There comes a time that you as company would like to give back. Giving back most of the time involves charity events. Unfortunately the Dutch tax office does not share the giving back philosophy, hence a tax return on the yield due to charity events is taxed.
How to avoid taxation on charity donations?
The answer could be in an ANBI status. ANBI is short for Algemeen Nut Beogende Instelling. I think we will keep it to ANBI in this article, but the English translation is Public Benefit Organization.
If you have for instance a foundation and at least 90% of the efforts are focused on the general good, you could qualify. The ANBI cannot be a BV company or other legal entity with a share capital, neither can the board of the ANBI use the funds as if the assets in the ANBI were their own.
You might have learned that Mr Facebook Zuckerberg donated 99% of his shares to charity. Actually it is of course a charity organization owned by himself. Then again, for the Dutch ANBI status you cannot use the money in the organization as if it was your own. That aspect might make his new charity organization not meet the Dutch ANBI requirements.
What is the effect of an ANBI status?
The ANBI status implies that you can raise money for the projects done by your ANBI organization. The income generated due to anything your organize to raise the money is not taxed.
Moreover, a private individual can donate to this ANBI foundation and claim a gift deduction in the income tax return if the total of the calendar donations exceeded the 1% of the total (both tax partners) taxable income, with a maximum of 10% of the taxable income.
Companies can make a donation to an ANBI foundation and deduct the donation from the company’s profit when the donation does not exceed 50% of the profit with a maximum amount of EUR 100.000 per tax year.
If the ANBI is regarded a cultural ANBI, then the company can deduct 50% more from the company’s result that actually was paid. However, this increase of deduction is maximized at EUR 2.500. I think it is strange that the corporate tax legislation is generous to have a company donate EUR 100.000 max, but the cultural increase is limited to EUR 2.500. That should be EUR 50.000 as well in my opinion.
What can go wrong?
The ANBI status is obtained by completing the ANBI request form. If you point out in the form that your activities are at least 50% for the Public Benefit, the ruling is issued to you. Unfortunately the oldtimer museum must have misinterpreted this question on the form as they do not spend at least 50% of the activities on the Public Benefit. The ANBI status was applied for in 2008 and granted. Only in 2011 the tax office discovered that the oldtimer museum did not comply from the start in 2008 with the ANBI requirements. Hence the Dutch tax office retro actively rejected the ANBI to 2008. The oldtimer museum apparently made a complaint as the court decided last month that the tax office was correct. If the organization was not in fact an ANBI, the organization was not an ANBI. Hence the status should be seen as never issued, therefore the retroactive effect was correct.
How to do it right?
If your organization is not for 50% focused on charity and to be frank, you need to have a salary from your organization, you do act as if the money is yours, because it is and your organization has a share capital, we recommend to set up a foundation next to your company. That foundation then meets the requirements to become an ANBI foundation. Your company makes donations to your ANBI foundation, which results in a tax deduction in the company which is not taxed in the ANBI foundation and you can use the money for the Public Good.
Orange Tax Services
We will be glad to assist you in the set up of the foundation, the request for the ANBI status and the compliance during the ANBI period of the foundation. Please contact us.