Source: EURLEX
Language: en
Format: md

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 06.06.1997
COM(97) 241 final

COMMUNICATION FROM THE COMMISSION

on

PROMOTING THE ROLE OF VOLUNTARY

ORGANISATIONS AND FOUNDATIONS IN EUROPE

**TABLE OF CONTENTS**

I. Introduction 1.

II. Scope 1

III The role and importance of Voluntary Organisations and Foundations 3

IV The sector and the European Institutions working together 6

V Problems and challenges facing the sector 8

VI Conclusion 11

Annex I. The survey 16

Annex II. Overview of the Legal and Fiscal Framework for Voluntary Organisations and
Foundations 26

Annex III Legal and Fiscal Framework for Voluntary Organisations and Foundations 31

_**fcA**_

INTRODUCTION

PURPOSE

1 This Communication concerns one sector

of the social economy in the European
Community - that of voluntary organisations
and foundations. These organisations are
playing an important role in almost every field of
social activity. They contribute to employment
creation, active cîtîzerjship, democracy, provide
a wide range of services, play a major role in
sport activities» represent citizens' interests to
various public authorities and play a major part
in promoting and safeguarding human rights as
well as having a crucial role in development
policies.

1.1 Over the years they have made an
increasing contribution to the development of
Europe which is something that should be
encouraged and developed,

1.2 Given this importance, the European
Commission carried out an extensive survey in
order to gain a better knowledge of the sector
and to identity issues to be addressed. The
results of the survey are given in annex 1.

1.3 The aim of the document is to illustrate

the growing importance of the sector within the
European Union, to show what problems and
challenges these organisations are facing and to
open up a dialogue on the basis of a set of ideas,
in order to favour their development at
European and national level, to improve their
capacity to meet future needs and maximise
their contribution to European integration.

1.4 This document presents a series of
measures which could be taken at Member State

level, but does not seek to impose on Member
States specific solutions or actions. It is up to
individual Member States to take on the

different issues as they see fit. However,
conforming to the principles of subsidiarity and
proportionality there are some objectives which
can be dealt with at Community level. These
ideas are outlined in the "Conclusion \

II. SCOPE J

_**Voluntary organisations**_

_1_ Of the three sectors - co-operatives,
mutual societies, and voluntary organisations which go to make up the social economy, that
of voluntary organisations is by far the most
difficult to delimit or define.

2.1 At their most basic, voluntary
organisations are simply groups of people who
have come together for some purpose or other.

2.2 At one end of the spectrum, the world of
voluntary organisations merges imperceptibly
into the tissue of everyday social, community,
and family life; at the other end can be found
great institutions of enormous national and even
international importance such as universities,
hospitals, research and cultural institutions,
which many people are accustomed
(erroneously) to think of as straightforward
"public" bodies. Others, in contrast, have
hundreds of professional staff, thousands of
volunteers and a turnover of many millions of
ECU's. Very many voluntary organisations
work closely with public authorities in
conventional spheres like social work; others
maintain a strong tradition of complete
independence and are concerned with radical
social programmes or "alternative" lifestyles.

2.3 There is, however, some agreement that
voluntary organisations share to varying degrees
the following features:

a) they are distinguished from informal or ad
hoc, purely social or familial, groupings by some
degree, however vestigial, of formal or
institutional existence.

(b) they are non-profit-distributing^ that is
to say they have purposes other than to reap
profits for their management or members.

(c) they are independent, in particular, of
government and other public authorities, that
is to say free to govern themselves without
interference according to their own rules and
procedures.

(d) they must be managed in what is
sometimes called a "disinterested" manner. The

use of this term is meant to indicate not just that
voluntary organisations must not themselves be
profit-seeking, but also that those who manage
them ought not to do so in the hope of personal
gain.

(e) they must be active to some degree **in**
**the public arena** and their activity must be
aimed, at least m part, at contributing to the
**public** **good;**

**2.4** The degree to which particular voluntary
organisations share the above five features will
vary - considerably. Deciding, for example,
whether a voluntary organisation is indeed
independent is not easy, and the notion of the
"public good" is bound to be controversial. The
definition does, nonetheless, offer a degree of
coherence in a complex area.

2.5 This paper deals with all organisations
which share, to some degree, the above five
features. However, three very specific kinds of
organisation have been consciously excluded.
These are political parties, which can be
voluntary organisations but are clearly a special
case; religious congregations (that is, in the
strict sense, and not excluding organisations of
religious inspiration active in work of general
public benefit); and trade unions and employers'
organisations.

_Foundations_

3 Like voluntary organisations, foundations
also undertake a wide range of activities. In
some countries the foundation is frequently the
preferred vehicle for pursuing purposes
indistinguishable from those typically pursued in
other countries by voluntary organisations.
From the legal point of view, however,
foundations form a more homogeneous group
than do voluntary organisations, the only
important distinction being between those that
are for essentially private, and those that are for
essentially public, benefit. It is foundations
which have some public purpose (even while
remaining private bodies) which are the focus of
this Communication.

3.1 For present purposes foundations are thus
bodies with their own source of funds which

they spend according to their own judgement
on projects or activities of public benefit. They
are entirely independent of government or
other public authorities and are run by
independent management boards or trustees.

_Types of voluntary organisation_

4 Voluntary organisations and* foundations
are difficult to categorise and define. Part of the
difficulty at the European level lies simply in the
different national traditions which they reflect,
and their strong tendency to combine several
different objectives. Most voluntary
organisations and foundations can, however, be
considered as having one or more of the
following functions:

(a) Service delivery or provision to provide to
their members or clients services such as social

services, health care, training, information,
advice or support.

(b) Advocacy: Le. organisations whose
purpose is to campaign, lobby, and otherwise
argue on behalf of some cause or group with the
aim of changing public perception or policy.

(c) Self-help or mutual aid: organisations
typically formed by groups of individuals with
some common interest or need in order to

provide mutual help, information, support and
cooperation.

(d) Resource and co-ordination: so-called
"intermediary bodies" which co-ordinate the
activities of, or provide information and support
to, either individual organisations working in a
particular field or to the sector in general. Such
organisations fulfil the important function of
providing an interface between the sector and
public authorities.

4.1 Many voluntary organisations and
foundations are, of course, national and even
international in scope. The great majority,
however, carry out their activities in regions or
localities. In general, the narrower their
geographical focus the greater the range _of_
functions voluntary organisations tend to fulfil
and the more difficult it is to separate these

functions one from another. Throughout Europe
hundreds of thousands of autonomous local

groups working at the level of the
neighbourhood, city quarter, village, or small
rural area, whose aim is to improve the quality
of life for the local community. Such
organisations in effect simultaneously fulfil,
typically in an informal way, all the functions
described above - providing services and mutual
support, drawing attention to the needs of the
community or of particular groups within it, and
providing a mechanism through which the
community can make its aspirations known to
public authorities.

**The legal and fiscal framework for**
**Voluntary** **Organisations** **and**
**Foundations**

5 The importance of having clear, positive
legal and fiscal frameworks for voluntary
organisations and foundations to work in cannot
be underestimated. Organisations find it
difficult to develop their work when such
frameworks do not exist, whether they be at
national or European levels. Annex II gives an
overview on the way that legal and fiscal
frameworks for the sector are based in the

European Union.

m . **THE** ROLE AND IMPORTANCE OF

VOLUNTARY ORGANISATIONS AND

FOUNDATIONS

6 It is clear from the results of the

Commission's survey that voluntary
organisations and foundations, though often
very small, together command sizeable assets
and mobilise large human resources, both
salaried and volunteer. Like other forms of

enterprise, and particularly small and medium
sized enterprises many voluntary organisations
and foundations are also economically active they sell products, provide services for which
they are paid, and generate surpluses which are
then reinvested.

6.1 The contribution of the sector to the

economy is very considerable indeed. Just how

significant has recently been revealed by the
results of the first rigorous comparative survey
of the sector in four Member States (the United
Kingdom, France, Germany and Italy) directed
by the John Hopkins University, Baltimore [1] .
These results are of conceivable interest.

6.2 The study found that:

**in Germany the sector accounts for 3.7% of**
**total employment and 10% of total service**
**employment. That** **is** **no** **less** **than a** **million**
**people. The non-profit sector is especially**
**important** **in health: 40% of the hospital patient**
**days are provided** by **the** **sector^** **as are** 60% **of**
**the** residential care facilities.

**in France** 4.2% of the employed work in the
sector or over 10% of the total employed in the
service sector. In all some 800,000 people are
employed. Non-profit organisations look after
over half of those in residential care and about

20% of primary and secondary school students.
Non-profits are especially prominent in **social**
**services** and in **sport** where 80% of those with
sporting interests belong to non-profit clubs.

**in Italy** nearly 2% of the employed work in the
sector or over 5% of those employed in the
service sector. In total the sector, which is
prominent in **social services,** employs about
400,000 people. Non-profits run 20% of
kindergartens and over 40% of residential care
facilities.

**In the** UK 4% of the employed work in the
sector or over 9% of those in the service sector.

Altogether about 900,000 people are employed
in the sector, which plays an especially
important role in the provision of research and
**education:** - all colleges are run by non-profits,
as are 22% of primary and elementary schools.

6.3 Finally, the combined expenditures of the
sector in these countries was no less than 127

million ECU (17 billion in Italy, 31.3 billion in
France, 36.6 billion in the UK and 42.2 billion in
Germany).

Published in 1994.

**The** **figures** **for** **non-profit** **operating**
**expenditures** **as a percentage of gross**
**national product are no less impressive: 2%**
**in Italy; 3.3% in France, 3.6%** **in** **Germany;**
**and 4.8% in the UK**

**6.4** **Moreover it** **is** **in terms of employment**
**growth that the most interesting facts of all**
**emerge.** **What the study found** **~** **in any event in**
**France and Germany where figures were**
**available** **-** **was that over the decade from** **1980**

**to 1990 the sector has been a powerful creator**
**of** **employment.** **In France the sector accounted**
**for one out of every seven new jobs created in**
**that decade and in Germany one out of every**
**eight or** **nine!** **This** is **a very significant finding**
**indeed.**

**6.5** These figures should not, perhaps, come
as **a** complete surprise, given the growth of the
sector in the recent past and the reasons which
seem likely to be behind it (see paragraphs 1.4
and 1.5 of annexe I). Some of these reasons are
likely to be, historical, or to have been specific
to particular Member States. Other factors,
however - the discovery of new needs and the
development of new social preoccupations, and
above all the tendency of governments to
engage voluntary organisations and foundations
in the delivery of services of which they
themselves were formerly both designers and
providers have been increasing throughout the
Community.

6.6 But such policy developments have not
developed evenly in all the Member States. The
extent to which they have been accompanied by
clear constitutional or administrative changes
designed to favour the involvement of voluntary
organisations and foundations has varied. .

**6.7** **The** figures demonstrate clearly that **the**
**sector has shown itself capable of opening up**
**new opportunities** **contributing** **not just to**
**improving the quality of life but** **also**
**employment and economic growth. It is for**
**this reason that the sector should be**

**encouraged to play a bigger part in the quest**
**for** **job** **creation** **as** **stated** **in** **the**
**"Employment** **Pact'%** **for example in the**
**context of Local Employment Initiatives.**

**6.8** Throughout the Community many
voluntary organisations and foundations are
engaged in the training and retraining of the
unemployed, sometimes as providers of
government programmes but often on their own
account, as well as providing services for less
favoured people - for people with disabilities,
for alienated youth, for those who for one
reason or another have repeatedly failed to gain
a hold in the job market .

6.9 Voluntary organisations and foundations
also give valuable training to numerous
volunteers, many of whom later find
employment on the conventional jobs market as
a result of the experience and expertise they
have acquired. Volunteering is also for many
people an invaluable means of preserving the
work habit at a time when, particularly for the
long term unemployed. The voluntary sector is
likely to provide with enriching opportunities
for new experiences aiming at gaining social
abilities which will enhance employability and
moreover, the feeling of ownership and
citizenship among young people. The European
Voluntary Service deals with this issue and
provides an educational experience based on the
active involvement of young people in a local
project. Volunteering is also very important for
older retired people who are looking to continue
to use their skills and maintain a continued

active role in society.

_**Social importance**_

7 There are no accurate figures **of** knowing
how many persons in the **Union are** members **of**
voluntary organisations **but, on the** basis _**of**_
some Member States [1] estimates it is commonly
reckoned to be somewhere **between a third and**

a half of the population, approximately **a**
hundred million.

**7.1** **Historically** **the** **influence** **and**
**achievements of voluntary** **organisations,** **and**
**their sister organisations foundations, would**
**be difficult to overestimate.** It is to voluntary
organisations and foundations to which we owe
the origins of many of the services such as
education, health and social services which we

take for **granted** today. Their contribution to the
development **of** social and political ideas, and to
the **intellectual** climate in which we now live,
has been similarly immense. Voluntary
organisations and foundations have played a
vital role in **the** dissemination of scientific ideas

and of technological developments and have
provided forums for the exchange of thinking
across the whole range of human concerns.
They have led the fight for the recognition of
human rights and the dignity of the human
person, and for the preservation of our cultural
heritage and of the natural environment. Many
promote a spirit of solidarity on behalf of the
less favoured, the sick or people with
disabilities, the poor and the excluded, the aged
and the young, and between those who have
jobs and those who do not, between men and
women, between generations, between the more
prosperous regions and the poor or struggling
regions. Voluntary organisations make
important contributions to the fight against
social exclusion, sexual exploitation of women
and children, as well as racism and xenophobia.
They have played a major role in the
mobilisation of public opinion in favour of
development, promoted democracy, and have
established privileged links with the
representatives of civil society in the developing
countries, as well as providing much needed
emergency help and food aid in times of crisis,
often showing heroism working in troubled
regions.

7.2 Today voluntary organisations and
foundations are active in every conceivable field
of human interest or endeavour and their

contribution to the welfare and development of
our societies and to our diverse cultures remains

as essential as it has ever been, especially in
view of the process of European integration. At
the same time they continue to innovate, to
discover new needs and to experiment with
ways of responding to them.

**In** **this** **way voluntary organisations and**
**foundations** **continue,** **as they have always**
**done,** **not just to provide the seed bed or**
**"gene** **poor** **from which future social and**
**other policies may eventually grow but also**
**the political, social and intellectual climate** **in**

**which change comes to be seen as desirable**
**on a wider scale.**

_**Political importance - Citizenship**_

**8.** **For** **many** **people,** **membership of, or**
**volunteering** **for,** **voluntary** **organisations** **and**
**foundations,** **provides a vital means through**
**which they can express their** **sense of**
**citizenship, and demonstrate an active concern**
**for** their **fellows and for society at large.**

**8.1** The part that voluntary organisations play
in strengthening a sense of citizenship and
providing a means for its expression is of
growing importance at the European level.
Indeed, they have an active part to play in
creating a sense of European citizenship as
mentioned in Article 8 of the Treaty on
European Union. Voluntary organisations and
foundations have long fostered international
contact and understanding between peoples and
are now showing a keen interest in the part
citizens have to play in the forging of the
European Union and in giving substance to the
citizen's Europe. Their experience and basic
philosophy, together with their growing
organisation at the-European level, fit them well
for this role.

_**Political importance:**_ _**Promoting**_
_**Democracy**_

**9.** **Voluntary** **organisations** **and**
**foundations foster a sense of solidarity and of**
**citizenship,** **and** **provide** **the** **essential**
**underpinnings of our democracy. In the light**
**of the challenges now facing the European**
**Community, and indeed in the different**
**countries of East and Central Europe, these**
**functions have never been more vital.**

**9.1** There is no doubt that voluntary
organisations and foundations make a profound
and indispensable contribution to the democratic
life of Europe. Indeed, the existence of a welldeveloped association and foundation sector is
an indication that the democratic process has
come of age. For many people participation in **a**
voluntary organisation may be their only

experience of democratic processes outside of
the normal electoral framework.

9.2 Their contribution to the effectiveness

with which representative democracy functions
should not, however, be underestimated. Above
all, they now play an essential part as
intermediaries in the exchange of information
and opinion between governments and citizens,
providing citizens with the means with which
they may critically examine government actions
or proposals, and public authorities in their turn
with expert advice, guidance on popular views,
and essential feedback on the effects of their

policies.

9.3 That voluntary organisations and
foundations are important to the democratic
process does not mean that they could ever take
on the role occupied by elected representatives.
There are, indeed, some dangers in the sort of
"single issue" lobbying which some voluntary
organisations tend to espouse. Their
preoccupation with particular causes or with
particular individuals or groups can make them
unjustifiably impatient with the balance between
competing interests which all democratically
elected governments seek to achieve There is a
need for greater understanding about the
constraints of policy decision making.

IV THE SECTOR AND THE EUROPEAN

INSTITUTIONS WORKING TOGETHER

9.4 The European Institutions have a long
history of contacts and informal consultation
with the voluntary sector. This is the case with
many of the European Commission's services,
such as DGIB, DGVIII with Development
Agencies and ECHO which have achieved an
experience of particular interest in their
cooperation with humanitarian aid NGOs, DGV
and the platform of European Social NGOs
arising out of the Social Forum, DGXI and
environmental organisations, DGXXIII and the
Consultative Committee for Cooperatives,
Mutuals, Associations and Foundations. DGX
in particular looks to the voluntary sector to

disseminate information on European issues to
the citizens.

NGOs are involved in a significant number of
research projects funded within the 4th
Framework Programme (1994-1998). The
targeted Socio-Economic Research Programme
widely covers the issue of the role of the sector
in the economy and its importance for social
cohesion. It is intended to put even more
emphasis on this topic within the 5th
Framework Programme (1999 - 2002).

The European Parliament also relies on a large
number of voluntary organisations in order to
obtain information and views on a wide range of
issues. The heterogenity of the sector is valued,
in particular, for its knowledge and experience
of social policy, environmental, aid and
development issues and for providing a vital link
with citizens in their localities, especially to
those most vulnerable in society.

9.5 The increasingly pivotal role the
voluntary sector plays in a wide range of issues
central to the construction of Europe, including
in particular, in many Member States, in the
management and delivery of key aspects of
social welfare services, has been acknowledged
and reflected in the Commission's main

statements on social and employment policy, for
instance in the Green and White Papers on
Social Policy and the White Paper on Growth,
Competitiveness and Employment.

9.6 However, for many years the contacts
between the European Institutions and the
voluntary sector took place on a completely ad
hoc basis and it was not until the Treaty of the
European Union, in 1992, that the importance
of links with this sector was first formally
expressed in the creation of Declaration 23
which is annexed to the Treaty. [ 2 ]

Declaration 23 states: _"The Conference stresses the_
_importance, in pursuing the objectives of Article_
_117_ _of the Treaty establishing_ _the European_
_Community, of cooperation between the latter and_
_charitable_ _associations_ _and_ _foundations_ _as_

9.7 A high level of political commitment exists
at European level to ensuring that more
systematic consultation with the voluntary
sector is instigated, as regards both the
development and implementation of policy,
commensurate with their increasingly important
role, especially in social policy, in the Member
States [3] .

Subsequent to the creation of Declaration 23, a
number of developments have taken place which
moved forward the process of consolidating cooperation with, and instigating more systematic
consultation of, NGO's and other voluntary
sector organisations. Key amongst these
developments were:

- the holding of the first European Social
Policy Forum in March 1996, which brought
together over 1000 participants mainly from
NGOs, on the eve of the beginning of the
Intergovernmental Conference. This saw the
launch of a new policy objective: the building
over time of a strong civil dialogue at European
level to take its place alongside the policy
dialogue with the national authorities and the
social dialogue with the social partners. It is
intended that the Forum be held every two

years.

This emerging civil dialogue has two main
aims:

-to ensure that the views and grassroots
experience of the voluntary sector can be
systematically taken into account by policy
makers at European level so that policies can be
tailored more to real needs, and;

_institutions responsible for welfare establishments_
_and services_ _"._

It should also be noted that the Commission has had

a long standing dialogue with the sector in other
areas such as with Development NGOs through the
EC-NGO Liaison Committee which receives 90% of

its funding from the Commission.

-to disseminate information from the

European level down to the local level so that
citizens are aware of developments, can feel part
of the construction of Europe and can see the
relevance of it to their own situation, thus
increasing transparency and promoting
citizenship.

- the creation in 1995 of a Platform of

European social NGO's, representing a large
number of organisations, in order to assist in
the preparation of the European Social Policy
Forum and to facilitate the development of civil
dialogue.

- the setting up of a "Comité des Sages" in
1995 to prepare a report on fundamental rights
to be discussed at the Social Policy Forum with
a view to it providing an input to the IGC
discussions on the revision of the EU Treaty.

This report which advocated a Europe of civic
and social rights has also sparked off a
Europe-wide debate through a series of national
seminars involving, in particular, the voluntary
sector and the Social Partners.

 - the creation, in 1997, of a new budget line,
B3-4101, to promote co-operation with
NGO's and other voluntary sector
organisations and to strengthen the capacity
of these organisations to engage in civil
dialogue at European level;

9.8 In the context of the preparations for the
IGC an ongoing dialogue was developed
between the sector, the Commission and the
European Parliament,

Important issues relating to the sector have been
discussed in the framework of the IGC. These

include:

a legal base for regulations concerning
associations at European level

a legal base for incentive measures both in
employment and the social field

the integration of Declaration 23 into the
Treaty and specific provision for the
consultation of, and dialogue with charitable
associations and foundations on all policy
matters which concern them

a modification of article 8a to take (by codecision) measures to facilitate freedom of
circulation.

The Commission intends to make relevant

proposals according to the outcome of the IGC.

With regard to future progress, in order to
retain the maximum amount of creativity and
free expression, it is important not to overbureaucratise or institutionalise consultation of

the voluntary sector and to strive instead for a
flexible but systematic approach in developing
the civil dialogue and relations between the
voluntary sector and the European Institutions
which takes full account of the principle of
subsidiarity and of the specificities of each
Member State.

9.9 The Commission has also attempted to
open up a wide range of funding programmes to
the sector. This includes the Structural Funds,
the PHARE and TACIS programmes for East
and Central Europe, the Leonardo da Vinci
Programme, the Declaration 23 and the new
Third Sector and Employment budget lines, the
SME and Social Economy budget lines, as well
as the European Voluntary Service Programme
which encourages transnational volunteering,
the EDF for cooperation and development with
the LOME countries, and specific budget lines
for external actions, in particular cooperation
with the ALAMED countries, to name but a

few.

It is estimated that overall some 800 million

ECU (of which 196MECU is in the form of cofinancing) annually of EU development
assistance is channelled through NGOs and the
Commission looks to the sector in many policy
issues towards developing countries.

The European Commission is also working
closely with NGOs in the fight against sexual
exploitation of children and women.

**The Commission would like to see its**

**cooperation** **with** **the** **sector** **developed**
**further in view of deepening European**
**integration. Proposals to this end are made**
**in the "Conclusion".**

**V** **PROBLEMS** **AND** **CHALLENGES**

**FACING THE SECTOR**

**10.** Voluntary organisations and Foundations
are working under enormous pressure and
within a constantly changing environment. In
some cases organisations are taking on the
running of services that were hitherto provided
by the public authorities. However, there are
very real problems and challenges facing the
sector in the way that it can respond to
providing these new services. Organisations
which have traditionally played the role of
providing a back up for state run services,
suddenly find themselves having to run those
services themselves. This may mean completely
new staffing arrangements, new management
structures and needs, a complete change in the
financing of the organisation, a change in the
way that it works with the public authorities,
and indeed with other voluntary organisations
and foundations. How will the organisation be
resourced? Will funding come from public
authorities in the form of long term grants or
short term contracts: indeed, will there be
enough funding? Will an organisation be able to
increasingly draw on support from the public
(individuals) or the corporate sector? This
change may also mean a major rethink in the
raison d'être _of_ an organisation. Should an
organisation which was set up to promote the
needs of specific parts of the population (people
with disabilities, socially excluded, ethnic
minorities, etc.,) and to provide some back up
services, be asked to suddenly take on the
running of the mainstream service itself?

**10.1** These are all areas that have major
implications for organisations in the way that

they are resourced and trained, and public
authorities should be aware of the importance of
giving voluntary organisations and foundations
the resources and time to be able to adapt to
new needs.

