the relevant differences between 
national laws and by ensuring the same tax treatment across the EU, these options would be 
technically  challenging  and  politically  unacceptable  to  Member  States,  not  least  due  to  the 
political sensitivity of tax issues. 

6. 

MONITORING AND EVALUATION 

The  Commission  will  monitor  implementation  of  the  chosen  policy  option  and  assess  the 
progress  achieved  according  to  the  objectives  set.  The  necessary  data  will  be  gathered  in 
collaboration  with  national  authorities,  the  foundation  sector  and  any  other  relevant 
stakeholders. If the Statute is chosen, in its monitoring the Commission could focus on issues 
such as the number of European Foundations established, the variation in their  cross-border 
activities  and  trends  in  cross-border  donations.  If  limited  harmonisation  is  preferred,  the 
Commission  would  initially  focus  on  implementation  of  the  proposal,  and  only  then  on 
gathering data. As regards evaluation, an evaluation report would be undertaken seven years 
after  the  entry  into  force  of  the  chosen  proposal  to  assess  progress  and  check  whether  the 
objectives have been achieved. 

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