COMMUNICATION FROM THE COMMISSION

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PROMOTING THE ROLE OF VOLUNTARY ORGANISATIONS AND FOUNDATIONS IN EUROPE II. SCOPE I INTRODUCTION Voluntary organisations PURPOSE 2 Of the three sectors - co-operatives, 1 This Communication concerns one sector mutual societies, and voluntary organisations - of the social economy in the European which go to make up the social economy, that Community - that of voluntary organisations and foundations. These organisations are playing an of voluntary organisations is by far the most important role in almost every field of social difficult to delimit or define. activity. They contribute to employment 2.1 At their most basic, voluntary creation, active citizenship, democracy, provide organisations are simply groups of people who a wide range of services, play a major role in have come together for some purpose or other. sport activities, represent citizens’ interests to 2.2 At one end of the spectrum, the world of various public authorities and play a major part voluntary organisations merges imperceptibly in promoting and safeguarding human rights as into the tissue of everyday social, community, well as having a crucial role in development and family life; at the other end can be found policies. great institutions of enormous national and even international importance such as universities, 1.1 Over the years they have made an hospitals, research and cultural institutions, increasing contribution to the development of which many people are accustomed Europe which is something that should be (erroneously) to think of as straightforward encouraged and developed. "public" bodies. Others, in contrast, have hundreds of professional staff, thousands of 1.2 Given this importance, the European volunteers and a turnover of many millions of Commission carried out an extensive survey in ECU’s. Very many voluntary organisations order to gain a better knowledge of the sector work closely with public authorities in and to identify issues to be addressed. The conventional spheres like social work; others results of the survey are given in Annex 1. maintain a strong tradition of complete independence and are concerned with radical 1.3 The aim of the document is to illustrate social programmes or "alternative" lifestyles. the growing importance of the sector within the European Union, to show what problems and 2.3 There is, however, some agreement that challenges these organisations are facing and to voluntary organisations share to varying degrees open up a dialogue on the basis of a set of ideas, the following features: in order to favour their development at a) they are distinguished from informal or ad European and national level, to improve their hoc, purely social or familial, groupings by some capacity to meet future needs and maximise degree, however vestigial, of formal or their contribution to European integration. institutional existence. (b) they are non-profit-distributing, that is 1.4 This document presents a series of to say they have purposes other than to reap measures which could be taken at Member State profits for their management or members. level, but does not seek to impose on Member States specific solutions or actions. It is up to (c) they are independent, in particular, of individual Member States to take on the government and other public authorities, that different issues as they see fit. However, is to say free to govern themselves without conforming to the principles of subsidiarity and interference according to their own rules and proportionality there are some objectives which procedures. can be dealt with at Community level. These (d) they must be managed in what is ideas are outlined in the “Conclusion”. sometimes called a "disinterested" manner. The 1 use of this term is meant to indicate not just that 3.1 For present purposes foundations are thus voluntary organisations must not themselves be bodies with their own source of funds which profit-seeking, but also that those who manage they spend according to their own judgement them ought not to do so in the hope of personal on projects or activities of public benefit. They gain. are entirely independent of government or (e) they must be active to some degree in other public authorities and are run by the public arena and their activity must be independent management boards or trustees. aimed, at least in part, at contributing to the Types of voluntary organisation public good. 4 Voluntary organisations and foundations 2.4 The degree to which particular voluntary are difficult to categorise and define. Part of the organisations share the above five features will difficulty at the European level lies simply in the vary considerably. Deciding, for example, different national traditions which they reflect, whether a voluntary organisation is indeed and their strong tendency to combine several independent is not easy, and the notion of the different objectives. Most voluntary "public good" is bound to be controversial. The organisations and foundations can, however, be definition does, nonetheless, offer a degree of considered as having one or more of the coherence in a complex area. following functions: 2.5 This paper deals with all organisations (a) Service delivery or provision to provide to which share, to some degree, the above five their members or clients services such as social features. However, three very specific kinds of services, health care, training, information, organisation have been consciously excluded. advice or support. These are political parties, which can be (b) Advocacy: i.e. organisations whose voluntary organisations but are clearly a special purpose is to campaign, lobby, and otherwise case; religious congregations (that is, in the argue on behalf of some cause or group with the strict sense, and not excluding organisations of aim of changing public perception or policy. religious inspiration active in work of general (c) Self-help or mutual aid: organisations public benefit); and trade unions and employers’ typically formed by groups of individuals with organisations. some common interest or need in order to Foundations provide mutual help, information, support and cooperation. 3 Like voluntary organisations, foundations (d) Resource and co-ordination: so-called also undertake a wide range of activities. In "intermediary bodies" which co-ordinate the some countries the foundation is frequently the activities of, or provide information and support preferred vehicle for pursuing purposes to, either individual organisations working in a indistinguishable from those typically pursued in particular field or to the sector in general. Such other countries by voluntary organisations. organisations fulfil the important function of From the legal point of view, however, providing an interface between the sector and foundations form a more homogeneous group public authorities. than do voluntary organisations, the only 4.1 Many voluntary organisations and important distinction being between those that foundations are, of course, national and even are for essentially private, and those that are for international in scope. The great majority, essentially public, benefit. It is foundations however, carry out their activities in regions or which have some public purpose (even while localities. In general, the narrower their remaining private bodies) which are the focus of geographical focus the greater the range of this Communication. functions voluntary organisations tend to fulfil and the more difficult it is to separate these