**10.2 Despite their increasing reliance on**
**foundations and voluntary organisations to**
**carry** **out** **a wide range of functions, public**
**authorities** **have** **not** **on** **the** **whole**

**acknowledged their responsibility to ensure**
**that the sector is as well placed as possible to**
**make its distinctive contribution** **to** **the**

**public** **good,** **The result is that in** **many**
**Member** **States the sector» as a sector,**
**operates in what amounts, at least** **in**
**strategic terms, to a policy** **vacuum.** **This lack**
**of a coherent framework of public policy has**
**inhibited** **it** **from** **contributing,** **to** **the**
**optimum extent possible, to the solution of**
**the problems which we face.** **It** **is time it was**
**remedied.**

**10.3** One of the greatest problems facing policy
makers is the present serious lack of information
about the sector. In an important sense, policymaking has also been inhibited by the structure
of government itself, and in particular by the
habit of public authorities of relating to
associations and foundations as suppliers of
services to particular client groups or as
interlocutors in particular subject areas. Social
service departments have contact with
organisations supplying social services,
environment departments with those active in
the environmental field, and so on. Over a
period of time, such departments and their
officials can acquire a close and detailed
knowledge of the particular organisations with
which they deal. Within government as a whole,
however, such knowledge as departments may
acquire remains fragmented. For the most part it
is rare for public authorities to have an overview
of the sector as a whole or _of_ its needs, or of
significant developments within it. The same
phenomenon has no doubt also been one of the
factors which in a number of Member States has

inhibited the growth _of_ a "broad sectoral"

consciousness amongst voluntary organisations
and foundations themselves.

**10.4** The **urgent need now is for public**
**authorities to complement their** **"vertical"**
**approach and to begin to look seriously at**
**"horizontal"** **issues affecting the sector as a**
**whole with a view to developing appropriate**
**policies. At the same time, the public role of**
**voluntary organisations and** **foundations**
**needs** **to** **be** **acknowledged** **and** **the**
**acceptance of the sector as a full partner in**
**the debate on all policy and implementation**
**matters which concern them, needs to be**
**actively encouraged at all levels.**

**10.5** Over the past ten years the amount **of**
transnational work done by voluntary
organisations and foundations has increased
dramatically. This is due to **a** growing number
of European funding programmes being opened
up to the sector which encourage transnational
collaboration, and an expanding number **of**
organisations who are interested in developing
their services in other countries*

10.6 .There is also a large and continuously
growing number of European wide federations
or networks of voluntary organisations and
foundations. Some, such as the Red Cross
Liaison Committee act as a co-ordinating
organisation for individual national
organisations which share the same aims and
objectives, as well as the same name. Others
such as the European Foundation Centre or
CEDAG (the European Council for Voluntary
Organisations) act as a focus point for lobbying
the public authorities on behalf of the sector,
and providing and developing examples of good
practice within their - often - diverse
membership.

**10.7** There are also many development and
emergency aid agencies which have a long
tradition working overseas, but which are
working more and more together at a European
level and with the European Commission.
Indeed, the EC-NGO Liaison Committee of
Development NGOs, works closely with

DGVIII (Development), with ECHO, DGIB and
with other Dgs of the European Commission.

**10.8** The ability of voluntary organisations to
make their full contribution in transnational

activities in the social and employment field has
been limited by the suspension of some
European programmes since 1995 pending a
European Court of Justice ruling on the legal
basis of such measures. In its proposals to the
IGC, the Commission has endeavoured to
remedy this by proposing a legal base for the
transfer of best practice, networking and
exchange of experience on a transnational basis
in such fields as the fight against social
exclusion and the promotion of equal
opportunities and the combating of
discrimination on the grounds of gender,
disability, race or age. This would enable the
Community to adopt such incentive measures as
have already been established for education,
training and public health.

**10.9 There** **are** **however,** many **other**
**problems facing organisations trying to**
**develop their transnational European work:**
**They include:**

- _difficulties_ _finding_ _like_ _minded_
_organisations in other countries in order to_
_develop joint_ _projects._

Although on paper an organisation may seem to
have the same aims and objectives, in reality it
may not. The role of an organisation working
with a specific client group in one country may
differ a great deal from one working in another.
There are also difficulties in organisations
working together which is often due to
differences in culture and language

- _inability_ _of organisations_ _to_ _access_
_European_ _funding*_

Decision making for many European funding
programmes is frequently made at national rather
than at European level.

Many organisations have trouble
obtaining good up to date information on
European funding. They also may have
difficulties with Member States which are

reluctant to allow voluntary organisations and
foundations access to specific European funding
programmes in which the Member States have
a decision making role.

- _difficulties finding matching funding for_
_projects_ _which_ _are_ _co-financed_ _through_
_European funding programmes_

Matching funding for projects often comes
from public authorities who may be putting
forward their own rival bids, or not be interested
in supporting the project.

- over dependence on European
Community Funds leading to difficulties _m_
forward planning and continuity of management
owing to the incompatability of the short term
nature of this funding and the long term core
funding needs of voluntary organisations.

Difficulties in obtaining funds at national
level has led some organisations to look for
European funding which can be inappropriate to
their main aims and objectives. Failure to
continue receiving these funds can undermine
their existence.

- _difficulties faced by organisations due_ _lo_
_late payments of European funding._

Payments held up for various reasons at
European or national levels can often cause
problems for organisations carrying out
transnational projects.

- _lack_ _of_ _legal_ _recognition_ _for_
_organisations in other countries._

This can cause serious problems for
organisations wishing to open offices in other
Member States, or provide services that are
financed by public authorities from another
Member State. The Commission has already
proposed certain measures (notably the Statute
for a European Association) aimed at giving

**10**

organisations a legal personality in other
countries within the European Union.

- weak representativeness of organisations
taking part in consultation

In some cases European networks lack the
structure and adequate membership to ensure
that views of a wide spectrum of operating
organisations at local, regional and national
levels are taken into account.

- _tack of understanding by some public_
_authorities on what European work voluntary_
_organisations_ _and_ _foundations wish to_ _do._

Many organisations complain that
public authorities are not aware or being
supportive of the transnational work that they
are trying to do. This often results in
transnational projects being hindered.

- _lack_ _of adequate training._

Inadequate training can lead to poorly run
organisations and the inability to respond to
challenges and new needs.

- _lack of access to networking techniques_

Subsequent to poor training some
organisations are not able to develop links with
other like minded organisations.

10.10 Not all these problems are
insurmountable, and indeed some of them are
already being dealt with by the European
Commission and by some Member States.
However, it should be stated that they are often
dealt with on an ad hoc basis, and not as part of
a coherent strategy and policy towards the
sector. The following section presents a number
of ideas which can be addressed by the sector
itself, as well as at Member State and European
levels.

VI CONCLUSION

MEMBER STATE LEVEL

The Commission believes that for the most part
action will need to proceed, in line with the
principle of subsidiarity, at the level of the
Member State or, where appropriate, at the
level of the region or the locality.

The Commission proposes that the Member
States examine attentively the following areas:

- acquiring a much deeper knowledge and
understanding of the sector at aD levels

There is no doubt that policy making is at
present severely hampered by the lack of
systematic and reliable data about the sector.
Indeed there are parts of the Community where
the sector has had so little public profile that
policy makers appear to have been scarcely
aware of its existence. All concerned actors,
European,national, regional, local authorities
and the voluntary sector itself, need therefore to
address the question of what practical steps they
could each undertake to map the extent and
contribution the voluntary sector makes.

 - the relationship ("partnership**} between
public authorities and the sector

Voluntary organisations are being asked to take
on an increasingly important role, by public
authorities across the Community and by the
European Commission itself. It is therefore
important that voluntary organisations are given
the opportunity to be involved in planning
services and policy making with public
authorities at all levels. Relationships between
voluntary organisations and public authorities
should be clearer and new partnerships
developed. Partnership between voluntary
organisations and governments will involve
contractual arrangements between individual
voluntary organisations and public authorities
which will properly involve their own
constraints. But whatever relationship they may
have with governments, voluntary
organisations and foundations are
independent of government and must remain
so. Public authorities should review public
policy and make proposals about what would
need to be done for policy to help the
voluntary sector to increase its capacity and
where relevant to improve its skills in order

**11**

**that it can best fulfill the new roles it is being**
**called on to address.**

- **the law** governing voluntary organisations
**and foundations**

The competent authorities should examine what
scope exists for clarifying and adjusting legal
frameworks so that they are conducive to the
voluntary sector fulfilling its full potential at
national, regional and local levels.

- **the fiscal basis and** competition **rules** on
which the sector operates

The taxation rules applicable to the sector have
to be clear and simple, and incentives as well as
exemptions have to be studied attentively. Any
individual tax treatment has to be justified in
relation to the constraints specific to this sector
and to its method of internal organisation which
differentiates it from traditional economic

actors.

- **how the** continued financial health of the

sector **is** to be secured

Positive legal and fiscal regimes are important
for the growth of the sector in each country, as
well as to ensure public accountability.
However, public authorities should also ensure
that the sector is seen positively by society and
that funding by public authorities, the corporate
sector and private donations are all encouraged.

 - training

The growth of the sector has not been matched
by an increase in training to help voluntary
organisations develop their skills and expertise
in order to meet new needs. All too often,
training budgets are the first to be hit when
funding becomes difficult to obtain and
voluntary organisations are asked to cut costs.
Public authorities should ensure that voluntary
organisations are given adequate training in
order to provide the services and do the work
that is being increasingly asked of them.

 - information society developments

Voluntary organisations and foundations have a
clear interest in being associated closely with
information society developments. The
participation of voluntary organisations and
foundations in pilot projects, particularly in the
applications field, should be encouraged.

- better access to programs co-financed **by**
**the** Structural Funds

Many voluntary organisations are concerned
about access to finance from the Structural

Funds. Insofar as the implementation of
Community Support Frameworks and
operational Programmes is the responsibility of
Member States, the latter are encouraged to
examine and review current administrative

practise so as to facilitate access to information
and broader participation by the voluntary
sector. The same applies insofar as the
designation of beneficiaries for global grants is
concerned.

```
VOLUNTARY SECTOR

FOUNDATIONS LEVEL

```

AND

It is important that voluntary organisations and
foundations make every effort to promote
themselves, through use of the media and new
information technology. They should try to be
open and accessible in order that the public and
public authorities understand their aims and
objectives and how they work. Organisations
should encourage relevant training for their staff
and volunteers, and when appropriate, should
try to develop good links with public authorities
and the corporate sector.

The sector should look to diversify its funding
base in order not to become too dependant on
any one source of funding. Networks of
organisations should also try to ensure that their
membership base is as comprehensive as
possible in order for them to be truly
representative.

**EUROPEAN COMMUNITY LEVEL**

**In addition, the Commission proposes the**
**following at European Community level:**

 - Voluntary organisations play an extremely
important role as interfaces between citizens and
government authorities, although in many cases
this role still does not receive proper
recognition. Voluntary organisations are asking
for their work in this sphere to be recognised;
they are no longer satisfied with a single

**12**

lobbying role, but are asking to be consulted
systematically and regularly by Community
bodies on all matters»and on all decisions which

might affect the work they do, how they do it
and their efforts to achieve their objectives.

The Commission will maintain and further

develop a continuous exchange of information
and points of view by establishing systematic
and regular dialogue and consultation with the
sector [5] . In this connection the Commission

welcomes the establishment by the
aforementioned movements of the Consultative

Committee for Cooperatives, Mutual Societies,
Associations and Foundations, which aims to
ensure the consultation and the horizontal co
ordination of the sector. The Commission will

also look to develop its dialogue with the sector
through the European Social Policy Forum and
the new budget line promoting cooperation with
charitable associations, and will examine how
the representation of voluntary organisations on
other existing advisory committees can, where
appropriate, be organised. The development of
this **dialogue and partnership** will contribute
to a better understanding and building of
European integration at all levels. As well as
this, the revised treaty should include such
measures as the fight against exclusion, the
promotion of employment, and measures in
areas such as non discrimination and

immigration, which call for this strengthening of
dialogue.

 - The role of voluntary organisations in
present-day society will not be recognised
without more knowledge of how this sector
operates, and of its requirements and
expectations. As people are very far from being
fully aware of all this, particularly in all the
Member States and at European level, an effort
must be made in this direction. One of the ways
of making progress in this matter is to give a
**higher profile** to voluntary organisations and

In this context it should be recalled that the
European Commission has published a directory on
European Non Profit organisations in order to
enable officials to consult more systematically and
as widely as possible.

their work. For these reasons, and in order to
support the effort to improve knowledge of this
sector, the Commission will consider proposing
a **year of voluntary** **organisations** **and**
**European citizenship.**

**•** The Commission recognises the
importance of the role that voluntary
organisations can play as disseminators of
information, and as bodies close to ordinary
citizens, and proposes to involve them more
closely in its activities of disseminating
information. Voluntary organisations have
played an important role in the development of
past "European years". This role has not always
been acknowledged. The Commission therefore
intends to ensure that the role of voluntary
organisations is **recognised** and **publicised** in
all "European Years" relevant to the sector.

 - The European Parliament has proposed
that studies be made on the expansion of the
social economy in the European Community, in
particular the establishment of an **observatory**
to follow developments in this sector in the
single market. The Commission considers that
for voluntary organisations and foundations, this
task could be undertaken within the European
observatory for SMEs, and proposes that the
collection and analysis of information, in the
framework of the existing structures, should be
based on what voluntary organisations do and
want to do at transnational level, and
particularly on the problems which they
encounter in doing so, i.e. problems arising from
differences in their legal forms in the various
States, money transfers, leasing or purchasing
premises in other states, obtaining subsidies, the
effectiveness of the mutual recognition of
vocational qualifications, obstacles to
sponsoring in the Member States, etc. It would
also look to identify areas of good practice
which could be promoted and disseminated.

 - To undertake transnational activities,
voluntary organisations need instruments which
are not yet widespread, but which are a _sine qua_
_non_ for any activity of this kind. These
instruments range from a knowledge of
languages to familiarity with current differences
in the various Member States concerning

**13**

taxation, working methods, administrative
procedures etc. There is great demand for
training on the part of those voluntary
organisations which are interested in expanding
their transnational activities. The Commission

will therefore give an impetus to promoting
better access to **European** **training**
**programmes** which officials of voluntary
organisations wishing to expand into Europe
could use.

On the other hand the involvement of the

voluntary sector during the European year of
life long learning gives evidence of the actual
and potential contribution of this sector to life
long learning, including adult education which is
largely managed by the voluntary sector. In the
years to come, this contribution is likely to
become crucial to build a knowledge society for
all.

 - Voluntary organisations often have
difficulty in finding partners or people to work
with outside their own Member States who

could help them in their transnational activities,
and facilitate access for them to a number of

Community funds for which this is a condition
of eligibility. All the more because the numerous
Community instruments and policies available to
enterprises for **finding partners at European**
**level** (BC-Net, Europartenariat, BCC etc..) are
not always suited to the needs of voluntary
organisations. [6] Accordingly, the Commission
will see that they are made easily accessible to
voluntary organisations, and that they meet their
specific requirements.

 - Voluntary organisations and foundations
have a clear interest in being associated closely
with **information society developments.** An
effort should be made to raise their awareness of

the opportunities and benefits that the
information and communication technologies,
services and applications can offer them. The
Commission has already set up the Information

The RECITE and ECOS/OUVERTURE

programmes, and also the PACTE programme can
facilitate the internationalisation of voluntary
organisations and foundations.

Society Project Office as a "one stop shop"
within the Commission to facilitate access to

information in this area. The Information

Society Forum will seek to involve all parties
concerned, including voluntary organisations
and foundations, in the policy debate. The
participation of voluntary organisations and
foundations in pilot projects, particularly in the
applications field, should be encouraged.

   - Many voluntary organisations are calling
for **easier access to sources of finances,**
including to the Structural Funds as well as
other sources. The complexity of application
systems and administrative procedures, which
often lead to delays in payments can prevent
small, lean voluntary organisations from making
the valuable contributions they have the
potential to make in the implementation of the
various EU funding programmes.

Insofar as the Structural Funds are concerned,
the Commission will, in conjunction with the
Member States, continue to actively explore
ways of facilitating access to Community
finance, including the possibility of pre-financing
by the Member States and the increased use of
global grant finance. In general terms, it will be
proposing ways of streamlining and simplifying
procedures in the context of the reform of the
Structural Funds which is due to take effect

from the year 2000. Likewise, it will continue
to encourage a broad interpretation of the
concept of partnership extended to economic
and social partners [7], compatible with the need
for proper and effective systems for monitoring
the management of public funds.

The Commission will also explore ways of
publicising more widely information on existing
Community Finance which is available to
voluntary organisations and foundations. [8 ]

Article 4 of the Framework Regulation No. 2081/93
on the Structural Funds.

DGVIII (Development) already has a document
"Digest of Community Resources available for
financing the activities of NGOs and other
Governmental and/or Decentralised Bodies

representing Civil Society in the fields of
Development CO-operation and Humanitarian Aid".

**14**

The results of activities financed under the new

budget line B3-4013 will help shed some light
on the employment dimension of the third
sector. In particular the actual and potential
role of the voluntary sector and foundations in
the employment development process and their
job creation capacity will be examined and
examples of best practice identified. The
Commission will ensure that the resulting
analysis and conclusions are widely
disseminated.

The European Commission's support through
training and the use of information technologies
will improve their capacity to **network** in order
for them to fully participate in European
Community Programmes.

 - The survey has shown that there is a
growing interest by voluntary organisations in
developing their transnational work. Voluntary
organisations are keen to learn different models
and ways of working from organisations in
other countries. Many organisations find this
difficult to do, due to the lack of resources. The
Commission could help organisations such as
foundations to explore the possibility of them
setting up a **special fund** in order to facilitate
the transnational work of voluntary
organisations. In particular, the fund would
enable voluntary organisations to pre-finance
certain projects for which grants have been
asked from public authorities, and also enable
study visits, and the attendance of conferences,
seminars and training events for organisations
which normally lack the means to do so.

 - The numerous difficulties facing voluntary
organisations when they contemplate
transnational projects are often the result of
national legislations which are ill-suited to the
new needs, but they can also arise from the
effect of measures taken at Community level,
which, since they were drafted with other
objectives in view, may turn out to be obstacles
for voluntary organisations and foundations. For
this reason the Commission proposes to study
and monitor closely the effects of Community
policies, actions and legislation on this sector.
This **follow-up** and **analysis** should be carried
out systematically also through better

inter-departmental co-ordination, with the aim
both of monitoring the implementation of
Community rules in the sector and of promoting
the structures of voluntary organisations and
their access to the Single Market.

**The Commission intends to conduct a broad**
**dialogue involving the sector, the European**
**Parliament, the Committee of the Regions,**
**the** **Economic** **and** **Social** **Committee,**
**Member States and other interested parties**
**in order** **to** **fully discuss the issues contained**
**in this document. The Commission intends**

**to hold a series of conferences and seminars**

**to discuss the Communication and issues**
**arising out of it.**

**15**

**ANNEX!** **THE SURVEY**

**I** How many voluntary organisations and
foundations are there? How are they financed?
How many people belong to voluntary
organisations? How many people do they
employ? How many people work for voluntary
organisations or foundations as volunteers?
How big is the sector, and is it growing? How is
it developing at the European level? What are its
needs and aspirations for the future?

1.1 Unfortunately, as has already been made
clear, there is a serious lack of information
about the voluntary sector in Member States,
and still more at the European level. This lack of
essential facts reflects not simply what has, until
fairly recently, been a lack of interest amongst
scholars and policy makers, but also the absence
of any sort of convenient sampling frame.

1.2 In an attempt to throw some light on the
scene, the Commission therefore decided to
carry out a questionnaire study of voluntary
organisations in all the Member States. The
method used was to distribute questionnaires to
voluntary organisations throughout Europe via
their representative organisations in Brussels
and at national level. The survey was carried out
between June and October 1993 and altogether
some 2300 replies were received. This is a
surprisingly good response and the Commission
is grateful to everyone involved. **The response**
**may itself be taken as an indication of the**
**lively interest that voluntary organisations in**
**the** **different** **Member** **States** **have** **in**

**developments at a European level.**

**1.3** Given the method used, which was the
only one open to the Commission, the study
must be regarded as **strictly exploratory** and its
results, which are not in any sense scientific,
should be treated with caution. The findings are,
however, of interest and are discussed below.

_**Growth of the sector**_

1.4 All the evidence suggests that the
associative sector has grown enormously since
the end of the last war and the survey clearly
reflects this phenomenon, highlighting in
particular the very marked increase in the
number of voluntary organisations in the last
twenty or so years. The growth of the sector in
the last decade might justly be called explosive.
Of the voluntary organisations which responded
to the questionnaire, some 75% were founded
after 1961, about 65% after 1971 and about
45% after 1981. There is no reason to believe

that the sample was abnormally "young" nor
does growth appear to be slackening. There are
minor differences between the sector in different

Member States - for example, for reasons which
will be obvious, the sector appears to be on
average younger in Spain and Portugal than
elsewhere in Europe (84% of the Spanish and
85% of the Portuguese sample were founded
after 1971 and 63% and 62% respectively after
1981) - but the same basic phenomenon can be
observed everywhere in Europe.

1.5 There are no doubt many reasons for this
very marked growth but **the** following factors
have almost certainly been influential;

 - increases in **prosperity** following the
second world war and latterly increased **leisure**
**time** (shorter working week, longer holidays
and two-day weekends)

 - the **shift** evident in most European
economies during the 80's **towards** **the**
provision of **services**

 - the increasing **delegation to voluntary**
**organisations of services** (particularly social
services) previously delivered by public
authorities ("social privatisation")

 - changes in **public preferences** away from
uniform and relatively impersonal services of **the**
kind typically provided **by** public authorities
towards the **more individual client-oriented**

**approach** favoured by voluntary organisations

**16**

**•** **the** **identification** of **a** whole range **of** **new**
**needs** **and the** **growth** **of new** **social**
**preoccupations** **(e.g.** **sexual** **equality,** **the**
**environment** **and** **preservation** **of** **the biosphere,**
**foreign** **aid to** **developing countries following**
**the granting of independence** **to** **former colonies**
**in** **the** _**60%**_ **peace etc.)**

**•** **the** **employment** **crisis** **in the** **late** **70'$** **and**
**early 30's** **leading** **to** **the** **creation** **of**
**employment schemes** **involving voluntary**
**organisations**

**•** **historical reasons peculiar** **to** **particular**
**Member States such** **as the** **release** **of** **pent-up**
**associative demand following political** changes
in Spain **and** Portugal **or** the movement to create
structures outside the **purview** of the state
following the social **and** political upheavals of
196S

**•** **demographic changes taking place** **in**
**Europe** such as the increasing number of
retired/unemployed people leading. Member
States to offload services from the State to the

private **and** associative sectors as a way of
cutting public expenditure

_**Numbers of members**_

1.6 One well-known voluntary organisation in
the Community has over 13 million members.
Most voluntary organisations, however, are
small, often having no more than a handful of
active adherents. Because of the methods used

by the Commission, the sample contains a
disproportionate number (30%) of "intermediary
organisations" in the sense explained in
paragraph 4 and of national organisations. The
results will therefore have considerably
overestimated the average size of voluntary
organisations in the Community. (Most
intermediary organisations responding to the
survey were federations - that is, umbrella
bodies providing some centralised services (such
as information and combined lobbying) for a
number of separate voluntary organisations or
branches (usually with their own legal identity)
working in the same field. Nonetheless the
figures are of interest.

1.7 In the sample, about 40% of voluntary
organisations had fewer than 100 members and
more than half had fewer than 200. The range
was, however, very wide. Thus 13% of the
sample had between 1 000 and 5 000 members,
and 15% had over 5 000. As would be

expected, national organisations tended to have
more members than those with a regional focus

- they appear, roughly speaking, to have twice
as many members as regional organisations.

1.8 Of the federations responding to the
survey very nearly half represented more than
fifty organisations, with 9% representing over
500. Such bodies do, of course indirectly
represent large numbers of members of
individual voluntary organisations: in our sample
over half (55%) of federations indirectly
represented more than 10 000 members with
32% representing over 100 000. The average
number of members indirectly represented was
over 1 300 000.

1.9 The size of voluntary organisations and
federations appears to vary according to a
number of factors. Larger bodies tend to be
older, as do organisations working in fields of
obvious and enduring interest, such as social
services and education. As has already been
remarked, voluntary organisations with wide
geographical scope tend to be larger than those
with a relatively parochial focus. The size of the
membership also reflected to some degree the
size and relative wealth of the Member State

and the relative maturity of the sector.

_**Employment**_

**1.10** The numbers of staff employed by
voluntary organisations varies very widely from none at all to many thousands. The great
majority of voluntary organisations are, in
effect, small enterprises and, like their
counterparts in the conventional economy, most
employ no more than a handful of staff. A few,
however, are large organisations by any
standards, employing large numbers of full and
part-time salaried staff.

**1.11** The average voluntary organisation in our
sample employed 40 full and 10 part-time staff.
The equivalent average figure for intermediary

**17**

organisations was a little higher. These averages
do, however, conceal wide variations. Thus
some 14% of our sample employed no paid staff
at all, 17% employed over 50 people (full and
part-time), 6% between 101 and 500, and 4%
over 501. The commonest number of employees
was between 1 and 5. Full-time staff appear to
work on average for 36 hours a week and parttimers for 20 hours. These figures varied less
from country to country than they did according
to the area in which the voluntary organisation
was active: for example, as might be expected,
voluntary organisations active in the health or
social services field tended to employ many
more salaried staff than those active in, say, civil
rights.

_Volunteers_

**1.12** Another very important source of support
for voluntary organisations is, of course,
**volunteers.** 81% of our sample said that they
employed volunteers. Voluntary organisations in
some countries appeared to make rather greater
use of volunteers than others, but in no country
did the proportion of voluntary organisations
which have volunteers working for them fall
below 60%. Again, the numbers of volunteers
employed varied widely: 30% of voluntary
organisations (including federations and other
intermediary organisations) told us that between

1 and 5 volunteers were active in their

organisation; about 18% reported that they were
supported by between 6 and 10 volunteers; 60%
had over 51 volunteers, 10% had between 101
and 500, and 7% had over 500. A few voluntary
organisations (3%) were supported by over
2 000 volunteers. On average each volunteer
spent about nine hours a week working for the
organisation they supported.

**1.13** Although there did not appear to be major
differences between the number of organisations
in different Member States using volunteers, the
ratios of salaried staff to volunteers varied

widely from country to country - from about 1:1
to about 1:8. Such differences did not appear to
be related to the size or wealth of Member

States or any other particular factor. It may be
that they simply reflect varying traditions, or the

extent to which volunteering is, or is not,
organised.

**1.14** The numbers of volunteers employed also
varied markedly according to the voluntary
organisation's main field of activity. For
example, voluntary organisations working
mainly in the field of culture and recreation, or
in human rights, clearly depended to a much
greater extent on volunteer workers than did
voluntary organisations working in health,
education, or social services. However, while
there was some tendency for voluntary
organisations to rely on either salaried staff or
volunteers, it was not necessarily the case that
voluntary organisations with few salaried staff
had few volunteers, or vice versa - the mix
varied a great deal.

_Assets_

**1.15** The voluntary organisations and
federations in our sample had:

     - financial assets amounting to 2,208
thousand ECU,

     - property amounting to 702 thousand
ECU;'

     - equipment amounting to 1,102
thousand ECU;

     - other assets amounting to 835
thousand ECU;

     - total assets of 10,068 thousand

ECU.

These averages conceal wide variations between
voluntary organisations themselves and between
countries. By and large it is, as would be
expected, voluntary organisations in the richer
Member States which have on average bigger
assets, though the variation in even these
countries is as wide as anywhere. Voluntary
organisations in Member States where there are
still remnants of the old mortmain laws, or
where the laws governing inheritance are still
relatively rigid, have discernibly fewer assets in
the form of property.

_**Expenses**_

1.16 Data on organisations' annual expenditure
was broken down into salaries and wages,
administrative costs, and other costs. On
average the costs incurred by our sample
organisations amounted to the following:

salaries and wages: 27,743
thousand ECU

administrative costs: 465

thousand ECU

other costs: 1,044
thousand ECU

total costs 31,149
thousand ECU

There were minor differences between

countries: broadly voluntary organisations from
better off Member States spent more than
average on wages and salaries. Not surprisingly
larger organisations spent rather more on
administration than did federations, which were
generally more expensive to run than simple
voluntary organisations.

_**Sources of Income**_

1.17 Very many voluntary organisations
depend to some degree on external subsidies of
one kind or another, typically from public
authorities, but often from individuals or other
private donors. Many others are virtually selfsupporting, obtaining their income from
membership fees or by the sale of services or
other products. To get an idea of how they
financed their expenditures, we asked voluntary
organisations in our sample to state what
proportion of their income was from their own
resources and what proportion came from socalled external sources, such as gifts and
subsidies.

1.18 For the purposes of the study, income
from the sale of services (whether to members
or non-members) or products (e.g.
publications), membership fees, investment
income and income from contracts, were all

counted as "own resources". Under "External

resources" were included subsidies from

government bodies and other public authorities,

and support from individuals, international
bodies, foundations and companies.

1.19 On average membership fees (30%) and
the sale of services (30% of which 20% were to
members and 10% to non-members) made the
largest contribution to voluntary organisations'
"own resources", followed by contracts (17%),
sales of products (15%), and investment income
(8%). To put the matter in another way, on
average a typical European voluntary
organisations derives some 62% of its "own
resources" from economic activity of one form
or another - i.e. from selling services directly or
under contract, or from selling products such as
publications. Again these averages did,
however, conceal wide variations in the amounts
that voluntary organisations gained from various
sources and in their relative importance. For
example, in two Member States the most
important source of income in the "own
resources" category was sales to non-members;
and in another membership fees apparently
contributed little in comparison with contracts
with public authorities.

1.20 There was less variation apparent when
we looked at "external resources". By far the
most important source of external income for
voluntary organisations in all but one Member
State was reported to be subsidies from public
authorities (52%). This was followed by support
from individuals (22%), support from
international bodies (10%), grants from
foundations (9%), and lastly support from
companies (7%). Again to put these averages
into perspective, grants from foundations were
generally not an important source of income
(between 3% and 6%) in all but two Member
States, as were supports from business.

1.21 Of all the sources of internal and external

income, subsidies were clearly the most
important, followed by membership fees. The
following diagram compares all the sources of
internal and external income and gives their
mean percentages of the total.

**19**

**Own and External Resources**

**0,15** **0.20**

**avaraga** **part in %**

**1.22** Additional information was also sought
from voluntary organisations and federations
about the balance of "own" to "external" income

over the last three financial years. The ratio of
own resources to external resources was on

average about 45:55, with no significant
fluctuations over the three years. In each year,
however, there were some voluntary
organisations/federations claiming that 100% of
their income was derived exclusively either from
their own or from external resources. In other

words most voluntary organisations appear to
generate a little under half their income
themselves, relying for the remainder mainly on
subsidies of one kind or another; but there are
numbers of voluntary organisations which are
either wholly self-sufficient or alternatively,
wholly dependent on external aid.

**Social Services**

**Education and Research**

**Development and Housing**

**Culture and Recreation**

**International Activities**

**Civil Rights and Advocacy**

**Health**

**Philanthropy and Voluntarism**

**Environment**

**Business and Professional Voluntary organisations**

**20**

_Sphere of Activity_

**1.23** The questionnaire used the following ten
main spheres of activity with which to classify
voluntary organisations/federations:

**1.24** The figures in brackets indicate the
proportion of respondents naming each of these
areas as one in which they were active. These
figures take account of the fact that, as has
already been made clear, many voluntary
organisations are active in a number of fields at
once. This is clearly revealed by the following
diagram showing the proportions of voluntary
organisations whose main activity may lie in one
field but which are also active in others. There

were, as would be expected, differences
between countries, though it is noteworthy that
social services was named most frequently in all

**(57%)**

**(46%)**

**(40%)**

**(36%)**

**(35%)**

**(35%)**

**(26%)**

**(23%)**

**(18%)**

**( 8%)**

£

**Areas of Activity and Main Areas of Activity - frequencies in %**

**Social Services**

**Culture and Recreation**

**Development/Housing**

**Education and Research**

**International activities**

**Health**

**Civil Rights**

**Environment**

**Philanthropy**

**Business**

**30**

**frequencies in %**

**60**

but two countries (it is unlikely that this finding
simply reflects our particular sample). Greater
differences appeared, however, when we looked
in more detail at the type of social services
provided where voluntary organisations in
different countries appear to specialise in
different sub-areas such as family care, youth
work or services to elderly people or people
with disabilities. The latter three groups were, in
fact, most often mentioned. This may reflect the
fact that governments most often turn to
voluntary organisations to provide services for
these particular groups.

1.25 Looking in a little more detail at the
figures on, for example, "culture and
recreation", reveals that 41% of voluntary
organisations whose main activity lies in this
field are also involved with other cultural and

artistic activities - 37% with sport, 29% with
recreational and entertainment clubs and 27%

with the media and communication. Voluntary
organisations which gave another area as their
main field of activity were also active in "culture
and recreation".

1.26 A further example is provided by "health":
36% of voluntary organisations which claimed
that health was their main area of activity were
involved in rehabilitation, 35% were involved
with public health services, and 26% were active
in nursing homes. Nursing homes were also
mentioned by, for example, 29% of voluntary
organisations which gave "Philanthropy and

Voluntarism" as their main area of activity; and
17% of voluntary organisations who were
mostly involved in "social services" were also
involved in "rehabilitation".

1.27 This "multi-functionality" is typical of the
philosophical approach adopted by voluntary
organisations and often also reflects their
circumstances as key sources of aid or
information in a particular locality. Voluntary
organisations in .this sense are rarely entirely
"subject-oriented": their focus is above all on
people and their problems. In this spirit, many
voluntary organisations provide what is, in
effect a "one-stop-shop" either for the
inhabitants of a particular area, or for the group
which is their special concern. Thus a voluntary
organisation dealing with, for example, people
with disabilities, will deal not simply with the
immediate results of a particular disability, but
will tend to occupy itself also with the
information and advice needs of its clients and

with the whole range of concerns affecting
them, including, most importantly, their rights as
citizens. This latter is a particularly important
point: as a glance at the diagram will show:
while only 6% of our sample regarded
themselves as primarily concerned with human
rights, 35% gave it as a field in which they were
active. The same multi-functionality is evident
throughout the diagram.

1.28 When we looked at the expenditure and
assets of voluntary organisations working in
different fields we found that bodies concerned

with social services and health had the highest
expenditure. The voluntary organisations and
federations whose main concern was with civil

rights and advocacy had the lowest costs and
the smallest assets. Environmental voluntary
organisations/federations and those whose main
objective was education and research were best
off from the point of view of assets.

1.29 As regards the "own resources" of
voluntary organisations, the most important
source of income for bodies in the field of

culture and recreation was the sale of services to

members and membership fees, both providing
29%o. In the fields of education and research and

international activities, contracts, (25% and
27% respectively) were the most important
source of self-generated income, while in the
area of health it was membership fees (36%).
Voluntary organisations providing social
services also said that membership fees
constituted a significant part of their "own
resources" (33%), as did those dealing with civil
rights (38%), development and housing (31%)
and the environment (35%). In contrast, charity
organisations obtain the bulk of their own
resources by selling services to members (28%)
and non-members (26%). For business and
professional organisations, membership fees are
by far the largest element in the "own resources"
category.

Ï.30 As regards external sources of income,
organisations working in all fields are largely
supported by subsidies of one kind or another.
Subsidies provide from 31% of total external
income of charitable voluntary
organisations/federations to 73% of such
income for business and professional bodies. As
has already been noted, support from individuals
is also an important source of income.
Charitable voluntary organisations and
federations, for example, said that support from
individuals represented 37% of their external
income. Environmental voluntary organisations
claimed the proportion to be 29%, and in the
fields of social services, education and research
and international activities^ it represented a fifth
of external resources. The major exception to
this picture was provided by business and

professional voluntary organisations, which
derived only 2% of their external income from
individuals.

_**Geographical scope**_

1.31 In asking about the geographical area
covered by voluntary organisations, we were
chiefly interested in gaining an impression of
what sort of proportion of our sample
considered Europe as a significant, if not the
only, focus of their organisation. The results
varied surprisingly widely: in one country only
4% of respondents regarded their scope as
extending to Europe, compared to 35% in
another country. They should, however, be
considered together with our findings (reported
below) on the number of actual or intended
partnerships or other activities undertaken by
voluntary organisations at the European level.
Interestingly, there appears to be little
correlation between how important a focus
organisations consider Europe to be and their
propensity to form European partnerships.

1.32 The scope of a. voluntary organisation's
interest is not, of course, necessarily closely
related to its organisational structure. For
example, an internationally active voluntary
organisation may well be locally based, whereas
one which may be active at a national level
within a particular Member State may lack any
interest in Europe. As a broad rule, however,
the greater an organisation's geographical scope
the more it appears to play an active role at all
levels. Thus most national organisations
considered that they were also active at local
and regional level, but few local organisations
considered that their scope extended to national
level. In line with this, most of the voluntary
organisations that are active at the European
level are, in fact, nationally organised.

_**Target groups and beneficiaries**_

_._ 1.33 We asked voluntary organisations which
particular groups of people their organisation
worked with or was concerned with and to

indicate to whom, or to which bodies they
offered services and on what basis. The great
majority of voluntary organisations and

**22**

federations defined their target public widely 46%> of respondents said that they served the
"general public" or alternatively "young people"
(37%>) or "adults" (35%). In contrast, very few
voluntary organisations mentioned more
narrowly-defined groups as their particular
concern. It may be doubted whether there is
much significance in this finding. Since
voluntary organisations were not, in practice,
confined to one choice from the list provided in
the questionnaire, the likelihood is that most
respondents whose activity was directed on the
one hand at a specific group of people e.g.
"drug addicts" or "veterans" and, on the other
hand at the population as a whole (whether to
draw attention to their work or to canvass for

support) indicated both the specific group and
"general public".

**1.34** When we asked voluntary organisations to
whom they provided services the answer was,
again, most often the "general public" (39%),
followed as the next most frequent categories by
the "target group" (38%) and members. (36%),
governments or other public bodies (22%). The
extent to which these services were provided
free or in return for payment varied according to
the country concerned and to whom the service
was provided. Free services were most often
provided to the general public and to members,
and paying services to the voluntary
organisation's particular target group or clients
or to public authorities.

1.35 Overall, more free goods or services were
provided by voluntary organisations/federations
than goods and services against payment. Not
surprisingly, voluntary organisations and
federations that mainly offer their services free
rely more heavily on support from outside than
do bodies which charge. To what extent
services are provided free or, alternatively, have
to be paid for depended heavily on the voluntary
organisation's field of action. For example, the
support of the homeless is likely to involve the
provision of _free_ (or at least very cheap) goods
or services whereas it may be reasonable to
charge for, say, adult education. Similarly,
sports clubs, where perhaps relatively costly
equipment is needed, or which are prestigious,

will provide fewer free benefits than those
voluntary organisations involved in social
services, especially of a relatively informal kind.

**These** **findings,** **together with those on**
**voluntary** **organisations*** **sources of income**
**are a clear indication of the important**
**redistributive effect which these bodies have.**

_**European Community-wide partnerships**_

_**between voluntary organisations**_
_**and foundations**_

**1.36** Because of the method we used, our
sample undoubtedly contained a greater
proportion of voluntary organisations which are
active at the European level than would be
expected in a more scientific sample. The figures
are nonetheless impressive evidence of the
extent to which the sector is already beginning
to come together throughout the Community:
50% of those voluntary organisations answering
the relevant question, or nearly a quarter of the
total sample, said that they were already
involved in cross-border activities in some form

of partnership with nationals or organisations
from other Community countries.

1.37 Given that the inspiration for the majority
of the well-known networks already working at
European level came from countries in the north
of the Community, it might have been expected
that the tendency to form partnerships might be
less marked in the south than in the north. In the

event, the findings did not support this
hypothesis: there were differences between
countries, which are not altogether easy to
explain, but no clear division was discernible
between the overall picture north and south.

1.38 Looking ahead, 46% of our respondents
said that they envisaged entering into crossborder partnerships at some time in the future.
Interestingly, an analysis by country showed, in
effect, that it is voluntary organisations in those
countries that have hitherto formed a below
average number of partnerships which have the
strongest future intentions. In other words,
when it comes to operating on the European
stage, voluntary organisations in countries now
lagging behind appear to have every intention of
catching up.

**23**

L39 Of voluntary organisations already in
partnerships, 27% were active in "social
services", 14% in the field of "culture and
recreation", 13% in "international activities".
11%» in "education and research" and 10% in

"development and housing". Again, there was
evidence that voluntary organisations working
in some fields where few partnerships have yet
been formed have stronger future intentions as
regards cross-border work: for example, no
fewer than 75% of our sample voluntary
organisations which are active in the field of
"development and housing" said that they were
planning partnerships for the future. On the
other hand, only 22% of voluntary organisations
active in the health field said that they were
planning to enter into partnerships. This may
well reflect the fact that many voluntary
organisations supply what are, in effect, public
services - and furthermore in a highly regulated
field. In these sorts of circumstance,
partnerships may simply offer voluntary
organisations less and thus be less attractive.

_**Problems in forming partnerships**_

1.40 Just over half the voluntary organisations
involved in them said that they had met
problems in forming or running their
partnerships. The broad findings were as
follows:

_**M.lt*j~t***_ _**'**_ _**Vrt**_ _**''t**_ **•<*<•** _**Mr**_ **C » /** **" "** **' +** _**trtt'ttt**_ _**'tt**_

The figures in brackets indicate the proportion
of respondents encountering each kind of
problem. Few differences were apparent
between national, regional or local
organisations, though there was a tendency for
smaller organisations to be less preoccupied
with difficulties. The outstanding finding is, of
course, the extent to which "communication"
has caused difficulties, though the extent of
legal and fiscal problems is also noteworthy. It
seems likely that the legal difficulties, at least,
will be largely removed by the proposed Statute
for a European Association. Language is
probably the most important impediment to
"communication" but it is likely that there are
other complicating cultural factors at work as
well, such as misunderstanding of role and
importance of the sector in different countries,
misunderstanding of how organisations work,
the lack of understanding of cultural, legal and
fiscal backgrounds, the existence of different
ways of working etc..

_**Main future needs of voluntary**_
_**organisations**_

1.41 We asked respondents to tell us what they
felt were their voluntary organisation's main
needs for the future. The results are given
below.

**24**

**Main needs of European associations/foundations**

**30** **40** **50**

**frequencies in %**

It is clear from the results that the perceived
need for more funds and more staff, and above
all the former, is more or less universal. The
same demand exists in the sector in all the

Member States, though there is a tendency for
voluntary organisations in poorer countries,
where the sector tends to be less well

developed, to feel their comparative lack of
funds more keenly. Voluntary organisations are
not, on the whole, capital-intensive, and it is not
surprising, therefore, that there should not be
the same desire for more capital. Nonetheless
almost a quarter of our respondents mentioned
capital as a need.

1.42 The desire for more paid staff appears to
be felt most by older voluntary organisations
(those founded between 1945 and 1950):
younger voluntary organisations, in contrast,
appear in relatively greater need of information
and management advice. The desire for more
volunteers was very widespread but particularly
evident amongst voluntary organisations
working in the fields of "health" and, for
obvious reasons, in "philanthropy and
voluntarism". The need for more training was
mentioned by almost a quarter of respondents
and appears to be felt by voluntary organisations
working in all fields regardless of their age.

_**Points**_ _**for**_ _**the**_ _**Commission:**_
**-** _**development**_ _**of**_ _**the**_
_**sector at the European**_
_**level**_

1.43 Finally, we invited respondents to let us
know of any points which they would like to
bring to the attention of the Commission and to
put forward any suggestions they might have
about how the Commission might help the
development of the sector at the European level.
The answers we received ranged widely from
simple demands for "recognition" in a quite
general sense (either of the non-profit sector or
of some particular organisation) to relatively
complex suggestions for changes in, or
extensions to, European Community policies.

**25**

**ANNEX** **H** **OVERVIEW OF THE LEGAL**

**AND** **FISCAL** **FRAMEWORK** **FOR**

**VOLUNTARY** **ORGANISATIONS** **AND**

**FOUNDATIONS**

**II.** **1** The following is an overview of the legal
and fiscal basis on which foundations and

voluntary organisations operate in each of the
Member States. Following the definition given
in paragraph 2.3 no account is taken of
"economic" associations which exist in some

Member States and which can engage in
commercial or other profit making activities, nor
of the several varieties of private foundation.

_**Legal basis**_

n.2 The freedom to establish or join, or indeed
to leave, a voluntary organisation is nowadays a
right (normally guaranteed under the
constitution) in all Member States of the
Community. The right of association is, of
course, also guaranteed under the European
Convention on Human Rights. Generally
speaking it is possible for nationals of any
Member State to establish a voluntary
organisation or foundation anywhere in the
Community, although some Member States
stipulate that there should be a minimum
number of their own citizens or residents
involved [10] . Some Member States have however,
special statutes precisely to enable foreign
nationals to establish voluntary organisations
which, though subject to the same national
registration or publication requirements as any
other voluntary organisation, are then run
according to such internal regulations as may be
laid down in the country from which the
founders originate.

**II.3** Generally speaking, where jurisdictions
make the distinction between private and public

Article 16 of the ECHR permits derogations to the
right of association in the context of a political
activity of non-national citizens.

This is in fact in contravention of Articles 6 and 52

of the Treaty on European Union.

law both voluntary organisations and
foundations are entities of private law. Not all
Member States define either voluntary
organisations or foundations explicitly, and not
all make a fundamental legal distinction between
voluntary organisations on the one hand and
foundations on the other. For present purposes,
however, voluntary organisations can be taken
as groups of private individuals who have come
together for some non-profit end in the public
interest. In contrast, foundations are entities
which have charge of assets set aside for
purposes in the public interest in the form of an
endowment or of a regular dedicated source of
income.

**IL** 4 That part of the sector of interest here is,
therefore, neither wholly private nor wholly
public in nature. It follows that fundamental to
the law must be some means of demarcating its
proper sphere of operation from the territory
occupied by purely private activity, by
government, or by commercial companies and
other forms of profit making enterprise. Within
the Community this has been achieved either
formally - by setting but the basic features of
internal organisation and governance to which
non-profit organisations must conform, or by
objects - by laying down what spheres of
activity count as in the public interest and by
establishing other rules defining how the nonprofit status of the organisation is to be secured.

11.5 Broadly speaking the first of these
approaches - that of defining non-profits by their
formal features is characteristic of the civil code

tradition, and the second - that of delineating the
sphere of non-profit activity in the public
interest ("charity") by the purpose of the activity
itself- is the fundamental feature of the common

law tradition.

**11.6** Many commentators draw a sharp
distinction between these two approaches, and it
is certainly true that the legal traditions from
which they derive are very different. The
practical effect of the difference in approach
can, however, be exaggerated. Many
jurisdictions contain special legal provisions for
voluntary organisations with certain aims
regarded as of public interest which, combined

**26**

with different levels of tax relief, means that in
practical effect organisations in many Member
States are defined in terms of both their formal

structure and their objects. It is also true to say
that in practical terms the basic provisions of the
law on foundations (and in particular the
emphasis given to the preservation of assets,
with all that that implies) in code countries are
also very similar to those found in common law
jurisdictions. The clear link here is probably
historical. The common law on charity has
enjoyed an unbroken tradition and has never
drawn a fundamental distinction between

foundations and voluntary organisations - both
are charitable trusts. Since foundations are the

older form, it appears that the law was simply
applied later to voluntary organisations without
any major adaptations. In contrast many code
countries have not enjoyed the same continuity,
the result being that the law has diverged.