2 functions one from another. Throughout Europe significant has recently been revealed by the there are hundreds of thousands of autonomous results of the first rigorous comparative survey local groups working at the level of the of the sector in four Member States (the United neighbourhood, city quarter, village, or small Kingdom, France, Germany and Italy) directed rural area, whose aim is to improve the quality by the Johns Hopkins University, Baltimore1. of life for the local community. Such These results are of considerable interest. organisations in effect simultaneously fulfil, 6.2 The study found that: typically in an informal way, all the functions in Germany the sector accounts for 3.7% of described above - providing services and mutual total employment and 10% of total service support, drawing attention to the needs of the employment. That is no less than a million community or of particular groups within it, and people. The non-profit sector is especially providing a mechanism through which the important in health: 40% of the hospital patient community can make its aspirations known to days are provided by the sector, as are 60% of public authorities. the residential care facilities. The legal and fiscal framework for in France 4.2% of the employed work in the Voluntary Organisations and sector or over 10% of the total employed in the Foundations service sector. In all some 800,000 people are employed. Non-profit organisations look after 5 The importance of having clear, positive over half of those in residential care and about legal and fiscal frameworks for voluntary 20% of primary and secondary school students. organisations and foundations to work in cannot Non-profits are especially prominent in social be underestimated. Organisations find it services and in sport where 80% of those with difficult to develop their work when such sporting interests belong to non-profit clubs. frameworks do not exist, whether they be at national or European levels. Annex II gives an in Italy nearly 2% of the employed work in the overview on the way that legal and fiscal sector or over 5% of those employed in the frameworks for the sector are based in the service sector. In total the sector, which is European Union. prominent in social services, employs about 400,000 people. Non-profits run 20% of kindergartens and over 40% of residential care facilities. III. THE ROLE AND IMPORTANCE OF In the UK 4% of the employed work in the VOLUNTARY ORGANISATIONS AND sector or over 9% of those in the service sector. FOUNDATIONS Altogether about 900,000 people are employed in the sector, which plays an especially 6 It is clear from the results of the important role in the provision of research and Commission’s survey that voluntary education: - all colleges are run by non-profits, organisations and foundations, though often as are 22% of primary and elementary schools. very small, together command sizeable assets and mobilise large human resources, both salaried and volunteer. Like other forms of 6.3 Finally, the combined expenditures of the enterprise, and particularly small and medium sector in these countries was no less than 127 sized enterprises, many voluntary organisations billion ECU (17 billion in Italy, 31.3 billion in and foundations are also economically active - France, 36.6 billion in the UK and 42.2 billion in they sell products, provide services for which Germany). they are paid, and generate surpluses which are then reinvested. 6.1 The contribution of the sector to the 1 Published in 1994. economy is very considerable indeed. Just how 3 The figures for non-profit operating 6.8 Throughout the Community many expenditures as a percentage of gross voluntary organisations and foundations are national product are no less impressive: 2% engaged in the training and retraining of the in Italy; 3.3% in France, 3.6% in Germany; unemployed, sometimes as providers of and 4.8% in the UK government programmes but often on their own 6.4 Moreover it is in terms of employment account, as well as providing services for less growth that the most interesting facts of all favoured people - for people with disabilities, emerge. What the study found - in any event in for alienated youth, for those who for one France and Germany where figures were reason or another have repeatedly failed to gain available - was that over the decade from 1980 a hold in the job market . to 1990 the sector has been a powerful creator 6.9 Voluntary organisations and foundations of employment. In France the sector accounted also give valuable training to numerous for one out of every seven new jobs created in volunteers, many of whom later find that decade and in Germany one out of every employment on the conventional jobs market as eight or nine. This is a very significant finding a result of the experience and expertise they indeed. have acquired. Volunteering is also for many 6.5 These figures should not, perhaps, come people an invaluable means of preserving the as a complete surprise, given the growth of the work habit at a time when, particularly for the sector in the recent past and the reasons which long term unemployed, maintaining an ordered seem likely to be behind it (see paragraphs I.4 interest in their lives may be very difficult. The and I.5 of Annex I). Some of these reasons are voluntary sector is likely to provide enriching likely to be historical or to have been specific to opportunities for new experiences aiming at particular Member States. Other factors, gaining social skills which will enhance however - the discovery of new needs and the employability and moreover, the feeling of development of new social preoccupations, and belonging and citizenship among young people. above all the tendency of governments to The European Voluntary Service deals with this engage voluntary organisations and foundations issue and provides an educational experience in the delivery of services of which they based on the active involvement of young themselves were formerly both designers and people in a local project. Volunteering is also providers have been increasing throughout the very important for older retired people who are Community. looking to continue to use their skills and maintain an active role in society. 6.6 But such policy developments have not developed evenly in all the Member States. The Social importance extent to which they have been accompanied by clear constitutional or administrative changes 7 There are no accurate figures of knowing designed to favour the involvement of voluntary how many persons in the Union are members of organisations and foundations has varied. . voluntary organisations but, on the basis of 6.7 The figures demonstrate clearly that the some Member States’ estimates it is commonly sector has shown itself capable of opening up reckoned to be somewhere between a third and new opportunities contributing not just to a half of the population, approximately a improving the quality of life but also hundred million. employment and economic growth. It is for this reason that the sector should be 7.1 Historically the influence and encouraged to play a bigger part in the quest achievements of voluntary organisations, and for job creation as stated in the their sister organisations foundations, would “Employment Pact”, for example in the be difficult to overestimate. It is to voluntary context of Local Employment Initiatives. organisations and foundations to which we owe the origins of many of the services such as 4 education, health and social services which we the political, social and intellectual climate in take for granted today. Their contribution to the which change comes to be seen as desirable development of social and political ideas, and to on a wider scale. the intellectual climate in which we now live, has been similarly immense. Voluntary organisations and foundations have played a Political importance - Citizenship vital role in the dissemination of scientific ideas and of technological developments and have 8. For many people, membership of, or provided forums for the exchange of thinking volunteering for, voluntary organisations and across the whole range of human concerns. foundations, provides a vital means through They have led the fight for the recognition of which they can express their sense of human rights and the dignity of the human citizenship, and demonstrate an active concern person, and for the preservation of our cultural for their fellows and for society at large. heritage and of the natural environment. Many 8.1 The part that voluntary organisations play promote a spirit of solidarity on behalf of the in strengthening a sense of citizenship and less favoured, the sick or people with providing a means for its expression is of disabilities, the poor and the excluded, the aged growing importance at the European level. and the young, and between those who have Indeed, they have an active part to play in jobs and those who do not, between men and creating a sense of European citizenship as women, between generations, between the more mentioned in Article 8 of the Treaty on prosperous regions and the poor or struggling European Union. Voluntary organisations and regions. Voluntary organisations make foundations have long fostered international important contributions to the fight against contact and understanding between peoples and social exclusion, sexual exploitation of women are now showing a keen interest in the part and children, as well as racism and xenophobia. citizens have to play in the forging of the They have played a major role in the European Union and in giving substance to the mobilisation of public opinion in favour of citizen's Europe. Their experience and basic development, promoted democracy, and have philosophy, together with their growing established privileged links with the organisation at the European level, fit them well representatives of civil society in the developing for this role. countries, as well as providing much needed Political importance: emergency help and food aid in times of crisis, Promoting Democracy often showing heroism working in troubled regions. 7.2 Today voluntary organisations and 9. Voluntary organisations and foundations are active in every conceivable field foundations foster a sense of solidarity and of of human interest or endeavour and their citizenship, and provide the essential contribution to the welfare and development of underpinnings of our democracy. In the light our societies and to our diverse cultures remains of the challenges now facing the European as essential as it has ever been, especially in Community, and indeed in the different view of the process of European integration. At countries of Central and Eastern Europe, the same time they continue to innovate, to these functions have never been more vital. discover new needs and to experiment with 9.1 There is no doubt that voluntary ways of responding to them. organisations and foundations make a profound In this way voluntary organisations and and indispensable contribution to the democratic foundations continue, as they have always life of Europe. Indeed, the existence of a well- done, not just to provide the seed bed or developed association and foundation sector is "gene pool" from which future social and an indication that the democratic process has other policies may eventually grow but also 5 come of age. For many people participation in a Mutuals, Associations and Foundations. DGX voluntary organisation may be their only in particular looks to the voluntary sector to experience of democratic processes outside of disseminate information on European issues to the normal electoral framework. the citizens. 9.2 Their contribution to the effectiveness with which representative democracy functions NGOs are involved in a significant number of should not, however, be underestimated. Above research projects funded within the 4th all, they now play an essential part as Framework Programme (1994-1998). The intermediaries in the exchange of information targeted Socio-Economic Research Programme and opinion between governments and citizens, widely covers the issue of the role of the sector providing citizens with the means with which in the economy and its importance for social they may critically examine government actions cohesion. It is intended to put even more or proposals, and public authorities in their turn emphasis on this topic within the 5th with expert advice, guidance on popular views, Framework Programme (1999 - 2002). and essential feedback on the effects of their The European Parliament also relies on a large policies. number of voluntary organisations in order to obtain information and views on a wide range of 9.3 That voluntary organisations and issues. The heterogenity of the sector is valued, foundations are important to the democratic in particular, for its knowledge and experience process does not mean that they could ever take of social policy, environmental, aid and on the role occupied by elected representatives. development issues and for providing a vital link There are, indeed, some dangers in the sort of with citizens in their localities, especially to "single issue" lobbying which some voluntary those most vulnerable in society. organisations tend to espouse. Their preoccupation with particular causes or with 9.5 The increasingly pivotal role the particular individuals or groups can make them voluntary sector plays in a wide range of issues unjustifiably impatient with the balance between central to the construction of Europe, including competing interests which all democratically in particular, in many Member States, in the elected governments seek to achieve There is a management and delivery of key aspects of need for greater understanding about the social welfare services, has been acknowledged constraints of policy decision making. and reflected in the Commission’s main statements on social and employment policy, for IV THE SECTOR AND THE EUROPEAN instance in the Green and White Papers on INSTITUTIONS WORKING TOGETHER Social Policy and the White Paper on Growth, Competitiveness and Employment.