11.7 Voluntary organisations may be
incorporated or unincorporated and both forms
are found in all jurisdictions. It seems likely that
the majority of voluntary organisations in the
Community are in fact unincorporated and thus
without legal personality. There are some
disadvantages to being unincorporated: it is not
always easy for the voluntary organisations to
acquire any assets it may need, and its individual
board members or trustees, in whose names the
business of the voluntary organisation is carried
on, may be uncomfortably exposed to liabilities.
In most places the law has, however, developed
ways of mitigating the difficulties - by the use of
the law of agency, for example, or by a common
fund to which members contribute and to which

creditors have first recourse, and in most
jurisdictions the unincorporated voluntary
organisation does not appear to be prevented
from taking part in legal process as a voluntary
organisation (that is to say under its own name
rather than that of a responsible board member),

11.8 In code countries the incorporation of
voluntary organisations is generally achieved by
the publication of statutes conforming to the law
in the relevant official journal, together with a
list of (board) members. Incorporation (or, more
accurately, the registration which is its

condition) may be refused on the grounds that
the statutes of the body are non-conforming. A
refusal to register a voluntary organisation in
these circumstances is an entirely administrative
matter and implies no political judgement on the
status of the organisation. It needs, therefore, to
be carefully distinguished from the
circumstances in which organisations may be
refused special status for tax purposes (see
below, paragraph 5.14 and 5.15). The statutes
(and often a full or partial list of members) are
typically required to be registered with either the
local court or with the responsible ministry,
regional or local authority. All foundations have
legal personality, which again is normally
achieved by the publication of statutes etc..
Unlike voluntary organisations, however,
foundations are generally subject to some
degree of a priori control to ensure that the
statutes are in strict conformity to the law, that
(since they are often intended to exist "in
perpetuity") management succession has been
properly allowed for, and that their intended
assets are adequate to achieve their ends.

11.9 In common law jurisdictions no special
form' of incorporation is available for. either
voluntary organisations or foundations. Instead
bodies seeking the convenience or protection of
incorporation have a number of different forms
to choose from depending on the area of activity
in which they are engaged. By far the most
common is the so-called "company limited by
guarantee'" - in effect a non-profit-distributing
company - but there are other forms available
such as the "housing association" or the socalled "friendly society". There are also
(comparatively rare) examples of charitable
voluntary organisations and foundations which
have been incorporated by Royal Charter or by
special Act of Parliament.

11.10 Incorporation is available everywhere by
one means or another, but the resulting degree
of legal capacity is not always as great. In a
number of Member States legal capacity is
effectively unlimited (in any event as long as the
body concerned acts in accordance with its
statutes). In others, however, neither voluntary
organisations nor foundations can receive gifts

**27**

and legacies or own real property without the
express permission of the relevant public
authority.

H.11 There are differences too when _it_ comes

to the difficult question of the degree to which
voluntary organisations and foundations (but in
particular voluntary organisations) are allowed
to engage in economic activity without the loss
of tax privileges. Some degree of economic
activity is allowed in all Member States, the rule
generally applied being that such activity must
not be voluntary organisations [1] principal activity
in the sense that it must be carried out not for its

own sake kit for acme non-profit ain\ and must
ke ancillary to the objects of the voluntary
organisations in the sense that it must be directly
tied to the voluntary organisation's objects and
not simply designed to improve the
organisation's general financial position. In line
with the non-distribution constraint under which

all voluntary organisations operate, any surplus
from economic activity has, of course» to be put
towards the achievement of the voluntary
organisation's aims. In some jurisdictions, it is
possible for a voluntary organisation or
foundation to supplement its income by creating
or acquiring an entirely separate commercial
company which then remits its income to the
parent body.

As far as competition rules are concerned, all
competition rules will be adhered to, taking into
account the specificities of the sector.

_**Taxation**_

n. 12 All Member States allow some voluntary
organisations - broadly speaking, those which
are regarded as having purposes in the public
interest - some degree of relief from direct
taxation either by exempting them from taxes
imposed on companies and other forms of profit
making enterprise, or by imposing a lower rate
than that paid by companies, or by establishing a
minimum income threshold below which tax is

not incurred. These forms of relief are not

necessarily mutually exclusive. Where voluntary
organisations are exempt from company tax
they may have to pay income tax instead. Some
Member States allow partial or full exemption

from property taxes on real property owned or
occupied by the voluntary organisation or
foundation, In addition there may, rarely, be
partial relief from employment taxes.

11.13 If the principle of a degree of tax
exemption for some voluntary organisations and
foundations is universal, the approach adopted
by Member States differs significantly, as does
the extent to which relief is given to bodies
working in different spheres. In some
jurisdictions, voluntary organisations and
foundations are in principle subject to the same
tax regime as companies and receive no relief
from direct taxation unless they are recognised
(either, as having certain objects, by law, or
individually by the relevant authorities) for tax
purposes. In others (and in particular those
where voluntary organisations and foundations
are defined as being in the public interest) tax
relief is accorded as of right but may be lost if
the voluntary organisations is regarded as
carrying on commercial or lucrative activity
outside the limits recognised by law or
jurisprudence. In such circumstances the
privileged tax status of the organisation may be
removed altogether. Alternatively relief may be
withdrawn only in respect of those activities
which are regarded as profit making in the
relevant sense.

11.14 Besides these differences in approach
there are significant variations in the way in
which Member States delineate the sphere of
activity that they regard as being in the public
interest. There are thus considerable differences

in the extent of tax relief for which voluntary
organisations and foundations working in
different fields are eligible. Some jurisdictions
define the area of public interest for the
purposes of tax relief very generally and
broadly, including, for example, any activity of
public utility or benefit. Such jurisdictions
typically give full relief to all bodies meeting this
broad criterion. Other Member States take a

much more restrictive approach. In one, for
example, reliefs are presently available only for a
small number of individual organisations named
by the law. Yet other Member States take both
a restrictive approach and one which also

**28**

discriminates between different sorts of bodies.

Thus only very limited relief may be granted to
all non-profit bodies, fuller exemption being
confined to bodies operating in a restricted
number of fields - such, typically, as health,
culture or social services - and subject to
stringent management and accountability
requirements. Such special tax status is subject
to administrative and political discretion and in
some Member States appears to be increasingly
rarely accorded.

_**Tax relief for donors**_

**11.15** All Member States grant a measure of tax
relief to donors to voluntary organisations or
foundations, whether they be individuals or
companies or other forms of organisation.
Reliefs may be granted up to a maximum
amount in any one tax year or, alternatively, up
to a maximum proportion (expressed as a
percentage) of an individual's gross or after-tax
income. The arrangements for companies are
usually similar, relief generally being granted
either up to a maximum amount or up to a
proportion of profits before or after tax.
Minimum amounts or proportions may be
imposed and, in the case of companies, the
permitted base for calculating the maximum gift
may be turnover rather than profits.

**11.16** Some Member States grant some degree
of tax relief to donors to any voluntary
organisation or foundation active in the public
interest as broadly defined. In others, more
restrictive criteria are applied, relief to donors
typically being restricted to gifts to those
voluntary organisations which are themselves
granted special status for tax purposes. Indeed,
unless they possess the required status,
voluntary organisations in these Member States
do not normally have the capacity to receive
gifts at all (see paragraph 5.10 above). In
jurisdictions where voluntary organisations or
foundations normally have limited legal
capacity, voluntary organisations given a general
dispensation to receive gifts may nevertheless be
required to dispose of any gift of real property
within a specified period. In some Member

States the voluntary organisation or foundation
may be charged tax on the gift received.

**11.17** Member States also take a different

attitude when it comes to legacies. In some
Member States individuals are free to leave all

or part of their estate to a voluntary
organisation or foundation of their choice and,
while this appears to be a less common practice
than in the past, many still do so. Alternatively
they may create a new body - usually a
foundation - with some cherished aim. Such

testamentary gifts are generally tax free both to
the donor's estate and to the recipient body. In
those countries where voluntary organisations
and foundations have limited legal capacity,
however, it may be impossible to leave anything
but a notional part of an estate to a voluntary
organisation or foundation unless the recipient
body has received the required dispensation
from the authorities. Willing an estate may be
further complicated by strict laws governing
inheritance or by requiring that considerable
assets be set aside before a foundation can be

created.

_**Indirect**_ _**tax**_

**11.18** Article 13(A)(1) of the Sixth Directive
77/388/EEC of 17 May 1977 [11] requires Member
States to exempt from VAT "certain activities in
the public interest". These include hospital and
medical care, goods and services closely linked
to welfare and social security work or the
protection of children and young persons,
education and training for young persons and so

on. Many voluntary organisations and
foundations are, of course involved in the
provision of just such services and their
transactions are exempt from VAT, provided

Known as the "Sixth Directive", it governs the
harmonisation of the laws of the Member States

relating to turnover taxes and introduces a common
system of VAT and a uniform basis for its

assessment.

These exemptions are subject to certain conditions
(see Anicle 13.A.lb),g).h),i)) and are not given
automatically

**29**

that they obtain prior authorization from the
Member State in which they are established, i.e.
they are exempt from the need to file VAT
returns, to charge VAT to their clients or to pay
output tax. In addition, under Article 13(A)(2)
Member States can make the granting of any of
the listed exemptions to any body (other than
those governed by public law) subject to a
number of conditions designed in effect to
ensure that exempt bodies are bona fide nonprofit organisations whose activities will not
affect the competitive position of taxed
commercial enterprises. On the face of it the
ability to impose conditions on the granting of
exemptions would seem to leave a good deal of
scope for variations in the treatment of
voluntary organisations but in practice, with a
few minor exceptions all Member States appear
to have implemented the exemptions outlined in
Article 13.

11.19 In addition to the exemptions mentioned
above, a number of Member States "zero rate"
certain supplies. This can benefit non-profits by
allowing them to reclaim input tax.

**30**

**ANNEXE** **m** **THE LEGAL AND FISCAL**

**FRAMEWORK FOR VOLUNTARY**

**ORGANISATIONS**

**(ASSOCIATIONS)** **AND**
**FOUNDATIONS**

**BELGIUM**

_ASSOCIATIONS_

LEGAL POSITION

Right of association guaranteed by law?

Yes - Article 27 of the Constitution as

revised in 1994.

Basic definition

An association, in the strict sense of the
term, is a contract via which several
people agree to pool certain material
resources with an aim other than the

production or sharing of profits,
(associations involve a degree of
permanence in the shared existence).

Minimum number of founders

Three (for ASBLs).

Two for AIs formed under Belgian or
foreign law.

Main types of association

_De facto_ associations (not incorporated
in one of the forms laid down by law,
and not having a legal personality).

ASBL (Associations Sans But Lucratif)
defined by the Law of 27 June 1921 as
organizations which do not engage in
industrial or commercial operations, and
which do not seek to procure material
gain for their members.

International Associations under Belgian
law (IA) (Associations Internationale de
droit beige) limited to associations with
philanthropic, religious, scientific,
artistic, or educational objectives (Law
of 25 October 1919).

International Associations under foreign
law (Associations Internationale de droit
étranger) with the same aims as
associations under the IA Belgian law
(cf. Article 8 of the Law of 25 October
1919, which entitles an association with
its head office abroad to open an office
in Belgium).

Membership nationality requirements

ASBL: Three-fifths must be of Belgian
nationality or resident (established and
registered) in Belgium; otherwise the
association will not be able to claim legal
status _vis-à-vis_ third parties, who will
themselves, however, be entitled to hold
this against them;

IA(Belgian law): at least one
administrator of Belgian nationality, no
requirements for ordinary members.

IA(foreign law): none

Legal personality, and how acquired.

ASBL - by publication of statutes, plus
the full names, trades/professions and
addresses of the association's

administrators in the annexes to the

"Moniteur".

IA (Belgian law) - by Royal Decree
(published by extract in the "Moniteur");
legal personality effective vis-à-vis third
parties ten days after publication of the
statutes plus the full names,
trades/professions and addresses of the
association's administrators in the

annexes to the "Moniteur".

IA (foreign law) - legal personality
effective vis-à-vis third parties ten days
after publication of the statutes, plus the
same information as for IAs under

Belgian law (including the address of the
office in Belgium). Such publication
requires prior "recognition" by the
Government..

Legal capacity

Immovable property

All types of association are restricted to
the permanent ownership of only such

**31**

carried out for its own sake but for a

non-profit end) and ancillary to its main
object. (Ancillary means directly tied to
the association's objects and not simply
designed to improve the association's
financial position, and any profits are put
towards the association's aims.)

11. Disposal of assets on liquidation

To ends of no benefit to the individuals

involved, in general as laid down in the

statutes.

TAX POSITION

INDIRECT TAX

12. Article 13 of 6th VAT Directive

All exemptions of relevance to
Associations coming under Article 13
have been implemented. Organisations
must meet the criteria set out in Article

13(A)(2)(a).
13. Other specific exemptions

No. There is a lower rate (6%) for
vehicles for the transport of disabled,
sick, injured or blind persons, daily or
weekly publications of general
information and "produits de
récupération".

14. Zero Rates

DIRECT TAX

15. General position

A. Income tax

Not generally subject to company tax
unless considered to be carrying on
commercial/gainful activity outside the
limits recognised by law (Article 182 of
the Code des impôts sur les revenus:
CIR) or case law. Associations are liable
for the more favourable taxes on legal
persons (CIR Articles 220-226),
including in particular:

income tax and capital gains tax, and to
property tax unless the building is used
for religious, educational, medical, social
work or charitable purposes.

9.

10.

immovable property as is strictly
required for the fulfilment of their
purposes (extension of legal capacity for
the "Notre-Dame de la Paix" university
departments at Namur and the "Saint
Louis" university department at
Brussels).

Donations

ASBL: acceptance of donations of
movable property (including cash) above
FBR400 000 and of immovable

property must be authorized by Royal
Decree.

IA: acceptance of any donation
(irrespective of its value) must be
authorized by Royal Decree.

No authorization required for: goods
transferred to one ASBL by another
ASBL to promote activities similar to
those of the donor, donations granted by
public bodies to an ASBL, proceeds of
collections, etc.

Statutes

ASBL: There must be a written

document (authenticated or under
private seal) which must contain certain
items of information, including the
objective for which the association was
formed (Article 2 of the law of 1919).

IA (Belgian law): idem (the statutes
listed in Article 2 of the law of 1919

must be mentioned).

IA (foreign law) - As for IA (Belgian
law), plus the address of the office in
Belgium; otherwise can exercise in
Belgium all the rights accorded by its
national statute.

Registration requirements

None as such, but see publication
requirements above (para 6). A list of
international associations is kept by the
Ministry of Justice.

Commercial activity

Unclear. In theory not allowed, but in
practice acceptable so long as not the
association's principal activity (i.e. not

**32**

B. other taxes

A "compensatory inheritance tax" of
0.17% is payable on the association's
total assets held in Belgium. Tax on gifts
to Belgian associations is reduced to 8%
(1.1% if the donor is another ASBL or
IA, a recognised mutual society, an
establishment of public utility or a
professional union). Inheritance tax on
legacies made in their favour is reduced
to 8.8%.

16. Recognition of associations for tax

purposes

Under Article 104, paragraphs 1 and 3-5
of the "Code des impôts sur les
revenus", gifts to certain institutions and
organizations - in particular those
established in the form of associations or

foundations to which approval has been
granted by law or by Ministerial or
Royal Decree - are tax-deductible.
Approval by Royal Decree is granted for
a maximum period of three years
(renewable). Officially approved
institutions are generally exempt from
capital gains and property taxes. In
certain cases, express authorization is
required for the acceptance of
tax-deductible donations by approved
institutions established in the form of

associations or foundations (cf. 7
above).

17. Criteria for recognition

To qualify for recognition, an institution
must have legal personality, be of a
non-profit-making nature, both in itself
and as regards its members, be able to
provide documentary evidence of its
accounts, be active in the country or one
of the cultural communities, keep its list
of donors open to inspection by the tax
authorities and not spend more than
20% of its budget on administration.

18. Qualifying purposes for recognition

Apart from institutions recognised by
law, the activities of approved bodies
must fall within one of the following

fields: cultural promotion (libraries,
private radio and television stations,
museums, sports groups, tourism and
leisure associations), scientific research,
development aid, or social work.

19. Gifts by individuals

Tax-deductibility provisions apply solely
to gifts to recognized bodies (including
associations and foundations). Up to
10% of total taxable revenue up to a
limit of Bfr 10 million (index-linked) is
deductible. Gifts of major works of art
to museums are deductible at

government valuation.

20. Gifts by companies

Tax-deductibility provisions apply solely
to gifts to recognized bodies (including
associations and foundations). Up to 5%
of net operating profit up to a limit of
Bfr 20 million (non index-linked) is
deductible.

ACCOUNTS AND AUDITING

21. See paragraph 17 above for recognised
associations.

Other forms of associations do not have

to publish accounts. In general, internal
supervision by members, external
verification by tax authorities.

To obtain authorization by Royal Decree
to accept a gift, ASBLs must
nevertheless have been lodging their
annual accounts with the civil court,
where they are open to public
inspection, since their establishment or at
least for the past ten years

_FOUNDATIONS_

LEGAL POSITION

22. Constitution

Requires agreement of public authorities
to establishment and to statutes and

Royal Decree. The statutes together
with the names and addresses of

**33**

27. Disposal of assets on liquidation

By court-appointed receivers for the
purpose laid down in the statutes of the
foundation or, failing that, to ends as
close as possible to those for which the
body was founded.

TAX POSITION

28. As for recognised associations.

ACCOUNTS AND AUDITING

29.

The Government has a duty to ensure that the
foundation's funds go towards the purposes for
which it was created. All foundations must

produce annual accounts and budgets and
present them to the Government within two
months of producing them. Both are published
in the annexes to the "Moniteur". At the request
of the government ministry, administrators
found guilty of fraud or mismanagement can be
removed by the court. In such cases, new
administrators are appointed according to the
statutes or, at the request of the court, by the
Government.

**23.**

administrators must be published in the
annexes to the "Moniteur", and any
changes in the statute must also be
approved and published.

Basic definition

Assets irrevocably given over to one of
the following non-profit ends:
philanthropic, religious, scientific,
artistic or educational. No members

(Articles 27 _etseq.of_ the Law of 27 June
1921).

24. Nationality requirements?

Not for administrators, but siège must be
in Belgium.

25. Legal personality and how acquired

Yes, by Royal Decree approving the
statutes (published by extract in the
"Moniteur") and publication of the
statutes in the annexes to the "Moniteur"

(may be done retroactively to the act of
constitution.

26. Legal capacity

Cf. ASBL (7 above)

**34**

**DENMARK**

_ASSOCIATIONS_

LEGAL POSITION

1. Right to association guaranteed by law?

Yes - under constitution

2. Basic definition

None: NB Associations are not

necessarily "non-profit" organisations.

3. Minimum number of founders

Not stipulated

4. Types of associations

Single

5. Membership nationality requirements

None - anybody (legal person or
individual) residing permanently in
Denmark can form an association.

6. Legal personality and how acquired

Yes - by will of the members. Legal
personality is acquired as soon as
members have signed adequate statutes
and nominated a management
committee. (For requirements see
below.)

7. Legal capacity

Unlimited

8. Statutes in prescribed form?

No. But statutes of unregistered
associations must at least contain rules

governing relations between members
and the methods for nominating their
management bodies. The statutes of
registered bodies must contain
provisions required by law - e.g. the
name, head office, the number of
members charged with managing the
association and how they are nominated,
membership conditions and relations
between members, the accounting period
and method of presentation of accounts
etc. Changes have to be notified to the
register.

9. Registration requirements

The following categories of association
must be declared in the "Register of
Foundations" within three months of

their creation: employers associations;
trade unions and professional
associations which have as their principal
aim the protection of the economic
interests of the professional group to
which their members belong; all private
law associations with assets of more

than 250 000 Kroner (approx 31000
ECUs) except those:- contracted to
carry out legal social aid obligations on
behalf of communes or departments;
bodies holding property connected with
the national church; legally recognised
religious congregations; or educational
establishments authorised by the state,
provided such bodies have no other
powers or objectives.

10. Commercial activity

Associations, like foundations (see
below) can engage in economic activity,
but receipts from such activity are
subject to the same taxes as those
imposed on commercial companies.

11. Disposal of assets on liquidation

Freely determined by the association's
statutes (but see paragraph 17 below).

TAX POSITION

INDIRECT TAX

12. Article 13 of 6th VAT Directive

All exemptions of relevance to
associations coming under Article 13
have been implemented.
13. Other specific exemptions

Sales of second-hand goods in shops
owned by recognised associations and
special events organised by them.

14. Zero rates

Newspapers.

DIRECT TAX

15. General position

**35**

Employers' associations, trade unions
and other professional groupings whose
main purpose is to look after the
economic interests of the occupational
group to which its members belong
(labour market groupings) are taxable
under the Funds Tax Act. Other

associations which simply look after
their members' professional and
economic interests of a market-and

service-oriented nature (trade
associations) are similarly liable to tax
under the Funds Tax Act. The principle
behind this Act is that foundations and

associations must basically be subject to
the same rules as public limited
companies. The rate of tax is the same as
for corporation tax, i.e. 34%.

When reporting their taxable income,
labour market groupings need to include
only earned income, unearned income
and profits. Membership subscriptions
are thus not to be counted as taxable

income. These groupings are entitled to
deduct for tax assessment only that
expenditure which relates to taxable
income.

Trade associations are taxed in full on

earned income, but other income is
taxed only if it exceeds DKr 200 000.

Trade associations and labour market

groupings are entitled to deduct amounts
distributed for charitable or non-profit
purposes. They are also entitled to
deduct provisions set aside for
non-profit or charitable purposes.

Trade associations are also entitled to

deduct amounts distributed for purposes
which accord with their Memorandum of

Association, provided that the recipient
of any given distribution is liable to pay
tax on the relevant amount in Denmark.

Other associations, corporations and
foundations (stifelser) not covered by
the Funds Tax Act, are covered by the
Corporation Tax Act, § 1. 1 (6).
Associations are liable to pay tax only on
their earned income. Similarly,

associations are entitled to deduct

operating expenditure only if it relates to
earned taxable income.

Trade associations are also entitled to

deduct allocations intended to meet

purposes which accord with their
Memorandum of Association, insofar as
those purposes may be considered to be
charitable or non-profit.

Associations may set aside provisions to
fulfil charitable or non-profit purposes at
a later date.

16. Recognition of associations for tax

purposes

By law or, for the purpose of receiving
tax-deductible gifts or annuities, at the
discretion of the tax authorities.

Separate lists of bodies eligible to
receive gifts or annuities are published
each year by the tax authorities.
Application may be made for inclusion in
either or both of these lists. Exemption
from tax on legacies may be granted at
the discretion    - of the tax authorities.

Recognition for these latter purposes is,
in practice, generally given to bodies
listed as eligible to receive tax deductible
gifts.

17. Qualifying criteria for recognition

Bodies qualified to receive tax benefits
are structured as non-profit associations
or foundations. Precluded bodies include

those performing solely political tasks. It
is a condition that gifts (and legacies) be
used solely for charitable or non-profit
purposes to the benefit of a fairly large
group of people, and that any surplus at
liquidation be distributed in accordance
with those same principles. In addition,
the body must be resident in Denmark
(i.e. the head office must be located in
Denmark and most of the management
functions must be carried out there). It
appears that the rules qualifying the
receipt of tax deductible annuities are
stricter.

19. Gifts by individuals

**36**

Single tax deductible gifts can only be
made to bodies on the list published by
the tax authorities (see above, paragraph
16). Each gift must be at least 500 Dkr.
up to a maximum of 5 000 Dkr. a year.
The first 500 Dkr. are not deductible. In

addition, deductible gifts can be made
through covenants (contractual
annuities) up to a limit of 15% of earned
income plus capital gains before tax, or
up to a maximum of 15 000 Dkr.,
whichever is the greater. Covenants
must normally be for a minimum of ten

years.

20. Gifts by companies

As for individuals, except that single
gifts are deductible from taxable revenue
and covenants are allowed up to a
maximum of 15% of taxable profit (or
15,000 Dkr.).

ACCOUNTABILITY AND

SUPERVISION

21.

None laid down for unregistered
associations. Registered associations
must produce accounts conforming to
good practice and have them examined
and signed by one or more auditors.
These accounts must be sent to the

Registrar of Foundations within six
months of the end of the accounting
period. If, at the time it is drawing up its
accounts, the association has assets of
more than (approximately)

ECU 380,000, then at least one of the
auditors must be professionally qualified.
In this latter case, the audit must be a
full one and the auditor must be given
every facility by the association. Failure
to conform to registration or
management, accounting requirements is
punishable by a fine. The Minister of
Justice (who is responsible for the
Register) can require an association to
include in its statutes any provision
deemed necessary, and can ask for any

information thought necessary to verify
that the law has been complied with.

_FOUNDATIONS_

LEGAL POSITION

22. Freedom to establish?

Yes, but the amount of capital given
over should normally be at least 200 000
Dkr. (approx ECU 25,000). Foundations
with a smaller amount of initial capital
can be created with the agreement of the
Ministry of Justice, so long as the
amount is adequate for the ends
foreseen.

23. Basic definition

None in statute. Essentially, goods or
capital given over to some purpose
forming an entity with its own legal
personality managed according to its
own statutes by an independent board.
No members.

A Fund is a corporate fund if it passes
over goods or incorporeal rights,
disburses services and similar things for
which it normally receives payment, or if
it exercises a profession with real estate
selling or real estate demise, or if it can
qualify as a holding fund.

24. Nationality requirements?

Foundations can be created by foreigners
but they must be established in
Denmark. In addition, at least half of the
members of the managing board and all
the foundation's administrators must be

resident in Denmark. The authority
responsible for foundations may,
however, grant an exemption from the
residence requirement. In any event, the
requirement is waived if this provision
conflicts with international obligations.

25. Legal personality and how acquired

Newly-established foundations must
report to the Ministry of Justice (Civil
Law Directorate) and the tax authorities
(Inland Revenue) in the foundation's
home district within three months of

**37**

being set up. This is simply a formal
requirement and has no legal effect on
the foundation's legal status. Corporate
funds acquire legal personality by
registration in the register of Corporate
Funds at the Danish Commerce and

Companies Agency, for which the
Minister of Industry, Trade and Shipping
is responsible.

26. Legal capacity

Unlimited

27. Disposal of assets on liquidation

Foundations can be merged or liquidated
if their assets are no longer
commensurate with their objects.
Merger or liquidation - by distribution of
the capital - can take place after
application by the foundation's
administrators and with the agreement of
the Ministry of Justice, or can be
imposed by the Minister. Bodies
authorised to receive gifts must agree to
distribute any surplus on liquidation to a
similar institution.

Corporate funds can be merged or
liquidated if their assets are no longer
commensurate with their objects or if
their purposes are no longer being
served. Merger or liquidation - by
distribution of the capital - can only take
place after application by the board of
the corporate fund and with the
agreement of the Administration of the
Corporate Funds, which normally is the
Danish Commerce and Companies
Agency, with consent from the Ministry
of Justice.

TAX POSITION

**28.**

Foundations covered by the Funds Act
or the Commercial Funds Act are

taxable in accordance with the Funds

Taxation Act. The principle behind this
latter Act is that funds and associations

must basically be subject to the same
rule as public limited companies. The

rate of tax is the same as for corporation
tax, i.e. 34%.

Earned income must be included in full

when taxable income is reported. The
first Dkr 25 000 of other income is

tax-free.

Foundations are entitled to deduct

amounts distributed for charitable or

non-profit purposes. They are also
entitled to deduct amounts distributed

for purposes which accord with their
Memorandum of Association, provided
that the recipient of any given
distribution is liable to pay tax on the
relevant amount in Denmark. They are
further entitled to deduct provisions set
aside for non-profit or charitable

purposes.

ACCOUNTABILITY AND

SUPERVISION

For the most part as for registered
associations (see paragraph 21 above).
But in addition: the administrative

authority responsible can remove
members of the board who commit acts

which render them unworthy of their
position, who do not fulfil the nationality
or residence requirements, who fail to
act in conformity with the statutes, or
who are demonstrably incapable of
fulfilling their role; the administrative
authority can also appoint members of
the board (even in non-conformity with
the statutes);

bankrupt members of the board must
resign;

founders and their relatives cannot form

the majority on the board without the
permission of the administrative
authority. Nor, in the case of a
foundation created by a company, can
anybody who owns more than half the
voting capital form, conjointly with the
founder and his or her relatives, the
majority on the board without the
permission of the administrative
authority;

**38**

**board** **members** **cannot receive larger**
**fees** **for** **their** **services** **than** **are**

**considered normal for the type of work**
**involved.**

**board members cannot take part in**
**debates in which they have an interest;**

**all foundations must basically have their**
**annual accounts audited, and if their own**
**capital in the preceding year was over 3**
**million Dkr, the auditor must be a**
**chartered accountant. The auditor must**

**normally be resident in Denmark and**
**must be absolutely independent of the**
**foundation, its board members and of**
**any of its employees concerned with**
**accounting or the administration of its**

**assets. The audit must be detailed and**

**critical, and the auditor must abide by**
**any requirements** **imposed** **by the**
**relevant authority. He or she must be**
**given every facility by the foundation;**

**members of the board are responsible for**
**any damage to the foundation due to**
**their management, as if relevant are the**
**foundation's auditors and the companies,**
**if any, to which they belong;**

**foundations can set aside reasonable sums to**

**their reserves, but aside from this their funds**
**must be spent on their objects. The amounts**
**allocated for reserves or spending can be varied**
**by** **the** **authority** **responsible.**

**39**

**GERMANY**

_ASSOCIA_ _TIONS_ _(VEREINE)_

LEGAL FRAMEWORK

Right of association guaranteed by law?

Yes: Constitution, Article 9, paragraph
1: German nationals have the general
right of association. The legal position of
the association is governed by Article 21
_et seq._ of the Civil Code (BGB) and by
the relevant provisions of the Law on
Association (VereinsG).

Basic definition

No legal definition. In legal practice and
theory an association is defined as a
permanent and structured group of
persons (natural or legal) who form an
entity on a voluntary basis with a view to
attaining a common object. The concept
of the communality of the members must
be expressed at least by a common
denomination and in a body which
represents them.

Minimum number of founders.

Two founder-members. However, there
must be at least seven when the statutes

are registered with a view to obtaining
legal personality.

Types of associations.

The Civil Code governs non-profit
associations _(Idealvereine,_ Article 21
BGB) and commercial associations
which aim to make profits
_(wirtschaftliche_ _Vereine,_ Article 22
BGB). However, the latter are of only
marginal importance, and require
authorization by the public authority
concerned. The result, _de_ _facto,_ is that
the concept of an association is more or
less restricted in Germany to non-profit
organizations, irrespective of whether
they have legal status.

Membership nationality requirements

No restrictions.

Legal personality and how acquired.

By entry in the register of associations in
the court local to the head office (Article
21 BGB).

7. Legal capacity.

Unlimited

8. Statutes

For registered associations (BGB 57 and
58).

9. Registration requirements.

For associations wishing to acquire full
legal personality.

10. Commercial activities.

A non-profit association may engage in
commercial activities if they are purely
ancillary, do not constitute the main
object of the association and play a very
secondary role in relation to its main
non-profit activity. If these commercial
activities are not completely ancillary,
they cannot constitute the association's
main or statutory activity. In principle,
ancillary activities are allowed only if
their purpose is to help in the
performance of activities to which tax
concessions are attached (not only fund
raising) and if this purpose can be
attained only through this activity
(Articles 65 to 68 of the tax code). The
income, profits and assets arising from
other commercial activities of an

association which is recognized as a
public utility are liable to ordinary tax.

11. Disposal of assets on liquidation

Assets pass to the non-profit association
named in the statutes. The statutes may
lay down that the Annual General
Meeting should nominate the non-profit
association authorized to receive the

assets, but in this case the authorization
of the tax authorities is required.

TAX POSITION

INDIRECT TAX

12. Article 13 of the Sixth VAT Directive

**40**

All the exemptions applicable to
associations under Article 13 apply.

13. Other specific exemptions

None

14. Zero rates

No

DIRECT TAX

15. General position

associations are liable for corporation
tax. If their income does not exceed

DM 7 500 they are exempt from
corporation tax (concession).

16. Associations which are recognized or
which enjoy tax concessions.

Tax concessions are granted to
associations whose statutes and effective

management are inspired exclusively by
altruism and the general good and which
are directly engaged in a philanthropic or
religious activity (Articles 51 to 68 of
the tax code). Tax concessions are not
^confined to associations, but are granted
on the same conditions to any legal
persons within the meaning of Article 1
of the law on corporation tax.

17. Criteria for recognition

It must be clearly apparent from the
statutes and the association's

administration that in its actions it is

pursuing an objective for the public
good. The statutes must state very
precisely:

the object;

the way in which the object is
attained;

the non-profit activity aimed solely
and directly at this object;

that if the association were to be

wound up or deprived of its status as a
public utility, its assets would remain in
the public utility field;

that the effective management must
be in accordance with the statutes.

18. Recognized bodies

19.

Under Articles 52-54 of the Tax Code,
any association whose statutes and
actual management are exclusively
inspired by altruism and the general
good and which is directly engaged in a
philanthropic or religious activity is
recognized as being of public utility for
tax purposes.

In tax law, a distinction is made, with
regard to the financial activities of an
association of public utility, between
activities strictly connected with the
declared object in order to enjoy tax
concessions and financial activities

unconnected with this object and
therefore taxable.

Activities strictly connected with the
declared object are those for which the
receipts are wholly allocated to the
object which the association has
declared in order to enjoy tax
concessions. There are no limits on these

activities, which are deemed to be
without profit aim, and which enjoy tax
concessions.

On the other hand, activities not directly
related to the declared object are
taxable. These are mainly commercial
activities engaged in by the association
through enterprises engaged to raise
funds to be used to attain the object for
which the association has applied for tax
concessions. These activities are taxed in

the same way as any other commercial
activity, but do not entail the loss of
non-profit status provided that they do
not take over from the main activity of
the association (first paragraph of Article
55 of the Tax Code).

Gifts by individuals

Gifts made by a natural or legal person
liable to tax in Germany with the aim of
promoting charitable, ecclesiastical or
religious activities for activities which
are recognized as being for the general
good to an association recognized by the
tax authorities as being of public utility
can be deducted from the donor's taxable

**41**

income up to certain ceilings; the
ceilings vary, depending on the purpose
of the gift, by between 5% and 10% of
the donor's total taxable income.

20. Gifts by companies

Companies may deduct gifts up to 0.2%
of the sum of total turnover and salaries

and wages paid.

20(a). Gifts to non-resident associations

Such gifts are not deductible.

ACCOUNTS AND AUDITING

21. Accounts

The association must produce an annual
profit and loss account. This
accountancy obligation vis-à-vis
members is laid down in Articles 27 (3)
and Article 666 of the Civil Code, and
vis-à-vis the tax authorities (for the
purposes of establishing the non-profit
nature of the social object), in Article 63
(3) of the Tax Code.

If the association is engaged in a
commercial activity, it is required by
commercial law to keep accounting
records in the same way as businesses.
In all cases, two sets of accounts must
be presented, one for taxable activities
and the other for non-taxable activities.

Auditing

The administrators are responsible to the
Annual General Mmeeting for keeping
proper accounts. The statutes may
provide for a supervisory body and also
for its powers. If a supervisory body
(Aufsichtsrat) is set up, the provisions
applicable to GmbH and AG forms of
companies are not applicable. The
responsibilities of such a body are
determined by the statutes.

The task of auditing associations has
passed to the tax inspectorate. It
comprises the process of regularly
recognizing and checking their
non-profit status. As soon as a non-fiscal
infringement is detected, the file is

forwarded either to the Ministry of
Internal Affairs, which is empowered to
dissolve an association covering more
than one _"Land\_ or - if the association

does not cover more than one _Land -_ to

the senior government authority in the
_Land_ concerned .

_FOUNDA_ _TIONS_ _(STIFTUNGEN)_

22. Constitution

By a Memorandum of Association
subscribed to by any person, physical or
legal, _inter vivos_ (in which case it can be
revoked up to the date of approval), or
through a will. The memorandum must
state the object of the foundation, the
resources available for pursuing this
object and the governing body or bodies.
The resources provided must be
adequate for pursuing the object which
the foundation has set itself. An

application for authorization must be
made to the _Land_ in which the

foundation has its head office (under the
law of the _Lander)._ An appeal against
refusal of authorization may be made
only on the basis that the administration
had not applied its own criteria.

**23.** Definition

24.

25.

26.

**27.**

Assets to which a legal personality
attaches.

Nationality requirements

Any person may be a founder.

Acquisition of legal personality

Through approval by the competent
authority.

Legal capacity

The maximum capacity required to attain
the object of the foundation. It may do
all that is necessary, or even simpiy
useful, in pursuing its objective.

Disposal of assets on liquidation

If it has become impossible for the
foundation to accomplish its object, or if
the foundation is jeopardizing the public
good, the administrative authority may

**42**

**amend its object while complying with**
**the intentions of the founder as far as**

**possible. The executive committee must**
**be heard. The authority may also abolish**
**and dissolve the foundation (Article 87**
**BGB).** **In this event, the assets go to the**
**persons designated in the statutes.**
**Otherwise, they go to the state. The**
**liquidation** **procedure** **is** **as** **for**
**associations.**

**TAX POSITION**

**28.** **See associations**

**ACCOUNTS AND AUDITING**

**29.** **Accounts**

**See associations**

**30.** **Auditing**

**The managing body for the foundation is**
**subject to the competent administrative**
**authority, which is concerned only with**
**conformity with the rules of public**
**order. It operates in the exclusive**
**interest of the foundation. Auditing of**
**the accounts is governed by the statutes.**

**43**

GREECE

_**ASSOCIATIONS**_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

Yes. Article 12 of the 1975 Constitution

protects non-profit associations and
unions provided that they conform to the
laws of the State, which cannot make the
exercising of this right subject to prior
authorization.

2. Basic definition

Article 61 of the Civil Code. A union of

persons with legal personality, formed
with a view to pursuing a given object,
as well as a collection of goods assigned
to serving a given object.

3. Minimum number of founders

Twenty

4. Types of associations

Common law associations

Special associations

Unions of persons (without legal
personality and to which the provisions
relating to companies apply if no other
provision is made).

5. Membership nationality requirements

The right of association is extended to
non-nationals under Article 11 of the

European Convention for the Protection
of Human Rights and Fundamental
Freedom

6. Legal personality and how acquired

Following the application to the Court of
First Instance in the area of the

administration's office (the
Memorandum of Association and the

statutes must be appended), the legal
authorities verify that the provisions of
the law are complied with (check on
legality). The association acquires legal
personality once the Court's decision is

final and the association is entered in the
register of that court..

7. Legal capacity

Full legal capacity except for acts
inherent to physical persons.

8. Statutes

They must be drawn up in writing and
are subject to rules on publicity.

9. Registration requirements

Registration constitutes acquiring legal
personality.

10. Commercial activities

Making a profit occasionally in order to
obtain resources for the association is

authorized.

11. Disposal of assets on liquidation

Article 77 of the Civil Code. The assets

of a legal person which has been wound
up pass to the State, unless provided
otherwise by law, the charter or the
statutes, or by the decision of the
competent authority. The State is bound
to pursue the object formerly pursued by
the legal person, using these assets. The
assets of the association wound up may
not under any circumstances be shared
among the members.

TAXATION

INDIRECT TAXATION

12. Article 13 of the Sixth VAT Directive

Application of the exemption laid down
in Article 13.
13. Other exemptions

Specific rate (4%) for associations
pursuing an object for the public good.

14. Zero rates

No

DIRECT TAXES

15. General position

Income tax. The basis of taxation for

legal persons not pursuing a

**44**

profit-making object is constituted by
the net taxable income arising from the
leasing of buildings or land and
securities. The tax is not payable on
other income or receipts necessary for
pursuing the association's object, such as
members' regular subscriptions. In the
case of foreign associations, only
receipts necessary for pursuing the
association's object are not taxed.

16. .Recognition of association for tax

purposes

Associations with an object which is for
the public good enjoy exemption from
tax on income arising from the leasing of
land and real estate and from securities.

There is also exemption from paying
inheritance tax and taxes on gifts made
to legal persons which do not have a
profit-making object, are legally
constituted in Greece and pursue an
object of a national, religious,
philanthropic, pedagogic or artistic
nature or for the public good. The
exemption covers all non-national legal
persons with the same characteristics
regarding assets which they might inherit
in Greece, subject to the principle of
reciprocity.

17. Criteria for recognition

A very broad concept of the public
good. Covers any object which is not of
strictly private interest and concerns the
interests of large groups of persons
(philanthropic, religious, social, artistic,
educational).

18. Qualifying objects for recognition

The competent authority for granting
exemption is the tax inspectorate in the
region of the association's head office.

19. Gifts by individuals

Tax-deductible from taxable income, but
the donor must have Greek nationality.

If the amount exceeds DR 100 000 in

one year, it must be deposited in a loan
and deposit fund.

20. Gifts by companies

Tax-deductible provided that they have
been deposited in a loan and deposit
fund.

20(a). Gifts to non-resident associations

Not tax-deductible.

ACCOUNTS AND AUDITING

21. Accounts

The auditing authority is generally the
local authority.

FOUNDATIONS

22. Constitution

Concession system. Act of foundation
(act _intra vivos_ before a notary or a
sworn statement - unilateral act by the
founder) and presidential decree which
approves the will of the founder and is
issued by the competent Minister,
depending on the objects of the
foundation.

23. Definition

Set of goods intended to implement a
project for the public good (in principle)
and with a non-profit object.

24. Nationality requirements

25. Acquisition of legal personality

Concession system. Acquisition occurs
on the day of publication in the Greek
Official Journal of the decree granting
authorization.

26. Legal capacity

Full. Acquiring legal personality does
not automatically imply acquisition of
the assets assigned.

27. Disposal of assets on liquidation

TAXATION.

28. As for associations.

ACCOUNTS AND AUDITING

29. Accounts

Audit board.

30. Auditing

The operations of the foundation are
monitored by the State.

**45**

**SPAIN**

_**ASSOCIATIONS**_

**LEGAL FRAMEWORK**

**Right of association guaranteed by law?**

**Articles 22 (on associations) and 34**
**(on foundations) of the Constitution.**

**-** **Law 191/1964 of 24 December**

**1964** **governing** **associations** **and**
**Supplementary Decree of 20 May** **1965.**

**-** **Law 30/1994 of 24 November 1994**

**on foundations and tax advantages for**
**private persons engaged in activities for**
**the public good.**

**Several** **laws** **of** **Autonomous**

**Communities.**

**Basic definition**

**Group or union of several natural**
**persons with legal capacity which carries**
**out the wish of this group to pursue on a**
**permanent basis a given permissible**
**object laid down by the statutes of the**
**association (definition** **in the strict**
**sense).**

**Minimum number of founders**

**The law of 1964 specifies a meeting at**
**which "several persons" agree, without**
**anywhere stating the number of persons**
**or** **founder** **members** **required.**
**Nevertheless, the usual practice is to**
**require a minimum of three persons.**

**Types of association**

**1 - Associations governed by the Law**
**of 24 December** **1964** **(which does not**
**govern public or private foundations,**
**civil or commercial organizations or**
**corporate bodies).**

**2 - Associations governed preferentially**
**by special statutes (associations of**
**cannon law, associations established by**
**the state to attain specific objects, trade**
**unions** **and** **similar** **associations,**
**associations of civil servants and military**
**personnel, administrative associations of**

**property owners, political parties, sports**
**associations, students etc.).**

**Associations with social, educational,**
**cultural or sporting objects, or those**
**seeking more generally to promote the**
**public good, may be recognized as**
**"public utilities" by the Spanish Council**
**of Ministers, on a proposal from the**
**Minister for the Interior, which gives**
**them several advantages, including tax**
**advantages.**

**Membership nationality requirements**

**Non-nationals legally resident in Spain**
**have the right of association and may**
**exercise it in conformity with the laws**
**and** **regulations,** **(organic law 7/1985 on**
**the rights and liberties of non-nationals**
**in Spain)**

**Legal personality**

**Article 25 of the Civil Code grants the**
**status of legal person to corporate**
**bodies, associations and foundations for**
**the public good recognized by the law,**
**and** **to** **associations** **with** **specific**
**interests, whether civil, commercial or**
**industrial, to which the law grants their**
**own personality independent of that of**
**its members.**

**In accordance with the legal practice of**
**the supreme tribunal, legal personality**
**arises from a contract of association. In**

**Article 22 (3) the Constitution states**
**that associations are entered on the**

**appropriate** **register** **"for** **publicity**
**purposes only".**

**Legal capacity**

**Article 38 of the Civil Code grants legal**
**capacity to legal persons, which includes**
**associations which are recognized in**
**law. They may therefore acquire and**
**possess goods, and contract debts or**
**engage in civil or criminal proceedings.**

**Nevertheless, associations which are not**
**recognized as public utilities may not**
**acquire premises which are not strictly**
**necessary for achieving their object, and**

**46**

they must obtain authorization for
certain private donations.

8. Statutes

Article 3.2 of the Law of 1964 lists the

information which must be given in the

statutes.

9. Registration requirements

Entry in a register is obligatory. The
procedures for such registration vary
depending on the current provisions in
the autonomous region of the head
office of the association. For

associations subject to the Law of 1974,
there is a register for each province and
a national register.

There are also special registers for
certain associations governed by specific
systems.

10. Commercial activities

Authorized

11. Disposal of assets on liquidation

The procedure for disposing of assets in
the event of the association being
disbanded must be specified in the

statutes.

TAXATION

INDIRECT TAXATION

12.

Article 13 of the Sixth VAT Directive:

exemptions provided for in Article 13.

Law 37/1992 of 28 December 1992 on

VAT does not exempt associations
directly, in that the different rates do not
depend on the legal form of the entity
but on the nature of its activities.

However, it provides for numerous
operations common to associations
which are exempt or are eligible for a
deduction.

DIRECT TAXES

15. General position

Associations which have been

recognized as public utilities and which
fulfil the conditions laid down in Article

42 of the Law on Foundations and Tax

Concessions for Private Participation in
Activities for the Public Good have

several tax advantages.

1 - They are exempt from corporation
tax in respect of the activities which
constitute their social or specific object,
including additions to assets derived
from acquisitions or transfers of cash
bonds. They are also exempt in respect
of any profit from commercial activity,
provided this corresponds to the entity's
object or specific purpose.

Income from commercial activities or

from capital is not exempt, but is also
eligible for certain concessions, in
particular the tax band, which is a fixed
rate of 10%.     

2 - They are exempt from most local

taxes.

16. Associations which are recognized or
which enjoy tax concessions

Associations which have been

recognized public utilities and which
fulfil the conditions laid down in Article

42 of the Law on Foundations and Tax

Concessions for Private Participation in
Activities for the Public Good, and in
particular the following conditions:

they must pursue objects for the
public good (social assistance, civic
matters, educational, cultural, sporting,
health, development cooperation,
environmental protection, promotion of
the "économie sociale", voluntary social
work or research work etc.);

they must allocate at least 70% of
their net income to these objects;

they must submit their accounts
annually to the competent body in good
order;

13. Other specific exemptions

See 12.

14. Zero rates

No

**47**

in the event of liquidation, they must
assign their assets to achieving objects
for the public good;

their statutory representatives must
be honorary officials.

17. Criteria for recognition as a public utility.

These are given in Article 4 of the Law
on Associations of 1964, as amended by
the Law on Foundations and Tax

Concessions for Private Participation in
Activities for the Public Good. The main

criteria are:

the statutory objects must be for the
public good;

activities must be open to all and not
restricted to members;

the association must be non-profit,
any profits must not be shared out, and
no fees must be paid to the committee
for carrying out its duties;

it must possess the human and
material resources necessary for
achieving its statutory objects.

it must have been in operation
continuously for two years prior to
submitting its application.

18. Types of associations recognized

cf. 16 and 17.

19. Gifts by individuals

Donors who are natural persons may
deduct from their taxable income

donations or gifts to bodies which enjoy
tax concessions, under certain conditions
and with certain limitations. Normally,
this deduction will be 20% of the value

of the gift. However, total tax-deductible
expenditure must not exceed 30% of
taxable income.

20. Gifts by companies

Organizations with a legal personality
may under certain circumstances deduct
gifts made to bodies which enjoy tax
concessions. This deduction may not
exceed 10% of taxable income in most

cases.

In addition, participation by businesses
in activities for the public good, and - in
particular - the acquisition of works of
art to be offered as a gift and
expenditure on promoting and
developing certain arts also attract tax
concessions.

20(a) Gifts to non-resident associations

There is no legislation governing
associations on this point (for
foundations cf. 24).

ACCOUNTS AND AUDITING

21. Accounts

Article 11 of the decree of 20 May 1965
provides that associations must keep
accounts which show all receipts and
expenditure. These accounts must be
sent to all members of the association,
and then submitted annually to the
Annual General Meeting, with a budget
for the following year.