9.4 The European Institutions have a long 9.6 However, for many years the contacts history of contacts and informal consultation between the European Institutions and the with the voluntary sector. This is the case with voluntary sector took place on a completely ad many of the European Commission’s services, hoc basis and it was not until the Treaty of the such as DGIB, DGVIII with Development European Union, in 1992, that the importance Agencies and ECHO which have achieved an of links with this sector was first formally experience of particular interest in their expressed in the creation of Declaration 23 2 cooperation with humanitarian aid NGOs, DGV which is annexed to the Treaty. and the platform of European Social NGOs arising out of the Social Forum, DGXI and environmental organisations, DGXXIII and the Consultative Committee for Cooperatives, 2 Declaration 23 states: “The Conference stresses the importance, in pursuing the objectives of Article 6 9.7 A high level of political commitment exists -to disseminate information from the at European level to ensuring that more European level down to the local level so that systematic consultation with the voluntary citizens are aware of developments, can feel part sector is instigated, as regards both the of the construction of Europe and can see the development and implementation of policy, relevance of it to their own situation, thus commensurate with their increasingly important increasing transparency and promoting role, especially in social policy, in the Member citizenship. States3. · the creation in 1995 of a Platform of Subsequent to the creation of Declaration 23, a European social NGO’s, representing a large number of developments have taken place which number of organisations, in order to assist in moved forward the process of consolidating co- the preparation of the European Social Policy operation with, and instigating more systematic Forum and to facilitate the development of civil consultation of, NGO’s and other voluntary dialogue. sector organisations. Key amongst these developments were: · the setting up of a “Comité des Sages” in 1995 to prepare a report on fundamental rights · the holding of the first European Social to be discussed at the Social Policy Forum with Policy Forum in March 1996, which brought a view to it providing an input to the IGC together over 1000 participants mainly from discussions on the revision of the EU Treaty. NGOs, on the eve of the beginning of the Intergovernmental Conference. This saw the This report which advocated a Europe of civic launch of a new policy objective: the building and social rights has also sparked off a over time of a strong civil dialogue at European Europe-wide debate through a series of national level to take its place alongside the policy seminars involving, in particular, the voluntary dialogue with the national authorities and the sector and the Social Partners. social dialogue with the Social Partners. It is intended that the Forum be held every two · the creation, in 1997, of a new budget line, years. B3-4101, to promote co-operation with NGO’s and other voluntary sector This emerging civil dialogue has two main organisations and to strengthen the capacity aims: of these organisations to engage in civil dialogue at European level; -to ensure that the views and grassroots experience of the voluntary sector can be 9.8 In the context of the preparations for the systematically taken into account by policy IGC an ongoing dialogue was developed makers at European level so that policies can be between the sector, the Commission and the tailored more to real needs, and; European Parliament.

Important issues relating to the sector have been 117 of the Treaty establishing the European discussed in the framework of the IGC. These Community, of cooperation between the latter and include: charitable associations and foundations as institutions responsible for welfare establishments - a legal base for regulations concerning and services”. associations at European level 3 It should also be noted that the Commission has had a long standing dialogue with the sector in other - a legal base for incentive measures both in areas such as with Development NGOs through the employment and the social field EC-NGO Liaison Committee which receives 90% of its funding from the Commission.

7 - the integration of Declaration 23 into the The European Commission is also working Treaty and specific provision for the closely with NGOs in the fight against sexual consultation of, and dialogue with charitable exploitation of children and women. associations and foundations on all policy matters which concern them The Commission would like to see its cooperation with the sector developed - a modification of Article 8a to take (by further in view of deepening European co-decision) measures to facilitate freedom of integration. Proposals to this end are made circulation. in the “Conclusion”.

The Commission intends to make relevant V PROBLEMS AND CHALLENGES proposals according to the outcome of the IGC. FACING THE SECTOR

With regard to future progress, in order to 10. Voluntary organisations and Foundations retain the maximum amount of creativity and are working under enormous pressure and free expression, it is important not to over- within a constantly changing environment. In bureaucratise or institutionalise consultation of some cases organisations are taking on the the voluntary sector and to strive instead for a running of services that were hitherto provided flexible but systematic approach in developing by the public authorities. However, there are the civil dialogue and relations between the very real problems and challenges facing the voluntary sector and the European Institutions sector in the way that it can respond to which takes full account of the principle of providing these new services. Organisations subsidiarity and of the specificities of each which have traditionally played the role of Member State. providing a back up for state run services, suddenly find themselves having to run those 9.9 The Commission has also attempted to services themselves. This may mean completely open up a wide range of funding programmes to new staffing arrangements, new management the sector. This includes the Structural Funds, structures and needs, a complete change in the the PHARE and TACIS programmes for financing of the organisation, a change in the Central and Eastern Europe, the Leonardo da way that it works with the public authorities, Vinci Programme, Declaration 23 and the new and indeed with other voluntary organisations Third Sector and Employment budget lines, the and foundations. How will the organisation be SME and Social Economy budget lines, as well resourced? Will funding come from public as the European Voluntary Service Programme authorities in the form of long term grants or which encourages transnational volunteering, short term contracts: indeed, will there be the EDF for cooperation and development with enough funding? Will an organisation be able to the LOME countries, and specific budget lines increasingly draw on support from the public for external actions, in particular cooperation (individuals) or the corporate sector? This with the ALAMED countries, to name but a change may also mean a major rethink in the few. raison d’être of an organisation. Should an It is estimated that overall some 800 million organisation which was set up to promote the ECU (of which 196 MECU is in the form of co- needs of specific parts of the population (people financing) annually of EU development with disabilities, the socially excluded, ethnic assistance is channelled through NGOs and the minorities, etc.,) and to provide some back up Commission looks to the sector in many policy services, be asked to suddenly take on the issues towards developing countries. running of the mainstream service itself? 10.1 These are all areas that have major implications for organisations in the way that

8 they are resourced and trained, and public consciousness amongst voluntary organisations authorities should be aware of the importance of and foundations themselves. giving voluntary organisations and foundations 10.4 The urgent need now is for public the resources and time to be able to adapt to authorities to complement their "vertical" new needs. approach and to begin to look seriously at "horizontal" issues affecting the sector as a 10.2 Despite their increasing reliance on whole with a view to developing appropriate foundations and voluntary organisations to policies. At the same time, the public role of carry out a wide range of functions, public voluntary organisations and foundations authorities have not on the whole needs to be acknowledged and the acknowledged their responsibility to ensure acceptance of the sector as a full partner in that the sector is as well placed as possible to the debate on all policy and implementation make its distinctive contribution to the matters which concern them, needs to be public good. The result is that in many actively encouraged at all levels. Member States the sector, as a sector, operates in what amounts, at least in strategic terms, to a policy vacuum. This lack 10.5 Over the past ten years the amount of of a coherent framework of public policy has transnational work done by voluntary inhibited it from contributing, to the organisations and foundations has increased optimum extent possible, to the solution of dramatically. This is due to a growing number the problems which we face. It is time this of European funding programmes being opened was remedied. up to the sector which encourage transnational collaboration, and an expanding number of organisations who are interested in developing 10.3 One of the greatest problems facing policy their services in other countries. makers is the present serious lack of information about the sector. In an important sense, policy- 10.6 There is also a large and continuously making has also been inhibited by the structure growing number of European-wide federations of government itself, and in particular by the or networks of voluntary organisations and habit of public authorities of relating to foundations. Some, such as the Red Cross associations and foundations as suppliers of Liaison Committee, act as a co-ordinating services to particular client groups or as organisation for individual national interlocutors in particular subject areas. Social organisations which share the same aims and service departments have contact with objectives, as well as the same name. Others organisations supplying social services, such as the European Foundation Centre or environment departments with those active in CEDAG (the European Council for Voluntary the environmental field, and so on. Over a Organisations) act as a focus point for lobbying period of time, such departments and their the public authorities on behalf of the sector, officials can acquire a close and detailed and providing and developing examples of good knowledge of the particular organisations with practice within their - often - diverse which they deal. Within government as a whole, membership. however, such knowledge as departments may acquire remains fragmented. For the most part it 10.7 There are also many development and is rare for public authorities to have an overview emergency aid agencies which have a long of the sector as a whole or of its needs, or of tradition in working overseas, but which are significant developments within it. The same working more and more together at a European phenomenon has no doubt also been one of the level and with the European Commission. factors which in a number of Member States has Indeed, the EC-NGO Liaison Committee of inhibited the growth of a "broad sectoral" Development NGOs works closely with DGVIII