Lastly, they * must be sent to the
provincial authorities in the case of
associations in an Autonomous

Community which has no regulations on
this matter, or to the Ministry of Justice
in the case of associations which have

been recognized public utilities.

Auditing

The law of 1964 provided for the
auditing of associations by the
government authorities, but this was
implicitly repealed by the 1978
Constitution.

Associations recognized as public
utilities must submit an annual report of
their activities during the previous
financial year to the Ministry of Justice.

_FOUNDATIONS_

22. Constitution

A foundation may be constituted
_"inter vivos"_ or _"mortis causa"._ In the

first case, there must be a notarized
written act, and in the second case, its

**48**

**constitution must be stipulated in the**
**will.**

**Entry in a register of foundations, which**
**falls within the competence of the**
**Ministry of Justice, is compulsory and**
**constitutes official formation of the**

**foundation.**

**23.** **Definition**

**Article 1 of the Law on Foundations of**

**1994** **defines** **foundations** **as**

**organizations constituted on a non-profit**
**basis** **which,** **at the wish of their**
**founders, have their assets assigned**
**permanently to an object for the public**
**good.**

**24.** **Nationality requirements**

**Non-nationals may set up a foundation**
**in Spain.**

**In** **addition,** **like Spanish foundations,**
**foreign foundations can also engage in**
**activities in Spain which relate to their**
**object and can enjoy the concessions**
**granted** **to** **Spanish** **foundations,**
**provided** **they** **are** **represented** **on**
**Spanish territory and are entered in the**
**register of foundations.**

**Registration may be refused if their**
**object is not for the public good or if**
**they are not legally constituted in**
**accordance with their national legislation**
**(Article 5 of the above law).**

**25.** **Acquisition of legal personality**

**Foundations assume a legal personality**
**once they are entered in the register of**
**the charter. Registration may be refused**
**if this act is not in conformity with the**
**above law.**

**26.** **Legal capacity**

**The assets of the foundation may consist**
**of any kind of goods and assets which**
**can be valued in financial terms. The**

**foundation must be the owner of these**

**and an inventory of** **them** **must appear in**
**the register.**

**The assets are managed and disposed of**
**by the body** **which manages the**

**27.**

**28.**

**foundation, in accordance with the**
**statutes. Notwithstanding, Article 19 of**
**the above law sets limits to the disposal**
**of the goods of the foundation and**
**makes several transactions subject to the**
**prior** **authorization** **of** **government**
**authority.**

**In addition, foundations may not have**
**shares in trading companies in which**
**they** **are liable to** **be responsible**
**themselves for the company's debts.**
**They may, however, hold shares in joint**
**stock companies.**

**Disposal of** **assets** **on liquidation**

**Goods** **and** **assets** **resulting from**
**liquidation of the foundation must be**
**assigned to private non-profit bodies and**
**foundations pursuing objects for the**
**public good which are specified in the**
**charter or in the statutes of the**

**foundation. In the absence of such**

**stipulations, the governing body or**
**government authorities will decide which**
**of these organizations will assume these**
**rights.**

**Nevertheless, by derogation to these**
**provisions, the act establishing the**
**foundation or its statutes may provide**
**that these goods must be assigned to**
**other public bodies pursuing objects for**
**the public good (Article** **31** **of the above**
**law).**

**TAXATION**

**Foundations legally entered in the**
**register which fulfil the conditions laid**
**down in Article 42 of the above law**

**enjoy the same tax concessions as**
**associations (cf. 15-20). To do so, they**
**must be accredited by the Ministry of**
**Finance and must expressly apply for**
**them.**

**ACCOUNTS AND AUDITING**

**29.** **Accounts**

**49**

**The management of the foundation must**
**draw up an inventory, a** **balancé** **sheet**
**and accounts, and a report on the**
**activities of the foundation and its**

**financial management every year. It must**
**also obtain a discharge for the budget of**
**receipts and expenditure for the previous**
**year.** **All** **these documents must be sent**
**to the government authorities.**

**In addition, under certain circumstances,**
**an external audit is compulsory.**

**Lastly,** **within** **the** **three** **months**
**preceding the end of each** **financial** **year**
**the management must also draw up and**
**forward to the government authorities**
**the budget for the forthcoming year**
**(Article 23 of the above law).**

**30.** **Auditing**

**Supervision by a higher authority is**
**intended to assist the foundation in**

**exercising its** **right** **to exist and to ensure**
**that its constitution and operation are**
**legal. This supervision is carried out by a**
**government body in the case** **of**
**foundations** **which** **fall** **within** **the**

**competence of the government.**

**This government body is responsible for**
**auditing the accounts. It can request the**
**legal authorities to intervene temporarily**
**in the** **foundation** **and** **can** **assume the**

**responsibilities of the governing body**
**during the period laid down by the**
**judge.**

**50**

FRANCE

_ASSOCIATIONS_

LEGAL FRAMEWORK

1. Right to association guaranteed by law?

Yes    - (by the preamble to the
Constitution of 1958 containing the
principles laid down in the Declaration
of the Rights of Man and of the Citizen
of 1789) and by the Constitutional
Council (Decision of 16 July 1971,
French Journal Officiel, 18 July 1971).

2. Definition

An association is the convention

whereby two or more persons have in
common, on a permanent basis, their
knowledge or activities for a purpose
other than sharing profits (Article 1 of
the law of 1901).

3. Minimum number of founders

Two

4. Types of associations

Non-recognized or _de facto_ associations

Recognized associations

Associations recognized as a public
utility (no legal definition, this
recognition is a discretionary act by the
State).

5. Membership nationality requirements

No particular conditions

6. Legal personality and how acquired

Non-recognized associations    - not
applicable

Recognized associations - by declaration
to the local authorities of the name of

the association, its objects, its premises
and the name, profession, domicile and
nationality of each of the directors, with
two copies of the statutes. This
declaration must be published in the
French Journal Officiel.

7. Legal capacity

10.

11

An association declared in this way may
acquire, possess or administer "only
such premises as are intended for
management of the association and
meetings of its members, and only such
buildings as are strictly necessary for the
accompishment of its stated aim"
(Article 4 of the law of 1901). It may
receive gifts and legacies only if it has as
its exclusive purpose the provision of
assistance and welfare services or

scientific or medical research, or if it is a
cultural or family association or an
association affiliated to a federation

recognised as a public utility.

An association which is recognized as a
public utility has a somewhat wider
capacity, since the term "strictly" is not
applied. It may also acquire woodlands
and land for forestry, and it can receive
gifts and legacies. If it receives as a gift
or legacy from a will a building which is
not necessary for its operation, it must
sell it and keep the proceeds. The
charitable works proposed must be
authorized by the authorities in each
case and in advance.

Statutes

No prescribed form for the statutes,
which constitute the law of the parties.

Registration requirements

None, see point 6 of declaration
procedure.

Commercial activities

Not prohibited, either in the law of 1901
or in legislation. Profits can be made.

Disposal of assets on liquidation

The balance of the assets must not be

assigned to the members; in accordance
with the statutes and/or the Annual

General Meeting, it is generally made
over to a non-profit organization which
pursues a similar purpose.

**51**

**TAX POSITION**

**INDIRECT TAX**

**12** **Article** **13** **of the Sixth VAT Directive.**

**All the exemptions applicable under**
**Article 13 seem to be included in the**

**General Tax Code.**

**13.** **Other specific exemptions**

**Certain exemptions from the registration**

**taxes.**

**14.** **Zero rates**

**None**

**DIRECT TAXES**

**15.** **General position**

**When they are exempt from VAT and**
**are non-profit, associations are not liable**
**to corporate taxes, such as corporation**
**tax,** **apprenticeship tax and trading tax.**

**When they are not liable to the taxes**
**levied on businesses at the ordinary rate**
**,they are liable to tax on their assets.**

**All associations are liable to local taxes,**
**i.e. accommodation tax (except for**
**unfurnished premises and those open to**
**the public) and property tax payable by**
**all owners of premises (except low-cost**
**accommodation).**

**When they are exempt from VAT they**
**are liable to a payroll tax. If they have**
**more than 10 employees, they are liable**
**to the contribution paid by employers for**
**ongoing vocational training and the**
**employers' contribution to the buiiding**
**effort**

**They are liable to tax on income from**
**their assets.**

**16.** **Recognition of associations**

**If an association wishes to engage in**
**certain specific activities, it must obtain**
**official approval, e.g for tourism and**
**leisure activities, certain "authorized"**
**activities in the field of health, social**
**work or** **medical/social** **work, activities**
**recognized as being of the nature of**

**public services, i.e. engaging in hunting**
**or fishing, organizing** **officiai** **sporting**
**competitions etc.**

**Associations** **recognized** **as** **public**
**utilities**

**Application for recognition is made to**
**the Ministry for the Interior and granted,**
**under certain circumstances, by decree**
**by the Conseil** **d'État.** **This recognition**
**imposes certain obligations but gives**
**broader entitlement to receive gifts and**
**acquire and possess premises.**

**17.** **Criteria for recognition as a public utility**

**Must be a recognized association, and**
**have operated regularly as such for three**
**years,** **must pursue an object for the**
**public good, cover more than the local**
**area,** **have at least 200 members, and**
**must adopt model statutes drawn up by**
**the Conseil d'État.**

**18.** **Criteria for recognition**

**Recognition is conferred by the state,**
**which assigns* tasks concerned with**
**public services to associations. These**
**associations receive various types of** **aid,**
**which are subject to administrative**
**constraints and rigorous monitoring. For**
**instance, the "ordonnance" of 8 August**
**1985 gives sporting federations the**
**monopoly for organizing competitions.**

**19.** **Gifts by individuals**

**Private gifts are tax-deductible at the**
**rate of 1.25% of taxable income for**

**recognized associations, and 5% for**
**foundations and associations recognized**
**as public utilities. These gifts give**
**eligibility to a reduction in tax equal to**
**40%** **of** **the** **value of the gift (50% when**
**they** **are** **for** **free** **meals** **or**
**accommodation for people in difficult**
**circumstances). Only gifts which are**
**made to a French association or a**

**foreign association operating in France**
**are tax-deductible.**

**20.** **Gifts by companies**

**52**

**Gifts from companies are tax-deductible**
**at the rate** **of** **37%** **or 42% of** **the** **taxable**

**profit up to 2%o of turnover for gifts to**
**recognized associations, and 3%o for**
**gifts** **to** **recognized** **public** **utility**
**associations and to foundations.**

**Only gifts which are made to a French**
**association or a foreign association**
**operating in France are tax-deductible.**

**ACCOUNTS AND AUDITING**

**21.** **Accounts**

**Only associations recognized as public**
**utilities, associations subsidized by local**
**authorities and associations engaged in**
**commercial** **activities** **above** **certain**

**thresholds (concerning their budget,**
**balance or number of employees) have a**
**legal obligation to provide accounts in a**
**standardized form.**

_FOUNDATIONS_

**LEGAL FRAMEWORK**

**22.** **Constitution**

**Public utility foundation. The draft must**
**be submitted to the Minister for the**
**Interior and then to the Conseil d'État,**
**which in granting recognition as a public**
**utility authorizes the foundation to**
**receive its working capital. The statutes**
**must be drawn up in accordance with the**
**model statutes issued by the Conseil**
**d'État, which lay down the composition**
**of the administrative committee. This**

**usually follows the principle of thirds,**
**one** **third** **of** **its** **members** **being**
**nominated by the founders, one third**
**being members** _**ex officio**_ **representing**
**the public authorities, and one third**
**being** **nominated** **by** **the** **"conseil**
**d'administration"** **-** **management**
**committee.**

**Sheltered foundation: set up within a**
**public utility foundation without creating**
**a new legal entity (rare).**

**Business foundation (Law of 4 July**
**1990).** **There is no need for these to be**

**recognized as public utilities. They are**
**established for a given period - generally**
**5 years renewable - and their action**
**programme** **is** **approved** **by** **the**
**administrative authorities.**

**23.** **Basic definition**

**Irrevocable assignation of goods, rights**
**and resources to work for an object for**
**the public good which is non-profit.**

**24.** **Nationality requirements**

**By** **definition,** **one-third** **of** **the**
**administrative committee is composed of**
**eligible** **persons** **representing** **the**
**government authorities and designated**
**persons.** **To** **engage** **in** **activities**
**permanently in France or to have the**
**same capacities as a French foundation,**
**a foreign foundation must be recognized**
**as a public utility.**

**25.** **Acquisition of legal personality**

**This is acquired once the decree of**
**recognition as a public utility has been**
**approved by the Conseil** **d'État** **and**
**published in the French Official Journal.**

**26.** **Legal capacity**

**Same conditions for accepting gifts as**
**for an association recognized as a public**
**utility, but a wider entitlement to possess**
**assets including premises.**

**27.** **Disposal of assets on liquidation**

**As for associations recognized as public**
**utilities (cf.** **11),** **but the administrative**
**authority's agreement must be obtained.**

**TAXATION**

**28.** **As for associations**

**ACCOUNTS AND AUDITING**

**Auditing and the obligation to produce**
**accounts are the same as for associations**

**recognized as public utilities.**

**53**

**IRELAND**

_**ASSOCIATIONS**_

LEGAL POSITION

Right of association guaranteed by law?

The general right to form associations is
guaranteed by Article 40.6 of the Irish
Constitution. The more specific right to
form associations for non-governmental
organisations is set out in the Companies
Acts and in the Industrial and Provident

Societies legislation.

Basic definition

There is no specific definition of
"associations" or similar term in Irish

law. The specific form which an
association takes on is determined by the
type of legal structure which it opts for.
This is discussed further below.

Types of association

There are three main types of structure
relevant to non-governmental
organisations:

(a) Unincorporated bodies. Such bodies
may have a written Constitution. This
would set out the aims and objectives of
the organisation and possibly details of
the membership and Management
Committee. In legal terms, the
Constitution is a contract or binding
agreement between the members of the
group to abide by the terms of the
agreement, i.e. to try to achieve the aim
set out in the Constitution to carry out
their activities in accordance with the

Constitution, etc.. However, while the
Constitution is legally binding as
between the members of the group, it
has no effect in relation to non members.

Thus the group does not have a legal
personality of its own.

(b) A company limited by guarantee.
This is a variation on the standard form

of legal personality for business firms in
Ireland. In this type of company there
are no shares in the company and the

members simply guarantee to pay a
certain (usually nominal) amount
towards the debts of the company if it is
wound up.

(c) Industrial and provident society. This
type of structure is frequently used by
co-operatives. In practice, many of the
rules in relation to the industrial and

provident society are quite similar to the
company limited, by guarantee.
However, there is one important
difference in that whereas a group can
become a limited company for any legal
purpose, in order to be registered as an
IPS, a society must be formed "for
carrying on any industries, businesses or
trades".

There are also various other types of
structure which may be of relevance to
non-governmental associations including
Trusts, Friendly Societies, etc..
However, the above three are the main
types of structure which would be used
in Ireland.

Minimum number of founders

Both the company limited by guarantee
and the industrial and provident society
must have at least seven members. There

is no legal minimum to form
unincorporated bodies.

Membership nationality requirements

There are no specific nationality
requirements in relation to any of the
main three types of legal structure.

Legal personality and how acquired

The unincorporated body has no
separate legal personality. Both the
company limited by guarantee and the
industrial provident society do have
separate legal personalities. This is
acquired by submitting the Constitution
of the body in the required form to the
relevant government organisation which
is authorised to certify the particular
body. The Constitution can then be
inspected by members of the general
public.

**54**

**7.** **Legal capacity**

**The legal capacity of** **the** **body is set out**
**in its Constitution. In the case of the**
**company limited by guarantee, this is**
**known** **as** **the** **Memorandum** **and**

**Articles. In the case of** **the** **industrial and**

**provident** **society,** **this is known as the**
**Rules.** **There are no specific limitations**
**on legal capacity in relation to non-**
**governmental associations other than**
**those generally laid down by law in**
**relation to legal structures generally.**

**8.** **Statutes in proscribed form?**

**In the case of the company limited by**
**guarantee, the statutes must be drawn up**
**in a form acceptable to the Companies**
**Office which is the relevant registration**
**body. Sample memorandum and Articles**
**are published in the Companies Acts,**
**and these or some variation on these**

**would generally be utilised by such**
**companies. In the case of the industrial**
**and provident society, again the Rules**
**must be acceptable by the Registrar of**
**Friendly Societies, who is the relevant**
**registration body. There is no official**
**form of prescribed** **rules but the**
**Registrar has approved rules drawn up**
**by** **various** **non-governmental**
**organisations,** **and** **these** **or** **some**
**variation on them are generally utilised.**

**9.** **Registration requirements**

**As set out above, both bodies must be**
**registered with the relevant registration**
**authority. Other than this, there is no**
**specific registration requirement.**

**10.** **Commercial activity**

**There is no specific limitation on the**
**ability of these types of** **body** **to carry on**
**commercial activity. However, where a**
**body wishes to obtain exemption from**
**certain** **taxes** **from** **the** **Revenue**

**Commissioners on the basis of its**

**charitable activities, it must be "the**
**subject of a binding trust for charitable**
**purposes only", i.e. the Constitution or**
**Rules of the group must contain a**

**binding clause which guarantees that any**
**money received by the group will be**
**used only for charitable purposes. In**
**addition, it is unlikely that a Constitution**
**which** **contained** **elements** **of** **a**

**commercial nature would be considered**

**to be charitable by the Revenue**
**Commissioners.**

**11.** **Disposal of assets on liquidation**

**The Companies Acts and the Industrial**
**and Provident Societies legislation do**
**not contain any general restrictions in**
**relation to** **disposal** **of assets on**
**liquidation. Again, where a company**
**wishes to be recognised as charitable by**
**the** **revenue** **Commissioners,** **the**
**Commissioners will normally insist that**
**on being wound up, any assets will be**
**transferred to another body of a**
**charitable nature.**

**TAX POSITION**

**INDIRECT TAX**

**12.** **Article 13 of the 6th VAT Directive**

**Article 13 has been implemented in**
**Ireland.**

**13.** **Specific exemptions**

**Specific exemptions of relevance to**
**NGOs (including those required by the**
**6th VAT Directive) include:**

**(a) school or university education and**
**vocational training or re-training;**

**(b) hospital** **and medical** **care or**
**treatment provided by a hospital, nursing**
**home, clinic or similar establishment;**

**(c) services for the protection or care of**
**children and young persons;**

**(d) supply of goods and services closely**
**related to welfare and social security by**
**non-profit organisations;**

**(e) supply of services and goods for the**
**benefit of their members by non profit**
**making organisations whose aims are**
**primarily of a political, trade union,**
**religious,** **patriotic,** **philosophical,**
**philanthropic or civic nature.**
**55**

14. Zero rates

Items which are zero-rated include

medical equipment and appliances, i.e.
invalid carriages and other vehicles,
orthopaedic appliances, etc., walking
frames and crutches and similar items.

DIRECT TAX

15. General position

The Companies Acts and the Industrial
provident Societies legislation do not
contain any general exemption from
taxation in relation to non-governmental
organisations.

16. Recognised associations

It is possible for either a company
limited by guarantee or, more
exceptionally, an industrial and
provident society, to seek exemption
from various taxes from the revenue

Commissioners on the basis of its

charitable status. In order to qualify as
charitable, the objects and powers of the
company or society must be so framed
that every object to which its income or
property can be applied is charitable and,
as set out above, its main objects and the
application of its income or property
must be bound by a binding trust. This
means that it must be obliged by law to
advance only its stated main objects and
to apply its income and property to these
objects exclusively.

17. Qualifying criteria for recognition

In order to qualify as a charity, the
object of the company must fall under
one of the following headings:

(a) advancement of education;

(b) advancement of religion;

(c) relief of poverty, or

(d) other works of a charitable nature
beneficial to the community.

In addition to satisfying the above, the
company must keep annual audited
accounts and make these available to the

Revenue Commissioners on request; it

There is no specific supervision of
unincorporated bodies. Companies are
subject to reporting and accounting
requirements to the Companies office.
Annual returns and accounts must be

submitted and records must be kept
concerning changes in members,
management, etc.. Broadly similar
reporting requirements are imposed on
industrial and provident societies
(reporting to the Registrar of Friendly
Societies). In extreme cases,
investigators can be appointed to
investigate the operation of these bodies.
Bodies which regularly fail to make
returns will be struck off. Generally,

18.

19.

must prohibit the payment of fees and/or
salaries (other than out-of-pocket
expenses) to officers and directors for
services rendered; it must also satisfy the
other criteria discussed, including those
in relation to the winding up of the
organisation.

The taxes from which an organisation
may be exempt include income tax,
corporation tax (in the case of
companies), capital gains tax, deposit
interest retention tax, capital acquisition
tax and stamp duty on a transfer or lease
of land.

There is no exemption in relation to
value added tax, and employees of a
charity are liable to income tax under the
PAYE system and Pay Related Social
Insurance.

Gifts by individuals and companies

In some circumstances, gifts by
individuals and companies may be
subject to tax relief. One of the main
reliefs of relevance to the non
commercial sector is that gifts of
between £100 and £10,000 to certain
educational establishments may be
entitled to relief.

ACCOUNTABILITY

SUPERVISION

AND

**56**

**however,** **the** **accountability** **and**
**supervision requirements are not very**
**stringent. In the case of charities, the**
**revenue** **Commissioners** **have** **a**

**supervisory function** **but again, in**
**practice, this is not very onerous.**

_FOUNDATIONS_

**There is no specific legislation on**
**"foundations"** **in Ireland. A body which**
**is** **recognised** **by** **the** **Revenue**
**Commissioners as having charitable**
**status may apply to the Commissioners**
**of Charitable Donations and Bequests to**
**be incorporated under the Charities**
**Acts,** **1973. However, there are only**
**about 25 such bodies in Ireland.**

**57**

**ITALY**

_**ASSOCIATIONS**_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

Articles 2 and 18 of the Constitution.

Articles 14 to 22 of the Civil Code. Law
of 27 February 1985, Law No 266 of 11
August 1991 on voluntary organizations.

2. Definition

The law does not give a definition. In
common practice it is any stable
organization of a number of persons
pursuing a common interest, other than
profit.

3. Minimum number of founders

No

4. Types of association

Recognized associations

Non-recognized associations

Committees

5. Membership nationality requirements

No restrictions

6. Legal personality

Only for recognized associations,
following the decree of recognition by
the government authorities. A condition
for such recognition is to have sufficient
assets to pursue the statutory objects.
The faculty of recognizing legal persons
may be assigned to the President of the
Italian Council of Ministers, the Region
or the Prefects, depending on the
territorial coverage of their activities.

There are certain constraints on

non-recognized associations (cf. 7).

7. Legal capacity

Private legal persons may not acquire
fixed assets or accept gifts or
inheritances, or even legacies without
government authorization. Authorization
is considered to be the condition for the

10.

11

acquisition to produce its effects. The
constraints on non-recognized
associations consist of restricted

autonomy on assets, in that persons who
have acted in the name and on behalf of

the association are also responsible for
the debts of the association Law No 52
of 27 February 1985 now allows
non-recognized associations to acquire
fixed assets. Non-recognized association
and committees may take legal action.

Voluntary organizations which are
entered in the register, even if they have
the form of non-recognized associations,
may acquire the goods necessary for
their activities and receive gifts and
legacies.

Statutes

The Memorandum of Association must

be in the form of a public act for
recognition to be granted. There are
certain minimum requirements.

Registration requirements

No obligation, but if the association is
not registered, the administrators are
jointly and severally responsible, with
the legal person, for its debts (Article 33
of the Civil Code).

Commercial activities.

Associations may engage in commercial
activities. Such activity should not be
aimed at making a monetary profit, but
exclusively at obtaining their purposes.
If, on the other hand, the commercial

activities are autonomous in relation to

the purpose of the association, the
association may be considered as a _de_
_facto_ company, with important taxation
and social consequences. Article 24 of
the Civil Code provides that members
have no right to profit-sharing.

Disposal of assets on liquidation

The remaining assets are disposed of in
accordance with the provisions of the
Memorandum of Association or the

**58**

statutes. In the absence of specific
provisions, the decisions of the Annual
General Meeting which has decided on
the winding up are implemented. In the
absence of such decisions, the
government authorities decide.

TAXATION

INDIRECT TAXATION

12. Article 13 of the Sixth VAT Directive

Yes.
13. Other specific exemptions

Goods and services provided by
voluntary organizations are exempt from
VAT. Exemption from registration tax
and taxes relating to the Memorandum
of Association and all acts relating to the
activities of voluntary organisations.

Exemption from the taxes on gifts,
transfers, land registry and INVTM (tax
on the increased value of fixed assets)
for the associations which receive the

gifts. This also applies to legacies and
inheritances.

14. Zero rates

No

DIRECT TAXES

15. General position

Recognized and non-recognized
associations are liable to tax on the

income of legal persons (IRPEG), which
is proportional to the sum of the income
received as land revenue, revenue of a
land-income nature, income from capital
or income arising from engaging in a
commercial activity, whether occasional
or not. Amounts paid by members as
contributions or associations'

subscriptions are not included in the
taxable amount.

16. Recognition of associations for tax

purposes

The IRPEG is reduced by 50% for
historical, literary, scientific,

experimental and research societies
pursuing essentially cultural objects.

Profits from marginal trading and
production activities earned by voluntary
organizations are not taxable, provided
they are used for the institutional
purposes of the organization.

17. Criteria for recognition

Must have legal personality in the first
case and be a voluntary organization
within the meaning of Law No 266/91.

18. Criteria for obtaining tax concessions

For voluntary organizations, exemption
must be laid down by the criteria
established by an inter-ministerial decree
(involving the Ministry of Social Affairs
and the Ministry of Finance), which is
being drafted.

19. Gifts by individuals

Gifts for the public good, humanitarian,
religious or political objects may be
deducted up to a limit of 2%.

This limit may Be exceeded when the gift
is going to organizations for promoting
study, research, dissemination of
information, the acquisition,
maintenance or restoration of part of the
cultural heritage or to institutions which
organize fairs and exhibitions with a
particular cultural or scientific interest
with the authorization of the Ministry of
Culture.

Gifts for the central institute for the

support of the clergy of the Italian
Catholic Church, and those for helping
people in developing countries, may be
deducted up to a ceiling of
LIT 2 million.

Gifts to voluntary organizations which
are entered in the register are no longer
tax-deductible. The only deduction
possible at present is that concerning, on
the one hand, an organization subject to
corporation tax or, on the other hand, a
voluntary organisation with legal
personality. Entry in the regional register

**59**

**of voluntary organizations is therefore**
**no longer sufficient.**

**20.** **Gifts by companies**

**As in the case of private persons, gifts**
**for purposes concerning the public good,**
**or humanitarian, religious, or political**
**purposes, can be deducted up to a**
**ceiling** **of** **2%.**

**20(a).** **Gifts to non-resident associations**

**For associations with their head office in**

**Italy, the system** **is** **the same, provided**
**that they are entered in a regional**
**register on Italian territory.**

**ACCOUNTS AND AUDITING**

**21.** **The administrative authority has the**
**power to audit and monitor.**

_FOUNDATIONS_

**22.** **Constitution**

**Act** **of** **foundation** **(unilateral** **act**
_**inter-vivos**_ **in the form of** **a** **public act or**
**will).**

**23.** **Definition**

**Private legal person with assets assigned**
**to an object.**

**24.** **Nationality requirements**

**No.**

**25.** **Acquisition of legal personality**

**By government authorization in the form**
**of a decree of the President of** **the** **Italian**

**Council of Ministers**

**26.** **Legal capacity**

**As for recognized associations**

**27.** **Disposal of assets on liquidation**

**If nothing is laid down in the statutes,**
**the government authorities assign the**
**assets to other bodies with similar**

**objects.**

**TAXATION**

**Historical,** **literary,** **scientific,**
**experimental and research foundations**
**with exclusively cultural objects within**
**the meaning of Article 6 of Presidential**

**29.**

**30.**

**Decree No 601/73 enjoy a reduction of**
**50%** **on taxable income on legal persons.**
**Imports of godds for foundations with**
**the object of giving assistance or**
**carrying out charitable works,** **education,**
**training, study and research are exempt**
**from** **VAT.**

**In addition, as a general principle,**
**foundations which are not engaged in**
**commercial agricultural activities or**
**trade activities are not liable to VAT**
**within the meaning of Article 4 of**
**Presidential Decree No 633/72.**

**ACCOUNTS AND MONITORING**

**Accounts**

**No**

**Monitoring**

**The government authorities have powers**
**to monitor foundations, which consist**
**essentially of the power to amend the**
**objects of the foundation when these**
**have been attained, or have become**
**impossible or meaningless. They have**
**the power to coordinate the foundations**
**and may group foundations together**
**when** **their** **assets** **have** **become**

**insufficient.**

**60**

**LUXEMBOURG**

_**ASSOCIATIONS**_

**LEGAL FRAMEWORK**

**1.** **Right of association guaranteed by law?**

**Yes,** **under Article 26 of the Constitution**
**of 17 October 1868 as amended, the**
**Law of 21 April 1928 on non-profit**
**associations and foundations, and the**
**Law of** **11** **May 1936 guaranteeing**
**freedom of association.**

**2.** **Basic definition**

**Article 1 of the Law of 21 April 1928**
**defines a non-profit association as one**
**which does not engage in industrial or**
**trading activities, and which does not**
**seek to obtain material gain for its**
**members.**

**3.** **Minimum number of founders.**

**Three**

**4.** **Types of association**

**Non-profit associations (ASBL)**

_**De facto**_ **associations**

**5.** **Membership nationality requirements**

**No restrictions.**

**6.** **Legal personality and how acquired**

**Acquired on the date when the statutes**
**are published.**

**7.** **Legal capacity**

**An ASBL may possess, as its own**
**property or otherwise, only the premises**
**necessary for attaining its statutory**
**purposes. There is no limitation on**
**furniture.**

**Gifts exceeding LUF 500 000 must**
**always be authorized by Grand-Ducal**
**Decree.**

**8.** **Statutes**

**Written act duly authenticated or under**
**private seal.**

**9.** **Registration requirements**

**The Memorandum of Association must**

**be registered. The statutes and the full**

**names,** **trades/professions** **and addresses**
**of** **the** **administrators and the head office**

**must be deposited with the register of**
**trade and businesses. Any amendments**
**must also so be lodged. An alphabetical**
**list of members must be deposited with**
**the chancellery of the court for the place**
**in which the association has its offices in**

**the month when the statutes are**

**published.** **They** **must** **be** **updated**
**annually.**

**10.** **Commercial activities**

**Profit-making** **activities** **are** **not**
**prohibited but they must nevertheless be**
**occasional and ancillary to the main**
**activity.**

**11.** **Disposal of assets on liquidation**

**If** **the** **statutes contain no provisions, the**
**decision is taken by the Annual General**
**Meeting. If the meeting cannot make a**
**decision, the receivers decide on a**
**method of disposal which is as close as**
**possible to the social purpose.**

**TAXATION**

**INDIRECT TAXATION**

**12.** **Article** **13** **of** **Sixth** **VAT Directive**

**Yes**

**1-3**

**Other specific exemptions**

**Operations with an educational purpose**
**organized** **by** **public** **or** **private**
**establishments, operations carried out by**
**youth hostels, the organizers of sporting**
**or** **scientific,** **cultural,** **educational,**
**economic or professional events when**
**the income is intended mainly to cover**
**organizational** **costs,** **theatrical**
**representations,** **conferences,** **medical**
**and paramedical services, provided that**
**these** **exemptions** **do** **not** **distort**
**competition.**

**14.** **Zero rates**

**No**

**DIRECT TAXES**

**15.** **General position**

**61**

In accordance with Article 159 of the
Luxembourg Fiscal Code, ASBLs are
liable to tax on corporate bodies (ERC).
Any person liable to the IRC tax is also
liable to a wealth tax. Article 25 of the

law of 29 December 1971 lays down the
rights of registration and the rights of
succession and transfer on death. For

gifts _inter vivos_ and legacies, the rate is
6%.

16. Recognition of associations for tax

purposes

Article 161 of the Fiscal Code provides
for an exemption from IRC for
organizations pursuing directly and
solely charitable or cultural purposes or
purposes for the public good. However,
they are still liable to tax if they engage
in industrial or commercial activities.

Only disinterested activities of ASBLs
are exempt from tax and not any
ancillary or occasional profit-making
activities.

17. Criteria for recognition

Non-profit associations pursuing
charitable or religious purposes, or
purposes for the public good (public
health, youth and sport, sciences, arts,
culture) may be recognized as being for
the public good.

18. Qualifying purposes for recognition

Application must be made to the
Ministry of Justice. Purposes must be
non-profit, and recognized as being for
the public good in conformity with the
statutes. A Grand-Ducal "Arrêté",
adopted with the assent of the Conseil
d'Etat, confers the status. Tax

concessions are then awarded on the

basis of tax law.

19. Gifts by individuals

Gifts totalling over Flux 5 000 per
annum are tax-deductible up to a ceiling
of 10% of total income or

Flux 10 000 000. Any gifts must be to
recognized organizations for the public

good and other bodies recognized as
such in law.

20. Gifts by companies

The same rules apply to companies in
Luxembourg

20(a). Gifts to non-resident associations

These are not tax-deductible

ACCOUNTS AND AUDITING

21. Accounts

The annual accounts must be lodged
with the registry of the civil court on the
establishment of the association, or at
least the accounts for the past ten
financial years, to obtain authorization to
accept gifts.

_FOUNDATIONS_

22. Constitution

Assignment of assets by authenticated
document or by will, with approval by
Grand Ducal "Arrêté".

23. Definition

Foundations are circumscribed by law,
since the only establishments recognized
as foundations are those which are

engaged in philanthropic, religious,
scientific, artistic, educational, social,
tourism or sporting activities, using
revenue arising mainly from capital
acquired either at the time when they
were founded or subsequently, to the
exclusion of the pursuit of material gain.

24. Nationality requirements

None

25. Acquisition of legal personality

Simultaneously with approval of the
statutes by the Grand Ducal arrêté.

26. Legal capacity

As for associations

27. Disposal of assets on liquidation

As provided for in the statutes, failing
which the Ministry of Justice assigns
them to a purpose as close as possible to

**62**

**that for which the institution was**

**established.**

**TAXATION**

**28.** **As for associations**

**ACCOUNTS AND MONITORING**

**29.** **Accounts**

**Every year, within two months of the**
**end of the financial year, the accounts**
**and budget must be forwarded to the**
**Ministry of Justice. These documents are**
**published in the** **"Mémorial".**

**30.** **Monitoring**

**Article 40 of the law of 1928 provides**
**that the Minister for Justice shall ensure**

**that the assets of a foundation are**

**allocated to the purpose for which the**
**institution was established.**

**63**

```
  NETHERLANDS

```

_ASSOCIATIONS_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

Yes - the right of association is
recognized for any person resident
within the territory of the Netherlands
(Articles 1 and 8 of the Constitution).

2. Basic definition

In accordance with Article 2.26 of the

BW (Burgerlijk Wetboek - Civil Code),
an association is a legal person
composed of members and constituted
for a precise purpose other than that laid
down for cooperatives and mutual
societies [13] . It is constituted by a
multilateral legal act. It cannot share
profits among its members.

3. Minimum number of founders.

Two

4. Types of association

Associations under private seal

Associations by notarized act

Stateless associations (international
associations not under any specific legal
jurisdiction, not provided for in law but
recognized by the law)

5. Membership nationality requirements

No conditions

6. Legal personality and how acquired

Full: associations whose statutes appear
in a notarized act (incorporation of the
statutes in a notarized act can also be

done during the life of the association).
Such an association must be entered in

the register of associations;

Limited: associations whose statutes are

not incorporated in a notarized act.

Entry of such an association in the
register of associations has the effect of
limiting the responsibility of the
directors, which will be invoked only if
the other party claims that the
association has not met its obligations.

Foreign associations: the Netherlands
follows the principle of incorporation.
This means that an association

constituted abroad is recognized within
the Netherlands, and that the foreign law
applicable (which determines whether
legal personality can be granted) governs
the association under Netherlands law.

7. Legal capacity

Associations whose statutes are

incorporated in a notarized act have full
legal capacity, they may contract debts,
receive legacies and acquire fixed assets
without restrictions. Associations whose

statutes are not incorporated in a
notarized act '(with limited personality)
cannot acquire registered goods or
receive legacies.

8. Statutes

No obligatory form, except for statutes
incorporated in a notarized act, for
which the content is laid down.

9. Registration requirements

None, except for associations
constituted by notarized act or
recognized in a notarized act. The act
must be entered in the register held for
this purpose by the Chamber of
Commerce and Industry in the area of
the head office.

10. Commercial activities

An association may engage in
commercial activities, but the profits
must not be distributed to the members.

The purpose of an association cannot be
to make profits and distribute them to
the members.

11. Disposal of assets on liquidation
These are types of associations in Dutch law.

**64**

The statutes of an association

constituted by notarized act must specify
how the assets are to be disposed of on
liquidation or the procedure for
determining such disposal (BW - Civil
Code-and Article 2: 27 (f). Once
creditors have been paid, the balance of
the assets is assigned to all parties who
are entitled to them under the statutes,
pro-rata to their rights, otherwise to the
members. If no-one has a claim to the

remaining assets they pass to the state,
which will assign them in accordance
with the object of the legal person as far
as possible BW, Article 23b (1).

TAXATION

INDIRECT TAXATION

12. Article 13 of Sixth VAT Directive

All exemptions concerning associations
apply.
13. Other specific exemptions

There are several exemptions for goods
and services supplied by associations,
and special exemptions for the provision
of services and related goods by
associations to their members, provided
that the exemptions do not produce
restrictions on competition and that the
organization does not attempt to
distribute the profits to the members.

14. Zero rates

No.

DIRECT TAXES

15. General position

Income tax. In general, associations are
subject to the common law regarding
taxes. There is no special tax for
associations (legal persons). An
association may be subject to
corporation tax (Vpb) if it is carrying on
a business which brings it into
competition with businesses liable to
corporation tax, in respect of the profit
which it obtains from this activity.

Tax on fixed assets: Associations with a

real title to fixed assets or the users of
such assets must pay a local tax.

16. Recognition of associations for tax

purposes

No exact definition. Article 24(4) of the
law on estate duty provides for tax
exemptions for recognized organizations
which exist for the public good.

An association for the public good is
completely exempt from corporation tax
if the profits in any one year are less than
HF1 13 000 or if the profit for the past
four years is less than HF165 000,
provided that there is no profit motive,
or that the profit motive is secondary
and the profits are used solely for the
public good (Article 5 of the law on
corporation tax and "arrêté" of 20
August 1971). Charitable institutions,
libraries, retirement funds, institutions
for the preservation and management of
land for nature preservation purposes
and certain other institutions on specific
land.

Tax on income from fixed assets:

Associations not liable to corporation
tax may apply for reimbursement of the
fixed assets deduction, which is

deducted at source on dividends or

interest.

There are provisions for exemptions
_{inter alia_ on buildings used for religious
purposes) from property taxes.

17. Criteria for recognition

The relevant legislation does not give a
definition of the public good. The law on
estate duty specifies that a precise order
in respect of a legacy or a gift precludes
their being for the public good.
According to the law, the public good is
the opposite of the good of an individual
or of a restricted group.

18. Criteria for obtaining approval or
empowerment

Recognition by the registration and
estate duty inspectorate.

**65**

19. Gifts by individuals

Gifts made to approved Dutch
associations are tax-deductible at a rate

of between 1% and 10% of taxable

income on sums exceeding HFL 120 per
annum and per donor. Gifts made under
contracts in authenticated form for at

least five years are tax-deductible in full
in all cases where they are for the benefit
of a Dutch association composed of at
least 25 members (in which case public
good is not a criterion), provided that
such gifts are in the form of an annuity,
that the association has full legal
capacity and that it is not liable for
corporation tax.

20. Gifts by companies

Gifts made to associations or

foundations registered in the
Netherlands which have an academic,
religious, charitable, cultural object or
one for the public good (including
political parties) are tax-deductible when
they exceed a total of HFL 500 up to a
maximum of 6% of taxable income.

20(a). Gifts to non-resident associations

The same regulations apply to
associations registered abroad, which are
specifically mentioned by the Minister
for Finance.

ACCOUNTS AND AUDITING

21. Accounts

Within six months of the end of the

financial year, the administrative council
forwards to the Annual General Meeting
an annual report on the situation and
management of the association. It
submits the balance and the profit-andloss account, together with comments,
to the meeting for approval. These
documents are signed by the directors
and other officials.

Auditing

Internal: The statutes may provide that
the association will have a college of
commissaires. In the absence of such a

college, and of an accountant within the
meaning of Article 2.393 (1) attesting
the veracity of the documents, every
year the Annual General Meeting shall
appoint a commission of at least two
members who cannot be members of the

administrative council.

External: by declaration of a qualified
accountant attesting the reliability of the
documents. There is no obligation to
publish accounts.

_FOUNDA_ _TIONS_ _(STICHTING)_

22. Constitution

By authenticated act containing the
statutes. These statutes must be entered

in the special foundations register of the
Chamber of Trade and Industry in the
area of the head office.

23. Definition

A legal person created by a legal act
which has no members and which has

the aim of pursuing the object laid down
in the statutes using the goods assigned
to this object.

24. Nationality requirements

The head office must be in the

Netherlands, although foundations may
have offices abroad.

25. Acquisition of legal personality

By notarized act.

26. Legal capacity

Foundations have full legal capacity

27. Disposal of assets on liquidation

According to the procedures laid down
in the statutes. If there are no claimants

to the remaining assets, they revert to
the state, which will allocate them in
accordance with the object of the legal
person as far as possible.

28. Taxation

As for associations

ACCOUNTS AND AUDITING

29. Accounts

**66**

**In accordance with BW 2 10 (2), the**
**directors of the foundation are obliged**
**to draw up a balance sheet and a profit-**
**and-loss** **account for the legal person**
**within the six months following the end**
**of the financial year, and to keep them**
**for ten years.**

**30.** **Monitoring**

**Internal: In accordance with the statutes.**

**External: The government authorities**
**may ask the directors for information. If**
**cooperation is not forthcoming, the**
**President of the Court can order the**

**documents** **to** **be** **shown** **to** **the**

**government authorities. At the request**
**of the government authorities, or any**
**other person concerned, the Court can**
**order the directors to be suspended or**
**dismissed and can appoint alternate**
**directors.**

**67**

to create an association must be

submitted to the competent authorities
and be accompanied by a draft of the
statutes. If no prohibition against
forming an association is issued within
six weeks, or if the authorities declare
that they do not prohibit its formation,
the association may begin to function. At
least three members must decide at an

initial general meeting to form an
association on the basis of statutes which

have not been rejected by the authorities.
The association acquires its legal
personality by virtue of this decision. It
acquires its legal capacity by electing
representatives as laid down in the

statutes.

7. Legal capacity

Full legal personality after it has been
constituted. L.

8. Statutes

The statutes, as provided for under the
law of 1951," must state that the
association is registered in accordance
with Article 12 of the law of 1951.

TAX POSITION

INDIRECT TAX

12. Article 13 of 6th VAT Directive

Vereine enjoy the same exemptions in
Austria as listed in Article 13 of the 6th

VAT directive.
13. Other specific exemptions

There are no specific exemptions
covering a wider scope than defined in
Article 13.

14. Zero Rates

Zero rates do not exist in Austria.

DIRECT TAX

15. General position

Also subject to Corporation Tax
(Korperschaftssteuer) are "nichtrechtsfàhige Personenvereinigungen, Anstalten,

**5.**

**AUSTRIA**

_**ASSOCIATIONS**_

LEGAL FRAMEWORK

Right of Asociation guaranteed by law?

Yes, under Article 12 of the basic
national law (Staatsgrundgesetz
StGG): Austrian citizens have the right
to form associations. "Legal"
associations are more specifically
governed by the 1951 Law on
Associations.

Basic definition

No legal definition. The following
definition is based on legal practice and
case law. An association is (1)
voluntary, (2) intended to be permanent
(3) a structured association of several
persons (4) intended for attaining a
given permissible purpose for the public
good (5) through continuous communal
activity.

Minimum number of founders

One founder (a person who declares
himself willing to form an association) is
sufficient. Subsequently, the association
must have at least three members (cf.
also 6).

Types of association

Austrian legislation distinguishes
between "ideelle Vereine" (non-profit
associations), which are governed by the
1951 Law on Associations, and
associations set up with profit in mind
(Associations Charter of 1852).

Membership nationality requirements

Non-nationals, even when not resident in
Austria, are entitled to become members

of an association in Austria.

Legal personality and how acquired

Every association founded in accordance
with the 1951 Law on Associations has a

legal personality. The notice of intention

**68**

**Stiftungen"** **and** **àndere**
**Zweckvermôgen** **".**

**16.** **Exempted from taxation**

**Non-profit organizations for the general**
**public, for the public welfare, churches**
**(§§ 34 - 47 Bundesabgabenordnung),**
**small insurance associations (60.000**
**ATS),** **associations in the field of**
**agricultural activities for the purpose of**
**using common equipment (Weidw und**
**Maschinengenossenschaften),** **etc.,**
**private foundations, unions which are**
**legal** **professional** **representatives,**
**financing associations for small and**
**medium-sized enterprises.**

**17.** **Qualifying criteria**

**The** **most** **important** **criterion** **for**
**recognition is the object defined in the**
**statutes of the association, such as**
**charity, non-profit, public welfare, other**
**specific purposes.**

**18.** **Qualifying objects**

**Religious communities recognized by**
**public** **law,** **"pensions** **-** **und**
**Unterstutzungskassen"** **under** **specific**
**conditions (§ 6 KSTG).**

**The exemptions do not apply to limited**
**taxable persons.**

**19.** **Gifts by Individuals**

**Gifts** **by** **individuals** **to** **religious**
**institutions (up to 1.000 - ATS** **p.a.),**
**high schools, associations in the field of**
**research** **and** **development** **can be**
**deducted from income tax. The amount**

**of deductable gifts is limited to 10% of**
**the total incomes the year before.**

_FOUNDATIONS_

**LEGAL POSITION**

**22.** **Constitution**

**Free to create**

**23.** **Basic definition**

**There are two different** **forms of**

**foundation. 1) Foundation in accordance**
**with the** **Bundes-Stiftungs-und-Fonds**

**Gesetz (law on foundations) or general**
**national legislation: with permanent**
**assets for pursuing objects for charitable**
**purposes or the public good. 2) Private**
**foundation, with legal personality, which**
**has been provided with funds by the**
**founder to be used, managed and applied**
**to** **pursue** **a** **permissible** **object**
**determined by the founder.**

**24.** **Nationality requirements**

**None**

**25.** **Acquisition of** **legal** **personality**

**Type 1 foundations (cf. 23 above): these**
**have legal personality, which is acquired**
**when the appropriate authorities decide**
**that the foundation can be authorized.**

**Type 2 foundations: these have legal**
**personality, acquired on entry in the**
**"Firmenbuch"** **(register of companies).**

**26.** **Legal capacity**

**Both forms of foundation have legal**
**personality, i.e. they can complete legal**
**formalities and be a party to legal**
**proceedings.**

**27.** **Disposal of assets on liquidation**

**Type 1: to be stated in the winding-up**
**notice of the authorities concerned with**

**foundations.**

**Type 2: assets pass to the ultimate**
**beneficiaries** **named** **in** **the**
**"Stiftungserklàrung"** **(declaration). If this**
**is revoked, they pass to the founder or**
**to the Republic of** **Austria**

**69**

**PORTUGAL**

_ASSOCIATIONS_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

Article 46 of the 1976 Constitution,
Civil Code, Articles 158 to 166 and 167
to 184, and Decree-Law 594/74 of 7
November 1974.

2. Basic definition

The law does not give a definition. In
accordance with general practice, a
group of individuals who pool certain
goods or services for an object which
excludes making a personal profit.

3. Minimum number of founders

No minimum.

4. Types of association

Private associations under the general
scheme

Private associations under a special
scheme (e.g. cooperatives and social
solidarity organizations)

Associations without legal personality
(non-recognized associations and special
committees)

5. Membership nationality requirements

Unless the statutes provide otherwise,
non-nationals can be members of an

association

6. Legal personality and how acquired

Standard recognition, granted on
condition that the act of establishing the
foundation is authenticated by a notary
and that its content is in conformity with
Article 167-1 of the Civil Code.