9 (Development), with ECHO, DGIB and with European funding. They may also have other Dgs of the European Commission. difficulties with Member States which are reluctant to allow voluntary organisations and 10.8 The ability of voluntary organisations to foundations access to specific European funding make their full contribution in transnational programmes in which the Member States have activities in the social and employment field has a decision-making role. been limited by the suspension of some European programmes since 1995 pending a * difficulties finding matching funding for European Court of Justice ruling on the legal projects which are co-financed through basis of such measures. In its proposals to the European funding programmes IGC, the Commission has endeavoured to remedy this by proposing a legal base for the Matching funding for projects often comes transfer of best practice, networking and from public authorities who may be putting exchange of experience on a transnational basis forward their own rival bids, or not be interested in such fields as the fight against social exclusion in supporting the project. and the promotion of equal opportunities and the combating of discrimination on the grounds * over-dependence on European of gender, disability, race or age. This would Community Funds leading to difficulties in enable the Community to adopt such incentive forward planning and continuity of measures as have already been established for management owing to the incompatability of education, training and public health. the short term nature of this funding and the long term core funding needs of voluntary 10.9 There are however, many other organisations. problems facing organisations trying to develop their transnational European work: Difficulties in obtaining funds at national They include: level has led some organisations to look for European funding which can be inappropriate to * difficulties finding like - minded their main aims and objectives. Failure to organisations in other countries in order to continue receiving these funds can undermine develop joint projects. their existence.

Although on paper an organisation may seem to * difficulties faced by organisations due to have the same aims and objectives, in reality it late payments of European funding. may not. The role of an organisation working with a specific client group in one country may Payments held up for various reasons at differ a great deal from one working in another. European or national levels can often cause There are also difficulties in organisations problems for organisations carrying out working together which are often due to transnational projects. differences in culture and language * lack of legal recognition for * inability of organisations to access organisations in other countries. European funding4 This can cause serious problems for Many organisations have trouble organisations wishing to open offices in other obtaining good up to date information on Member States, or provide services that are financed by public authorities from another

Member State. The Commission has already 4 Decision making for many European funding proposed certain measures (notably the Statute programmes is frequently made at national rather for a European Association) aimed at giving than at European level.

10 organisations a legal personality in other VI CONCLUSION countries within the European Union. MEMBER STATE LEVEL * weak representativeness of organisations taking part in consultation The Commission believes that for the most part In some cases European networks lack the action will need to proceed, in line with the structure and adequate membership to ensure principle of subsidiarity, at the level of the that views of a wide spectrum of operating Member State or, where appropriate, at the organisations at local, regional and national level of the region or the locality. levels are taken into account. The Commission proposes that the Member States examine attentively the following areas: * lack of understanding by some public acquiring a much deeper knowledge and authorities on what European work voluntary understanding of the sector at all levels organisations and foundations wish to do. There is no doubt that policy making is at Many organisations complain that present severely hampered by the lack of public authorities are not aware or being systematic and reliable data about the sector. supportive of the transnational work that they Indeed there are parts of the Community where are trying to do. This often results in the sector has had so little public profile that transnational projects being hindered. policy makers appear to have been scarcely aware of its existence. All concerned actors, * lack of adequate training. European,national, regional, local authorities and the voluntary sector itself, need therefore to Inadequate training can lead to poorly run address the question of what practical steps they organisations and the inability to respond to could each undertake to map the extent and challenges and new needs. contribution the voluntary sector makes. the relationship ("partnership") between * lack of access to networking techniques public authorities and the sector Subsequent to poor training some Voluntary organisations are being asked to take organisations are not able to develop links with on an increasingly important role, by public other like minded organisations. authorities across the Community and by the European Commission itself. It is therefore 10.10 Not all these problems are important that voluntary organisations are given insurmountable, and indeed some of them are the opportunity to be involved in planning already being dealt with by the European services and policy making with public Commission and by some Member States. authorities at all levels. Relationships between However, it should be stated that they are often voluntary organisations and public authorities dealt with on an ad hoc basis, and not as part of should be clearer and new partnerships a coherent strategy and policy towards the developed. Partnership between voluntary sector. The following section presents a number organisations and governments will involve of ideas which can be addressed by the sector contractual arrangements between individual itself, as well as at Member State and European voluntary organisations and public authorities levels. 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

11 policy and make proposals about what would information society developments. The need to be done for policy to help the participation of voluntary organisations and voluntary sector to increase its capacity and foundations in pilot projects, particularly in the where relevant to improve its skills in order applications field, should be encouraged. that it can best fulfill the new roles it is being better access to programs co-financed by called on to address. the Structural Funds the law governing voluntary organisations Many voluntary organisations are concerned and foundations about access to finance from the Structural The competent authorities should examine what Funds. Insofar as the implementation of scope exists for clarifying and adjusting legal Community Support Frameworks and frameworks so that they are conducive to the operational Programmes is the responsibility of voluntary sector fulfilling its full potential at Member States, the latter are encouraged to national, regional and local levels. examine and review current administrative the fiscal basis and competition rules on practice so as to facilitate access to information which the sector operates and broader participation by the voluntary sector. The same applies insofar as the The taxation rules applicable to the sector have designation of beneficiaries for global grants is to be clear and simple, and incentives as well as concerned. exemptions have to be studied attentively. Any individual tax treatment has to be justified in relation to the constraints specific to this sector VOLUNTARY SECTOR AND and to its method of internal organisation which FOUNDATIONS LEVEL differentiates it from traditional economic actors. how the continued financial health of the It is important that voluntary organisations and sector is to be secured foundations make every effort to promote themselves, through use of the media and new Positive legal and fiscal regimes are important information technology. They should try to be for the growth of the sector in each country, as open and accessible in order that the public and well as to ensure public accountability. public authorities understand their aims and However, public authorities should also ensure objectives and how they work. Organisations that the sector is seen positively by society and should encourage relevant training for their staff that funding by public authorities, the corporate and volunteers, and when appropriate, should sector and private donations are all encouraged. try to develop good links with public authorities training and the corporate sector. The growth of the sector has not been matched The sector should look to diversify its funding by an increase in training to help voluntary base in order not to become too dependant on organisations develop their skills and expertise any one source of funding. Networks of in order to meet new needs. All too often, organisations should also try to ensure that their training budgets are the first to be hit when membership base is as comprehensive as funding becomes difficult to obtain and possible in order for them to be truly voluntary organisations are asked to cut costs. representative. Public authorities should ensure that voluntary EUROPEAN COMMUNITY LEVEL organisations are given adequate training in order to provide the services and do the work In addition, the Commission proposes the that is being increasingly asked of them. following at European Community level: information society developments Voluntary organisations play an extremely Voluntary organisations and foundations have a important role as interfaces between citizens and clear interest in being associated closely with government authorities, although in many cases 12 this role still does not receive proper Member States and at European level, an effort recognition. Voluntary organisations are asking must be made in this direction. One of the ways for their work in this sphere to be recognised; of making progress in this matter is to give a they are no longer satisfied with a single higher profile to voluntary organisations and lobbying role, but are asking to be consulted their work. For these reasons, and in order to systematically and regularly by Community support the effort to improve knowledge of this bodies on all matters and on all decisions which sector, the Commission will consider proposing might affect the work they do, how they do it a year of voluntary organisations and and their efforts to achieve their objectives. European citizenship. The Commission will maintain and further The Commission recognises the develop a continuous exchange of information importance of the role that voluntary and points of view by establishing systematic organisations can play as disseminators of and regular dialogue and consultation with the information, and as bodies close to ordinary sector5. In this connection the Commission citizens, and proposes to involve them more welcomes the establishment by the closely in its activities of disseminating aforementioned movements of the Consultative information. Voluntary organisations have Committee for Cooperatives, Mutual Societies, played an important role in the development of Associations and Foundations, which aims to past “European years". This role has not always ensure the consultation and the horizontal co- been acknowledged. The Commission therefore ordination of the sector. The Commission will intends to ensure that the role of voluntary also look to develop its dialogue with the sector organisations is recognised and publicised in through the European Social Policy Forum and all “European Years" relevant to the sector. the new budget line promoting cooperation with The European Parliament has proposed charitable associations, and will examine how that studies be made on the expansion of the the representation of voluntary organisations on sector of co-operatives, mutual societies, other existing advisory committees can, where voluntary organisations and foundations in the appropriate, be organised. The development of European Community, in particular the this dialogue and partnership will contribute establishment of an observatory to follow to a better understanding and building of developments in this sector in the single market. European integration at all levels. As well as The Commission considers that for voluntary this, the revised treaty should include such organisations and foundations, this task could be measures as the fight against exclusion, the undertaken within the European observatory for promotion of employment, and measures in SMEs, and proposes that the collection and areas such as non-discrimination and analysis of information, in the framework of the immigration, which call for this strengthening of existing structures, should be based on what dialogue. voluntary organisations do and want to do at The role of voluntary organisations in transnational level, and particularly on the present-day society will not be recognised problems which they encounter in doing so, i.e. without more knowledge of how this sector problems arising from differences in their legal operates, and of its requirements and forms in the various States, money transfers, expectations. As people are very far from being leasing or purchasing premises in other states, fully aware of all this, particularly in all the obtaining subsidies, the effectiveness of the mutual recognition of vocational qualifications, obstacles to sponsoring in the Member States, 5 In this context it should be recalled that the etc. It would also look to identify areas of good European Commission has published a directory on practice which could be promoted and European Non Profit organisations in order to enable officials to consult more systematically and disseminated. as widely as possible.

13 · To undertake transnational activities, Voluntary organisations and foundations voluntary organisations need instruments which have a clear interest in being associated closely are not yet widespread, but which are a sine qua with information society developments. An non for any activity of this kind. These effort should be made to raise their awareness of instruments range from a knowledge of the opportunities and benefits that the languages to familiarity with current differences information and communication technologies, in the various Member States concerning services and applications can offer them. The taxation, working methods, administrative Commission has already set up the Information procedures etc. There is great demand for Society Project Office as a "one stop shop" training on the part of those voluntary within the Commission to facilitate access to organisations which are interested in expanding information in this area. The Information their transnational activities. The Commission Society Forum will seek to involve all parties will therefore give an impetus to promoting concerned, including voluntary organisations better access to European training and foundations, in the policy debate. The programmes which officials of voluntary participation of voluntary organisations and organisations wishing to expand into Europe foundations in pilot projects, particularly in the could use. applications field, should be encouraged. On the other hand the involvement of the Many voluntary organisations are calling voluntary sector during the European year of for easier access to sources of finances, life long learning gives evidence of the actual including to the Structural Funds as well as and potential contribution of this sector to life other sources. The complexity of application long learning, including adult education which is systems and administrative procedures, which largely managed by the voluntary sector. In the often lead to delays in payments can prevent years to come, this contribution is likely to small, lean voluntary organisations from making become crucial to build a knowledge society for the valuable contributions they have the all. potential to make in the implementation of the Voluntary organisations often have various EU funding programmes. difficulty in finding partners or people to work Insofar as the Structural Funds are concerned, with outside their own Member States who the Commission will, in conjunction with the could help them in their transnational activities, Member States, continue to actively explore and facilitate access for them to a number of ways of facilitating access to Community Community funds for which this is a condition finance, including the possibility of pre-financing of eligibility. All the more because the numerous by the Member States and the increased use of Community instruments and policies available to global grant finance. In general terms, it will be enterprises for finding partners at European proposing ways of streamlining and simplifying level (BC-Net, Europartenariat, BCC etc..) are procedures in the context of the reform of the not always suited to the needs of voluntary Structural Funds which is due to take effect organisations.6 Accordingly, the Commission from the year 2000. Likewise, it will continue will see that they are made easily accessible to to encourage a broad interpretation of the voluntary organisations, and that they meet their concept of partnership extended to economic specific requirements. and social partners7, compatible with the need for proper and effective systems for monitoring the management of public funds.

6 The RECITE and ECOS/OUVERTURE programmes, and also the PACTE programme can facilitate the internationalisation of voluntary 7 Article 4 of the Framework Regulation No. 2081/93 organisations and foundations. on the Structural Funds.

14 The Commission will also explore ways of transnational projects are often the result of publicising more widely information on existing national legislations which are ill-suited to the Community Finance which is available to new needs, but they can also arise from the voluntary organisations and foundations.8 effect of measures taken at Community level, The results of activities financed under the new which, since they were drafted with other budget line B3-4013 will help shed some light objectives in view, may turn out to be obstacles on the employment dimension of the third for voluntary organisations and foundations. For sector. In particular the actual and potential this reason the Commission proposes to study role of the voluntary sector and foundations in and monitor closely the effects of Community the employment development process and their policies, actions and legislation on this sector. job creation capacity will be examined and This follow-up and analysis should be carried examples of best practice identified. The out systematically also through better Commission will ensure that the resulting inter-departmental co-ordination, with the aim analysis and conclusions are widely both of monitoring the implementation of disseminated. Community rules in the sector and of promoting the structures of voluntary organisations and The European Commission’s support through their access to the Single Market. training and the use of information technologies will improve their capacity to network in order The Commission intends to conduct a broad for them to fully participate in European dialogue involving the sector, the European Community Programmes. Parliament, the Committee of the Regions, the Economic and Social Committee, The survey has shown that there is a Member States and other interested parties growing interest by voluntary organisations in in order to fully discuss the issues contained developing their transnational work. Voluntary in this document. The Commission intends organisations are keen to learn different models to hold a series of conferences and seminars and ways of working from organisations in other to discuss the Communication and issues countries. Many organisations find this difficult arising out of it. 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

8 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 C0-operation and Humanitarian Aid”.