Publication of extracts of the act of

establishing the foundation and the
statutes in the Portuguese Official
Journal makes the association

recognizable in law by a third party.

7. Legal capacity

Associations have legal capacity subject
to the _ultra vires_ rule. In accordance

with this rule, associations are
recognized as having not only the rights
and obligations which are necessary but
also those which are appropriate for
attaining their object. Only rights and
obligations inherent to a human person
are excluded.

8. Statutes

Yes. As for the Memorandum of

Association, i.e. the notarized act. There
is an obligatory basic minimum.

9. Registration requirements

For associations under the general
scheme, registration has the sole
function of publicity, and has no
constitutive function.

10. Commercial activities

Associations may have a financial object,
not excluding financial advantages for
the associates,-provided that these are
not in the form of a profit as such.

11. Disposal of assets on liquidation

In the case of goods bequeathed or
donated with instructions or intended for

a certain purpose, they must be assigned
to another legal person, with the same
instructions or object. In the case of
other goods, Article 162-2 of the Civil
Code authorizes members in accordance

with the statutes or by decision of the
general meeting to decide on their
assignment.

TAXATION

INDIRECT TAXATION

12. Article 13 of Sixth VAT Directive

Yes.

13. Other specific exemptions

Medical or paramedical care, educational
establishments, artistic activities,

insurance and social assistance services

14. Zero rates

**70**

Foodstuffs, newspapers, reviews and
cultural books, pharmaceutical products
and the like, passenger transport,
medical services, entertainments.

DIRECT TAXES

15. General position

Income tax for legal persons - ERC    (20% of taxable income) which is
payable on total income less certain
expenses. Subscriptions paid by
members and subsidies to finance the

attainment of the association's objects
are not considered as income.

Tax on assets.

16. Recognition of associations for tax

purposes

Legal persons of an administrative public
utility (religious communities, voluntary
firemen's associations etc.) are exempt
from IRC, as well as ordinary public
utilities pursuing exclusively scientific or
cultural objects, or performing charitable
or social work; specific institutions for
social solidarity (IPSS) and persons
legally similar to these.

17. Criteria for recognition

In the first two cases, the organizations
must cooperate with the government
authorities, at national, regional or local
level. IPSSs and similar bodies must be

registered with the regional social
security department. Nevertheless, the
decision is at the discretion of the

authorities. The extent of the exemption
may vary depending on the objects.

18. Qualifying objects for recognition

Exemptions are granted by the Ministry
of Finance at the request of applicants by
means of a decision (despacho)
published in the "Diâro da Republica

19. Gifts from individuals

Natural persons may deduct gifts to the
organization specified in Article 56 of
the law on the 1RS up to a value equal to
15% of their net taxable income. This

also applies to legal persons with
non-profit objects belonging to, or
established by, religious denominations,
teaching or educational associations,
scientific research or culture, literary,
artistic etc.

20. Gifts by companies

Legal persons may deduct gifts given as
cultural sponsoring or to organizations
such as teaching or educational,
scientific research or cultural, literary or
artistic associations from their taxable

profits up to a total value equal to 0.2%
of turnover, and 50% of any sum in
excess of that.

20(a). Gifts to non-resident associations

ACCOUNTS AND AUDITING

21. Accounts

The conseil de surveillance - supervisory
council - is the body responsible for
monitoring the activities of the
administrative body. It ensures that the
accounts of the association are properly
kept.

The accounts of associations which

enjoy tax concessions must always be
available to the tax authorities.

_FOUNDATIONS_

22. Constitution

By an act _inter vivos_ or a will. The
notarized form of the act is required,
except in the case of a non-public will.
The charter establishing the foundation
must state the object of the foundation
and specify the goods allocated to it.
The statutes must always be in
authenticated form.

23. Definition

There is no legal definition. In
accordance with general practice, the
foundation is an organization pursuing a
permanent object to which assets have
been assigned.

24. Nationality requirements

**71**

No, but the head office must be in
Portugal.

25. Acquisition of legal personality

Foundations acquire legal personality by
individual recognition, which is the
responsibility of the administrative
authority.

26. Legal capacity

As for associations

27. Disposal of assets in the event of winding

up

The assets of wound-up foundations are
disposed of according to the common
system for associations and foundations

TAXATION

28. As for associations

ACCOUNTS AND AUDITING

29. Accounts

30. Auditing

Foundations remain under the permanent
supervision of the competent authority
for recognition. Foundations must have
a tax council. They may be wound up by
the authority which recognized them
once their object has been attained or
has become impossible to attain, in the
event of illicit use of resources, if public
order is endangered or if the object
being pursued no longer corresponds to
that laid down in the statutes.

**72**

**FINLAND**

_ASSOCIATIONS_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

Yes. Article 10a of the Constitution Act

as amended in 1995 and Article 1 of the

Associations Act of 1989.

2. Basic definition

A contract by which several people act
together for the common realisation of a
non-profit purpose. (The association is a
permanent body in the sense that it is not
momentary

3. Minimum number of founders

Three

4. Types of association

A. Registered associations:

    - non profit associations

    - economic associations (for example cooperative societies established before the
entry into force of the Act on cooperative societies of 1954)

    - associations subject to permission
(provided by the Associations Act)

    - associations organised by a legal
act/statute (for example the Finnish
Advocates Associations)

B. Non-registered associations which do
not have legal capacity

5. Membership nationality requirements

Associations Act: none

Exceptions: if the primary purpose of the
association is to exercise influence over

State affairs, it may have as members
only Finnish citizens, foreigners residing
in Finland and associations whose

members are Finnish citizens or

foreigners residing in Finland or
associations who have member

associations made up of Finnish citizens
or foreigners residing in Finland.

Members of the Board: The chairman

and at least half of the members of the

board must be resident in Finland if the

Ministry of Trade and Industry has not
granted an exception.

6. Legal personality and how acquired

Yes. According to the Associations Act,
legal personality is acquired by
registration. Only registered associations
can have legal personality. The members
of a registered association shall not be
personally liable for the commitments of
the association.

7. Legal capacity

A registered association has full legal
capacity as a legal person. A registered
association may obtain rights, make
commitments and appear before a court
or another authority as a party. Nonregistered associations do not have legal
capacity

8. Statutes

Yes.

9. Registration requirements

Registration is not compulsory as such.
If registration is wanted, requirements of
registration are provided in the
Associations Act.

A notification of formation shall be

recorded in a Memorandum of

Association which shall include the rules

of the association and the name and

domicile of the chairman of the board

and the persons who have the right to
sign for the association. The notification
of formation shall be signed by the
chairman of the board

10. Commercial activities

A non-profit association may only
practise a trade or other economic
activity that has been provided in the
association's rules or that otherwise

relates to the realisation of its purpose or
that is to be deemed economically
insignificant.

**73**

For economic associations there are no

general statutes (see types of association
n. 4)

11. Disposal of assets on liquidation

After liquidation, the remaining assets
should be used as required in the rules of
the association. In the absence of such a

rule the liquidators must put the
remaining assets at the State's disposal
to be used to promote the same or
similar objects as the liquidated
association

TAX POSITION

INDIRECT TAX

12. Article 13 of Sixth VAT Directive

Corporations for the public good
(charitable organisations, sport
associations etc.) are liable to tax it their
income is deemed to be income from

business activities according to the
Income Tax Act. This means that in

practice all exemptions of relevance to
associations coming under Article 13
have been implemented

13. Other specific exemptions

None

14. Zero rates

Printing services for membership
publications of associations for the
public good are subject to zero rate

DIRECT TAX

15. General position

Generally subject to company tax (28%
of taxable income) on all their income;
liable to real estate tax on taxable value

of land and buildings

16. Recognition of associations for tax

purposes

According to the Income Tax Act, nonprofit associations (associations for the
public good) are liable to company tax
only on their income for business
activities, and communal tax (12,04% of

taxable income) on their income from
real property used for other than nonprofit purposes.

The National Board of Taxation may
grant exemption from tax on income
from business or real property if the
operation of associations is socially
significant

17. Criteria for recognition

Associations operate exclusively and
directly for the public good in a material,
spiritual or social sense; their activities
do not concern only a limited group of
persons; members must not get
economic benefits (shares of profit etc.)
from the operation

18. Qualifying objects for recognition

Dividends, interests and capital gains are
not subject to income tax unless the
property belongs to a business activity.
Business income does not contain, inter
alia:

    - sales proceeds, and other proceeds from
occasions arranged for financing the
operation of associations; proceeds from
membership bulletins and other
publications directly serving the
operation of associations

19. Gifts by individuals

Gifts given to non-profit associations are
not taxable income. Gifts are not

deductible in income taxation of

individuals

20 .Gifts by companies

Gifts given to non-profit associations are
not taxable income. In company
taxation, gifts are, within certain limits
(FIM 5000-150.000), deductible if given
for scientific or artistic purposes to
associations nominated by The National
Board of Taxation

20(a). Gifts to non-resident associations

ACCOUNTS AND AUDITING

21. Accounts

**74**

_FOUNDATIONS_ **TAX POSITION**

**22.** **Constitution** **28.**

**According to the Act on Foundations, as**
**amended in 1995, the establishment of a**
**foundation is subject to a permission**
**granted by the National Board of Patents**
**and Registration.** **29.**

**23.** **Basic definition**

**A foundation is established with a deed**

**of foundation which must include the**

**purpose of the foundation and its** **30.**
**property.**

**A foundation** **is governed** **by an**
**independent administration, the board of**
**which shall be set out in the by-laws of**
**the foundation**

**24.** **Nationality requirements**

**The members of the board of trustees**

**and the persons authorised to sign the**
**name of the foundation must be resident**

**in a member state** **of the EEA**

**Agreement. However, at least one of**
**those persons must be resident in**
**Finland, if the Ministry** **of** **Trade and**
**Industry has not granted an exception to**
**this requirement.**

**25.** **Acquisition of legal personality**

**Legal** **personality** **is** **acquired** **by**
**registration. Registration of** **a** **foundation**
**is compulsory.**

**26.** **Legal capacity**

**Full legal capacity as a legal person;**
**after a foundation has been registered, it**
**can** **acquire rights and** **undertake**
**obligations as well as sue and be sued in**
**its own name**

**27.** **Disposal of** **assets** **on liquidation**

**If the foundation, after its debts have**
**been paid, has assets and if the by-laws**
**do not provide for their use, they shall**
**pass to the State, which shall without**
**delay transfer the assets to be used to**
**further a purpose related to that of the**
**foundation**

**75**

**See references above to the tax position**
**for associations**

**ACCOUNTS AND AUDITING**

**Accounts**

**Foundation must have a minimum of**

**two auditors and two deputy auditors to**
**audit their accounts and administration**

**Auditing**

**The Ministry of justice ensures that the**
**administration** **of** **the** **foundation**

**complies with the law and the by-laws of**
**the** **foundation**

**SWEDEN**

_ASSOCIATIONS_

**LEGAL FRAMEWORK**

**1.** **Right of association guaranteed by law?**

**Yes.** **Chapter 2, Articles 2 and 20 in the**
**Constitution of 1974**

**2.** **Basic definition**

**An association (ïdeell** **fbrening")** **is a**
**legal person in which several persons act**
**together for a certain purpose. The**
**association may not have any economic**
**aims or at least no commercially**
**organised activity**

**3.** **Minimum number of founders**

**Not regulated**

**4.** **Types of association**

**Ideell** **fbrening** **which is not regulated by**
**statutory law**

**5.** **Membership nationality requirements**

**No special requirements**

**6.** **Legal personality and how acquired**

**The association is considered to have a**

**legal personality if** **there** **are statutes and**
**a board**

**7.** **Legal capacity**

**The association is able to acquire rights**
**and obligations, to sue etc., without any**
**special restrictions**

**8.** **Statutes**

**No,** **but the statutes have to be as**
**complete as necessary for the aim of the**
**association**

**9.** **Registration requirements**

**There are no general requirements. An**
**association with an economic activity**
**sometimes has to be registered in the**
**Trade Register**

**10.** **Commercial activities**

**In principle not allowed. The association**
**may, however, carry on some business**

**activity as** **long** **as it is not commercially**
**organised**

**11.** **Disposal of assets on liquidation**

**The assets are divided in accordance**

**with the statutes. If the statutes do not**

**regulate this matter, the assets may be**
**divided among the members**

**TAX POSITION**

**INDIRECT TAX**

**12-14 General position**

**Associations with charitable purposes**
**are generally not subject to indirect tax.**
**Other associations are subject to indirect**
**tax on the same conditions as other legal**

**persons.**

**DIRECT TAX**

**15.** **General position**

**Normally not subject to income tax or to**
**the** **net** **wealth** **tax.** **Non-profit**
**associations pay no income tax for**
**business with a natural connection to the**

**non-profit activity. Income from other**
**business activities are taxable.**

**19.** **Gifts by individuals**

**Gifts over 10 000 SEK are normally**
**subject to gift tax. With the exception of**
**religious communities and associations**
**serving educational, medical, national**
**defence,** **research,** **social** **work** **or**
**charitable purposes, the gift is not**
**deductible for the donor.**

**20.** **Gifts by companies**

**The same as 19.**

**ACCOUNTS AND AUDITING**

**21.** **Accounts**

**No special supervision for associations.**

_FOUNDATIONS_

**22.** **Constitution**

**All physical and legal persons can create**
**a foundation.**

**76**

**23.** **Basic definition**

**A property which according to the**
**dispositions of the founder (gift or will),**
**is singled** **out to be permanently**
**managed for a certain purpose.**

**24.** **Nationality requirements**

**None.**

**25.** **Acquisition of legal personality**

**A foundation has legal personality as**
**soon as it has been created, i.e. when the**
**property has been transferred to the**
**separate management.**

**26.** **Legal capacity**

**27.** **Disposal of assets on liquidation**

**In principle, a foundation cannot be**
**liquidated as long as it has assets.**
**However, in special cases the assets may**
**be used for a purpose which is very**
**close to the original purpose. A special**
**permit of a governmental authority is**
**required for such a procedure.**

**TAX POSITION**

**28.**

**Foundations serving national defence,**
**educational,** **medical,** **social** **work,**
**research or charitable purposes are only**
**taxable for business income.**

**Foundations with a non-profit purpose**
**are not subject to gift tax. Gifts are not**
**deductible for the giver.**

**Foundations are subject to indirect tax**
**on the same conditions as other legal**

**persons.**

**ACCOUNTS AND AUDITING**

**29.** **Accounts**

**30.** **Auditing**

**Foundations are generally supervised by**
**a local government authority.**

**77**

**UNITED KINGDOM**

_**ASSOCIATIONS**_ _**(Voluntary**_

_**Organisations)**_

LEGAL FRAMEWORK

1. Right of association guaranteed by law?

There is no written right to associations
although there exists freedom of
association. There is a freedom to create

trusts although in some cases trusts with
non-charitable objects may be void.
2. Basic definition

There is no single generally accepted
legal definition of an association. In its
widest sense, an association is one
formed by two or more people who of
their own volition join together in a
common purpose which is not in pursuit
of financial gain.

3. Minimum number of founders

In practice two.

4. Types of association

Unincorporated associations

Trust

Company limited by guarantee

Industrial and Provident society

Incorporated by Royal Charter

Incorporated by Act of Parliament.

5. Membership nationality requirements

No requirements for associations as
such. In the case of a charity in England
and Wales, the Charity commission will
only register if within jurisdiction. This is
normally construed to mean that in the
case of an unincorporated charity a
majority of the trustees should be
resident in England and Wales, in the
case of a company registration within the
jurisdiction is sufficient.

6. Legal personality and how acquired

Company limited by guarantee-obtained
by registration with register of
Companies.

Industrial & provident Society-obtained
by registration with Registrar of Friendly
Societies.

Incorporated by Royal Charter-obtained
through Royal Charter.,

Incorporated by Act of
Parliament-obtained through Act of
Parliament.

Unincorporated associations-No.

Trust no; however, the body of trustees
can obtain legal personality through
Certificate of incorporation issued by
Charity Commission.

7. Legal capacity

There are no restrictions in statute;
however, in some areas capacity will be
derived from the objects and powers
included in the governing document.

8. Statutes

No.

9. Registration requirements

Registration with the Charity
Commission for charities in England and
Wales. For other associations,
registration will depend on the legal
structure. Registration with the Registrar
of Friendly Societies for Industrial and
Provident Societies, registration with the
Registrar of Companies for companies
limited by guarantee.

10. Commercial activities

There is a restriction on the commercial

activities of charities. They can engage
in primary-purpose trading but not in
permanent trading as a means of fundraising. Charities that wish to trade to
any substantial degree must set up a
separate trading subsidiary which can
then covenant its profits back to the
parent charity and the tax can be
recovered.

**78**

**11.** **Disposal of assets on liquidation**

**In** **associations,** **this** **will** **be** **in**
**accordance** **with** **the** **governing**
**document.**

**In the case of** **charities,** **to other charities**
**with similar purposes. If the governing**
**document does not include provisions**
**dealing** **with** **this,** **the** **Charity**
**Commission may give directions by**
**Order or Scheme.**

**TAX POSITION**

**INDIRECT TAX**

**12.** **Article** **13** **of** **Sixth** **VAT Directive**

**Not all exemptions of relevance**
**charities have been implemented.**

**13.** **Other specific exemptions**

**to**

**corporation tax,** **capital** **gains tax,**
**inheritance tax.**

**17.** **Criteria for recognition**

**To qualify for the exemption, the income**
**or gains must be applied to charitable**
**purposes only and trading income other**
**than primary-purpose trading will often**
**be subject to corporation tax.**

**18.** **Qualifying objects for recognition**

**19.** **Gifts by individuals**

**When an individual or corporation**
**executes a deed of covenant promising**
**to pay a particular sum to a charity for a**
**period to exceed three years, a sum**
**representing tax at the basic rate must be**
**deducted and the Inland revenue refunds**

**to the charity the basic rate of income or**
**corporation** **tax** **on** **that** **sum.**
**Additionally, if the individual is a higher-**
**rate tax payer, he can receive further tax**
**relief trough the adjustment of his tax**
**code. A company can claim a deduction**
**from its profit for the gross amount, and**
**obtains tax relief** **at** **its marginal rate.**

**Similarly, since 1990 individuals have**
**been able to make one-off payments**
**under Gift Aid. Currently the minimum**
**donation is £250 in monetary form**

**20.** **Gifts by companies**

**20(a).** **Gifts to non-resident associations**

**ACCOUNTS AND AUDITING**

**21.** **Accounts**

**(a) The** **supply** **of** **education** **or**
**vocational training otherwise than** **for**
**profit.**

**(b) The provision** **of nursing and**
**medical care in an approved institution.**

**(c) The provision of welfare services**
**otherwise than for profit.**

**(d) Fund-raising events.**

**14.** **Zero rates**

**These include sales of donated goods,**
**supply of advertising for fund-raising or**
**educational purposes, certain aids for**
**disabled people, vehicles and ambulances**
**for disabled people, certain medicines**
**and medical equipment supplied to**
**charities. Construction of** **new** **residential**

**property and buildings used for a certain**
**charitable purposes are zero rated.**

**DIRECT TAX**

**15.** **General position**

**No specific exemptions for associations**
**as such.**

**16.** **Recognition** **of** **associations** **for tax**

**purposes**

**Charities are exempt from most forms of**
**direct taxation including income tax,**

**79**

**Financial Statement**

**1.** **TITLE OF OPERATION**

Communication from the Commission on Promoting the Role of Voluntary
Organisations and Foundations in Europe.

**2.** **BUDGET HEADING INVOLVED:** **B5-3202**

**3.** **LEGAL BASIS**

Council Decision of 9 December 1996 on a Third Multi-Annual Programme for Small
and Medium sized Enterprises in the European Union 1997 - 2000.

**4.** **DESCRIPTION OF OPERATION**

Expenses incurred in connection with meetings of experts and information campaigns
with a view to defining future approaches on the role of associations in the European
Union.

4.1 Period covered and arrangements for renewal

The meetings of experts and information campaigns will be for the period of 1997 only.

**5. CLASSIFICATION OF EXPENDITURE OR REVENUE**

**5.1** NCE

**5.2** **DA**

**<Pz)**

A small proportion (meetings of experts and information ) is 100% financed.

The other subsidies for cofmancing with other resources in the public and/or private
sectors will be adjusted in accordance with Community interests.

Conventional subsidies for colloquia, seminars and round tables are allocated at
particular percentage rates, depending on the needs of the organizers and the importance
of the event as regards the _économie sociale_ sector

**7. FINANCIAL IMPACT**

There will be a series of meetings and conferences in 1997. Total costs 100.000 ECU

```
 8. FRAUD PREVENTION MEASURES; RESULTS OF MEASURES TAKEN

```

Bearing in mind contractual obligations and the principles of economy and sound
financial management, all agreements and contracts between the Commission and the
recipients of payments include anti-fraud provisions (monitoring, reports to be submitted,
etc.) for checking subsidies and acceptance of services and studies ordered by the
Commission before payment.

**9. ELEMENTS** **OF** **COST-EFFECTIVENESS** **ANALYSIS** **FOR** **THE**

**COMMUNICATION** **ON** **VOLUNTARY** **ORGANISATIONS** **AND**

**FOUNDATIONS**

9.1 Specific and quantified objectives; target population:

The establishment of a co-ordinated policy for networks of European voluntary
organisations and foundations.

An information network on the _économie_ _sociale_ (European citizens' advice
bureaus) has been set up by the European Committee of Workers Cooperative
Productive Societies, the Euro-Citizen Action Service, the Comité Européen des
Associations d'Intérêt Général and the European Foundation Centre in order to
meet the need for enterprises in the _économie sociale_ sector to interact with the

##### **_fl_**

Community's business community via the European Euro-Info Centres network
(the network for networking);

9.2 Justification:

It is necesssary to discuss with the Member State governments and voluntary
organisations (associations) and foundations how best to implement the policy
recommendations set out in the document.

9.3 Monitoring and evaluation of the operation

The voluntary organisations and foundations sector is highly diversified.

This situation calls for great attention at the preparatory stage of the proposed
actions so as to strike the right balance between perceived requirements and
resources employed.

When the actions are launched, the indicators will be proposed in accordance
with the specific features of the action on the basis of a standard fact sheet to be drawn up
by the departments. This fact sheet must take account of the eligibility criteria for the
various funds and sources of finance.

_Assessment of the results obtained_

The scheduled actions are of prime importance, since they must enable
associations and foundations to take advantage of the benefits of the
frontier-free Single Market while complying with competition rules and without
sacrificing their identity as partnerships. The results will be assessed, for
example, on the basis of the objectives for each action in the light of the
European aspects identified on the ground, and of the difficulties encountered
by _économie sociale_ businesses, because of their involvement in local
developments, in using the Structural Funds correctly and to the full.

10 ADMINISTRATIVE EXPENDITURE (SECTION III, PART A OF THE BUDGET)

#### **_s-z_**

```
Actual mobilization of the necessary administrative
resources will depend on the Commission's annual
decision on the allocation of resources, taking into

account the number of staff and additional amounts

authorized by the budgetary authority.

 10.1 Effect on the number of posts

```

```
Type of p ost

```

```
Staff to be

assigned to
managing the
operation

Permane Temporar

nt y posts

posts

1

1 x A

1

```

```
Source

Existing

resource

s in the

DG or

departme

nt

concerne

d

1

1

```

```
Duratio

n

12

months

```

```
Official

s or

temporar

y staff

```

```
A

B

C

```

```
Additio

nal

resourc

es

no

```

```
Other

resources

  Total

```

```
The cost of a staff member

100.000 ECU.

```

```
;A1 to A5 level) is estimated at

# **_n_**

```

```
   10.2 Overall financial impact of additional human

      resources

                              ECU

               Amount Method of calculation"

               s

Officials

Temporary staff

Other resources (indicate none

budget heading)

           Total none

      10.3 Increase in other administrative expenditure
      as a result of the operation

                              ECU

Budget heading Amount Method of calculation

               s

          Total none within existing budget

```

### **_W_**

ISSN 0254-1475

###### COM(97) 241 final

## DOCUMENTS

EN 05 06 10 16

Catalogue number : CB-CO-97-282-EN-C

ISBN 92-78-21231-8

Office for Official Publications of the European Communities

L-2985 Luxembourg