15 particular the very marked increase in the ANNEX I THE SURVEY number of voluntary organisations in the last twenty or so years. The growth of the sector in I How many voluntary organisations and the last decade might justly be called explosive. foundations are there? How are they financed? Of the voluntary organisations which responded How many people belong to voluntary to the questionnaire, some 75% were founded organisations? How many people do they after 1961, about 65% after 1971 and about employ? How many people work for voluntary 45% after 1981. There is no reason to believe organisations or foundations as volunteers? that the sample was abnormally "young" nor How big is the sector, and is it growing? How is does growth appear to be slackening. There are it developing at the European level? What are its minor differences between the sector in different needs and aspirations for the future? Member States - for example, for reasons which I.1 Unfortunately, as has already been made will be obvious, the sector appears to be on clear, there is a serious lack of information average younger in Spain and Portugal than about the voluntary sector in Member States, elsewhere in Europe (84% of the Spanish and and still more at the European level. This lack of 85% of the Portuguese sample were founded essential facts reflects not simply what has, until after 1971 and 63% and 62% respectively after fairly recently, been a lack of interest amongst 1981) - but the same basic phenomenon can be scholars and policy makers, but also the absence observed everywhere in Europe. of any sort of convenient sampling frame. I.5 There are no doubt many reasons for this I.2 In an attempt to throw some light on the very marked growth but the following factors scene, the Commission therefore decided to have almost certainly been influential: carry out a questionnaire study of voluntary increases in prosperity following the organisations in all the Member States. The second world war and latterly increased leisure method used was to distribute questionnaires to time (shorter working week, longer holidays voluntary organisations throughout Europe via and two-day weekends) their representative organisations in Brussels the shift evident in most European and at national level. The survey was carried out economies during the 80's towards the between June and October 1993 and altogether provision of services some 2300 replies were received. This is a the increasing delegation to voluntary surprisingly good response and the Commission organisations of services (particularly social is grateful to everyone involved. The response services) previously delivered by public may itself be taken as an indication of the authorities ("social privatisation") lively interest that voluntary organisations in the different Member States have in changes in public preferences away from developments at a European level. uniform and relatively impersonal services of the kind typically provided by public authorities I.3 Given the method used, which was the towards the more individual client-oriented only one open to the Commission, the study approach favoured by voluntary organisations must be regarded as strictly exploratory and its results, which are not in any sense scientific, the identification of a whole range of new should be treated with caution. The findings are, needs and the growth of new social however, of interest and are discussed below. preoccupations (e.g. sexual equality, the environment and preservation of the biosphere, Growth of the sector foreign aid to developing countries following the granting of independence to former colonies I.4 All the evidence suggests that the in the 60's, peace etc.) associative sector has grown enormously since the end of the last war and the survey clearly the employment crisis in the late 70's and reflects this phenomenon, highlighting in early 80's leading to the creation of 16 employment schemes involving voluntary I.8 Of the federations responding to the organisations survey very nearly half represented more than historical reasons peculiar to particular fifty organisations, with 9% representing over Member States such as the release of pent-up 500. Such bodies do, of course indirectly associative demand following political changes represent large numbers of members of in Spain and Portugal or the movement to create individual voluntary organisations: in our sample structures outside the purview of the state over half (55%) of federations indirectly following the social and political upheavals of represented more than 10 000 members with 1968 32% representing over 100 000. The average number of members indirectly represented was demographic changes taking place in over 1 300 000. Europe such as the increasing number of retired/unemployed people leading Member I.9 The size of voluntary organisations and States to offload services from the State to the federations appears to vary according to a private and associative sectors as a way of number of factors. Larger bodies tend to be cutting public expenditure older, as do organisations working in fields of obvious and enduring interest, such as social Numbers of members services and education. As has already been remarked, voluntary organisations with wide I.6 One well-known voluntary organisation in geographical scope tend to be larger than those the Community has over 13 million members. with a relatively parochial focus. The size of the Most voluntary organisations, however, are membership also reflected to some degree the small, often having no more than a handful of size and relative wealth of the Member State active adherents. Because of the methods used and the relative maturity of the sector. by the Commission, the sample contains a disproportionate number (30%) of "intermediary Employment organisations" in the sense explained in paragraph 4 and of national organisations. The I.10 The numbers of staff employed by results will therefore have considerably voluntary organisations varies very widely - overestimated the average size of voluntary from none at all to many thousands. The great organisations in the Community. (Most majority of voluntary organisations are, in intermediary organisations responding to the effect, small enterprises and, like their survey were federations - that is, umbrella counterparts in the conventional economy, most bodies providing some centralised services (such employ no more than a handful of staff. A few, as information and combined lobbying) for a however, are large organisations by any number of separate voluntary organisations or standards, employing large numbers of full and branches (usually with their own legal identity) part-time salaried staff. working in the same field. Nonetheless the I.11 The average voluntary organisation in our figures are of interest. sample employed 40 full and 10 part-time staff. I.7 In the sample, about 40% of voluntary The equivalent average figure for intermediary organisations had fewer than 100 members and organisations was a little higher. These averages more than half had fewer than 200. The range do, however, conceal wide variations. Thus was, however, very wide. Thus 13% of the some 14% of our sample employed no paid staff sample had between 1 000 and 5 000 members, at all, 17% employed over 50 people (full and and 15% had over 5 000. As would be part-time), 6% between 101 and 500, and 4% expected, national organisations tended to have over 501. The commonest number of employees more members than those with a regional focus was between 1 and 5. Full-time staff appear to - they appear, roughly speaking, to have twice work on average for 36 hours a week and part- as many members as regional organisations. timers for 20 hours. These figures varied less from country to country than they did according

17 to the area in which the voluntary organisation education, or social services. However, while was active: for example, as might be expected, there was some tendency for voluntary voluntary organisations active in the health or organisations to rely on either salaried staff or social services field tended to employ many volunteers, it was not necessarily the case that more salaried staff than those active in, say, civil voluntary organisations with few salaried staff rights. had few volunteers, or vice versa - the mix varied a great deal. Volunteers Assets I.12 Another very important source of support for voluntary organisations is, of course, I.15 The voluntary organisations and volunteers. 81% of our sample said that they federations in our sample had: employed volunteers. Voluntary organisations in financial assets amounting to 2,208 some countries appeared to make rather greater thousand ECU; use of volunteers than others, but in no country did the proportion of voluntary organisations property amounting to 702 thousand which have volunteers working for them fall ECU; below 60%. Again, the numbers of volunteers equipment amounting to 1,102 employed varied widely: 30% of voluntary thousand ECU; organisations (including federations and other other assets amounting to 835 intermediary organisations) told us that between thousand ECU; 1 and 5 volunteers were active in their total assets of 10,068 thousand organisation; about 18% reported that they were ECU. supported by between 6 and 10 volunteers; 60% had over 51 volunteers, 10% had between 101 These averages conceal wide variations between and 500, and 7% had over 500. A few voluntary voluntary organisations themselves and between organisations (3%) were supported by over countries. By and large it is, as would be 2 000 volunteers. On average each volunteer expected, voluntary organisations in the richer spent about nine hours a week working for the Member States which have on average bigger organisation they supported. assets, though the variation in even these countries is as wide as anywhere. Voluntary I.13 Although there did not appear to be major organisations in Member States where there are differences between the number of organisations still remnants of the old mortmain laws, or in different Member States using volunteers, the where the laws governing inheritance are still ratios of salaried staff to volunteers varied relatively rigid, have discernibly fewer assets in widely from country to country - from about 1:1 the form of property. to about 1:8. Such differences did not appear to be related to the size or wealth of Member Expenses States or any other particular factor. It may be that they simply reflect varying traditions, or the I.16 Data on organisations' annual expenditure extent to which volunteering is, or is not, was broken down into salaries and wages, organised. administrative costs, and other costs. On I.14 The numbers of volunteers employed also average the costs incurred by our sample varied markedly according to the voluntary organisations amounted to the following: organisation's main field of activity. For salaries and wages: 27,743 example, voluntary organisations working thousand ECU mainly in the field of culture and recreation, or administrative costs: 465 in human rights, clearly depended to a much thousand ECU greater extent on volunteer workers than did voluntary organisations working in health,

18 other costs: 1,044 sales of products (15%), and investment income thousand ECU (8%). To put the matter in another way, on total costs 31,149 average a typical European voluntary thousand ECU organisations derives some 62% of its "own resources" from economic activity of one form There were minor differences between or another - i.e. from selling services directly or countries: broadly voluntary organisations from under contract, or from selling products such as better off Member States spent more than publications. Again these averages did, average on wages and salaries. Not surprisingly however, conceal wide variations in the amounts larger organisations spent rather more on that voluntary organisations gained from various administration than did federations, which were sources and in their relative importance. For generally more expensive to run than simple example, in two Member States the most voluntary organisations. important source of income in the "own Sources of Income resources" category was sales to non-members; and in another membership fees apparently I.17 Very many voluntary organisations contributed little in comparison with contracts depend to some degree on external subsidies of with public authorities. one kind or another, typically from public I.20 There was less variation apparent when authorities, but often from individuals or other we looked at "external resources". By far the private donors. Many others are virtually self- most important source of external income for supporting, obtaining their income from voluntary organisations in all but one Member membership fees or by the sale of services or State was reported to be subsidies from public other products. To get an idea of how they authorities (52%). This was followed by support financed their expenditures, we asked voluntary from individuals (22%), support from organisations in our sample to state what international bodies (10%), grants from proportion of their income was from their own foundations (9%), and lastly support from resources and what proportion came from so- companies (7%). Again to put these averages called external sources, such as gifts and into perspective, grants from foundations were subsidies. generally not an important source of income I.18 For the purposes of the study, income (between 3% and 6%) in all but two Member from the sale of services (whether to members States, as were supports from business. or non-members) or products (e.g. I.21 Of all the sources of internal and external publications), membership fees, investment income, subsidies were clearly the most income and income from contracts, were all important, followed by membership fees. The counted as "own resources". Under "External following diagram compares all the sources of resources" were included subsidies from internal and external income and gives their government bodies and other public authorities, mean percentages of the total. and support from individuals, international bodies, foundations and companies. I.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%),

19 Own and External Resources

Investment Income

Support Companies

to non-members

Support International Organsations

Grants

Sales of Products

Resource Contracts

to members

Support Individuals

Membership-Fees

Subsidies

0,00 0,05 0,10 0,15 0,20 0,25 0,30 0,35 average part in %

I.22 Additional information was also sought Sphere of Activity from voluntary organisations and federations about the balance of "own" to "external" income I.23 The questionnaire used the following ten over the last three financial years. The ratio of main spheres of activity with which to classify own resources to external resources was on voluntary organisations/federations: average about 45:55, with no significant fluctuations over the three years. In each year, however, there were some voluntary I.24 The figures in brackets indicate the organisations/federations claiming that 100% of proportion of respondents naming each of these their income was derived exclusively either from areas as one in which they were active. These their own or from external resources. In other figures take account of the fact that, as has words most voluntary organisations appear to already been made clear, many voluntary generate a little under half their income organisations are active in a number of fields at themselves, relying for the remainder mainly on once. This is clearly revealed by the following subsidies of one kind or another; but there are diagram showing the proportions of voluntary numbers of voluntary organisations which are organisations whose main activity may lie in one either wholly self-sufficient or alternatively, field but which are also active in others. There wholly dependent on external aid. were, as would be expected, differences between countries, though it is noteworthy that social services was named most frequently in all Social Services (57%) Education and Research (46%) Development and Housing (40%) Culture and Recreation (36%) International Activities (35%) Civil Rights and Advocacy (35%) Health (26%) Philanthropy and Voluntarism (23%) Environment (18%)

20 Business and Professional Voluntary organisations ( 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

Areas of Activity/ Main Activity Business

0 10 20 30 40 50 60

frequencies in %

but two countries (it is unlikely that this finding involved in rehabilitation, 35% were involved simply reflects our particular sample). Greater with public health services, and 26% were active differences appeared, however, when we looked in nursing homes. Nursing homes were also in more detail at the type of social services mentioned by, for example, 29% of voluntary provided where voluntary organisations in organisations which gave "Philanthropy and different countries appear to specialise in Voluntarism" as their main area of activity; and different sub-areas such as family care, youth 17% of voluntary organisations who were work or services to elderly people or people mostly involved in "social services" were also with disabilities. The latter three groups were, in involved in "rehabilitation". fact, most often mentioned. This may reflect the I.27 This "multi-functionality" is typical of the fact that governments most often turn to philosophical approach adopted by voluntary voluntary organisations to provide services for organisations and often also reflects their these particular groups. circumstances as key sources of aid or information in a particular locality. Voluntary I.25 Looking in a little more detail at the organisations in this sense are rarely entirely figures on, for example, "culture and "subject-oriented": their focus is above all on recreation", reveals that 41% of voluntary people and their problems. In this spirit, many organisations whose main activity lies in this voluntary organisations provide what is, in field are also involved with other cultural and effect a "one-stop-shop" either for the artistic activities - 37% with sport, 29% with inhabitants of a particular area, or for the group recreational and entertainment clubs and 27% which is their special concern. Thus a voluntary with the media and communication. Voluntary organisation dealing with, for example, people organisations which gave another area as their with disabilities, will deal not simply with the main field of activity were also active in "culture immediate results of a particular disability, but and recreation". will tend to occupy itself also with the I.26 A further example is provided by "health": information and advice needs of its clients and 36% of voluntary organisations which claimed with the whole range of concerns affecting that health was their main area of activity were them, including, most importantly, their rights as 21 citizens. This latter is a particularly important is also an important source of income. point: as a glance at the diagram will show: Charitable voluntary organisations and while only 6% of our sample regarded federations, for example, said that support from themselves as primarily concerned with human individuals represented 37% of their external rights, 35% gave it as a field in which they were income. Environmental voluntary organisations active. The same multi-functionality is evident claimed the proportion to be 29%, and in the throughout the diagram. fields of social services, education and research I.28 When we looked at the expenditure and and international activities, it represented a fifth assets of voluntary organisations working in of external resources. The major exception to different fields we found that bodies concerned this picture was provided by business and with social services and health had the highest professional voluntary organisations, which expenditure. The voluntary organisations and derived only 2% of their external income from federations whose main concern was with civil individuals. rights and advocacy had the lowest costs and Geographical scope the smallest assets. Environmental voluntary organisations/federations and those whose main I.31 In asking about the geographical area objective was education and research were best covered by voluntary organisations, we were off from the point of view of assets. chiefly interested in gaining an impression of I.29 As regards the "own resources" of what sort of proportion of our sample voluntary organisations, the most important considered Europe as a significant, if not the source of income for bodies in the field of only, focus of their organisation. The results culture and recreation was the sale of services to varied surprisingly widely: in one country only members and membership fees, both providing 4% of respondents regarded their scope as 29%. In the fields of education and research and extending to Europe, compared to 35% in international activities, contracts, (25% and another country. They should, however, be 27% respectively) were the most important considered together with our findings (reported source of self-generated income, while in the below) on the number of actual or intended area of health it was membership fees (36%). partnerships or other activities undertaken by Voluntary organisations providing social voluntary organisations at the European level. services also said that membership fees Interestingly, there appears to be little constituted a significant part of their "own correlation between how important a focus resources" (33%), as did those dealing with civil organisations consider Europe to be and their rights (38%), development and housing (31%) propensity to form European partnerships. and the environment (35%). In contrast, charity I.32 The scope of a voluntary organisation's organisations obtain the bulk of their own interest is not, of course, necessarily closely resources by selling services to members (28%) related to its organisational structure. For and non-members (26%). For business and example, an internationally active voluntary professional organisations, membership fees are organisation may well be locally based, whereas by far the largest element in the "own resources" one which may be active at a national level category. within a particular Member State may lack any I.30 As regards external sources of income, interest in Europe. As a broad rule, however, organisations working in all fields are largely the greater an organisation's geographical scope supported by subsidies of one kind or another. the more it appears to play an active role at all Subsidies provide from 31% of total external levels. Thus most national organisations income of charitable voluntary considered that they were also active at local organisations/federations to 73% of such and regional level, but few local organisations income for business and professional bodies. As considered that their scope extended to national has already been noted, support from individuals level. In line with this, most of the voluntary

22 organisations that are active at the European do bodies which charge. To what extent level are, in fact, nationally organised. services are provided free or, alternatively, have to be paid for depended heavily on the voluntary Target groups and beneficiaries organisation's field of action. For example, the support of the homeless is likely to involve the I.33 We asked voluntary organisations which provision of free (or at least very cheap) goods particular groups of people their organisation or services whereas it may be reasonable to worked with or was concerned with and to charge for, say, adult education. Similarly, indicate to whom, or to which bodies they sports clubs, where perhaps relatively costly offered services and on what basis. The great equipment is needed, or which are prestigious, majority of voluntary organisations and will provide fewer free benefits than those federations defined their target public widely - voluntary organisations involved in social 46% of respondents said that they served the services, especially of a relatively informal kind. "general public" or alternatively "young people" (37%) or "adults" (35%). In contrast, very few These findings, together with those on voluntary organisations mentioned more voluntary organisations' sources of income narrowly-defined groups as their particular are a clear indication of the important concern. It may be doubted whether there is redistributive effect which these bodies have. much significance in this finding. Since European Community-wide partnerships voluntary organisations were not, in practice, between voluntary organisations confined to one choice from the list provided in and foundations the questionnaire, the likelihood is that most respondents whose activity was directed on the I.36 Because of the method we used, our one hand at a specific group of people e.g. sample undoubtedly contained a greater "drug addicts" or "veterans" and, on the other proportion of voluntary organisations which are hand at the population as a whole (whether to active at the European level than would be draw attention to their work or to canvass for expected in a more scientific sample. The figures support) indicated both the specific group and are nonetheless impressive evidence of the "general public". extent to which the sector is already beginning I.34 When we asked voluntary organisations to to come together throughout the Community: whom they provided services the answer was, 50% of those voluntary organisations answering again, most often the "general public" (39%), the relevant question, or nearly a quarter of the followed as the next most frequent categories by total sample, said that they were already the "target group" (38%) and members. (36%), involved in cross-border activities in some form governments or other public bodies (22%). The of partnership with nationals or organisations extent to which these services were provided from other Community countries. free or in return for payment varied according to I.37 Given that the inspiration for the majority the country concerned and to whom the service of the well-known networks already working at was provided. Free services were most often European level came from countries in the north provided to the general public and to members, of the Community, it might have been expected and paying services to the voluntary that the tendency to form partnerships might be organisation's particular target group or clients less marked in the south than in the north. In the or to public authorities. event, the findings did not support this I.35 Overall, more free goods or services were hypothesis: there were differences between provided by voluntary organisations/federations countries, which are not altogether easy to than goods and services against payment. Not explain, but no clear division was discernible surprisingly, voluntary organisations and between the overall picture north and south. federations that mainly offer their services free I.38 Looking ahead, 46% of our respondents rely more heavily on support from outside than said that they envisaged entering into cross- 23 border partnerships at some time in the future. fiscal 21% Interestingly, an analysis by country showed, in legal 19% effect, that it is voluntary organisations in those countries that have hitherto formed a below- administrative 29% average number of partnerships which have the communication 51% strongest future intentions. In other words, other 35% when it comes to operating on the European The figures in brackets indicate the proportion stage, voluntary organisations in countries now of respondents encountering each kind of lagging behind appear to have every intention of problem. Few differences were apparent catching up. between national, regional or local I.39 Of voluntary organisations already in organisations, though there was a tendency for partnerships, 27% were active in "social smaller organisations to be less preoccupied services", 14% in the field of "culture and with difficulties. The outstanding finding is, of recreation", 13% in "international activities". course, the extent to which "communication" 11% in "education and research" and 10% in has caused difficulties, though the extent of "development and housing". Again, there was legal and fiscal problems is also noteworthy. It evidence that voluntary organisations working seems likely that the legal difficulties, at least, in some fields where few partnerships have yet will be largely removed by the proposed Statute been formed have stronger future intentions as for a European Association. Language is regards cross-border work: for example, no probably the most important impediment to fewer than 75% of our sample voluntary "communication" but it is likely that there are organisations which are active in the field of other complicating cultural factors at work as "development and housing" said that they were well, such as misunderstanding of role and planning partnerships for the future. On the importance of the sector in different countries, other hand, only 22% of voluntary organisations misunderstanding of how organisations work, active in the health field said that they were the lack of understanding of cultural, legal and planning to enter into partnerships. This may fiscal backgrounds, the existence of different well reflect the fact that many voluntary ways of working etc.. organisations supply what are, in effect, public services - and furthermore in a highly regulated Main future needs of voluntary field. In these sorts of circumstance, organisations partnerships may simply offer voluntary organisations less and thus be less attractive. I.41 We asked respondents to tell us what they felt were their voluntary organisation's main Problems in forming partnerships needs for the future. The results are given below. 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:

24 Main needs of European associations/foundations

More funds

More paid staff

More volunteers

Capital

Training Main needs

Information

Advice on Management

Other Needs

0 10 20 30 40 50 60 70 80

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 Points for the Commission: Member States, though there is a tendency for development of the sector at voluntary organisations in poorer countries, the European level where the sector tends to be less well developed, to feel their comparative lack of funds more keenly. Voluntary organisations are I.43 Finally, we invited respondents to let us not, on the whole, capital-intensive, and it is not know of any points which they would like to surprising, therefore, that there should not be bring to the attention of the Commission and to the same desire for more capital. Nonetheless put forward any suggestions they might have almost a quarter of our respondents mentioned about how the Commission might help the capital as a need. development of the sector at the European level. I.42 The desire for more paid staff appears to The answers we received ranged widely from be felt most by older voluntary organisations simple demands for "recognition" in a quite (those founded between 1945 and 1950): general sense (either of the non-profit sector or younger voluntary organisations, in contrast, of some particular organisation) to relatively appear in relatively greater need of information complex suggestions for changes in, or and management advice. The desire for more extensions to, European Community policies. 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.

25 ANNEX II II.3 Generally speaking, where jurisdictions OVERVIEW OF THE LEGAL AND make the distinction between private and public law both voluntary organisations and FISCAL FRAMEWORK FOR VOLUNTARY ORGANISATIONS AND foundations are entities of private law. Not all Member States define either voluntary FOUNDATIONS organisations or foundations explicitly, and not all make a fundamental legal distinction between II.1 The following is an overview of the legal voluntary organisations on the one hand and and fiscal basis on which foundations and foundations on the other. For present purposes, voluntary organisations operate in each of the however, voluntary organisations can be taken Member States. Following the definition given as groups of private individuals who have come in paragraph 2.3 no account is taken of together for some non-profit end in the public "economic" associations which exist in some interest. In contrast, foundations are entities Member States and which can engage in which have charge of assets set aside for commercial or other profit making activities, nor purposes in the public interest in the form of an of the several varieties of private foundation. endowment or of a regular dedicated source of income. Legal basis II.4 That part of the sector of interest here is, II.2 The freedom to establish or join, or indeed therefore, neither wholly private nor wholly to leave, a voluntary organisation is nowadays a public in nature. It follows that fundamental to right (normally guaranteed under the the law must be some means of demarcating its constitution) in all Member States of the proper sphere of operation from the territory Community. The right of association is, of occupied by purely private activity, by course, also guaranteed under the European government, or by commercial companies and Convention on Human Rights.9 Generally other forms of profit making enterprise. Within speaking it is possible for nationals of any the Community this has been achieved either Member State to establish a voluntary formally - by setting out the basic features of organisation or foundation anywhere in the internal organisation and governance to which Community, although some Member States non-profit organisations must conform; or by stipulate that there should be a minimum objects - by laying down what spheres of number of their own citizens or residents activity count as in the public interest and by involved10. Some Member States have however, establishing other rules defining how the non- special statutes precisely to enable foreign profit status of the organisation is to be secured. nationals to establish voluntary organisations II.5 Broadly speaking the first of these which, though subject to the same national approaches - that of defining non-profits by their registration or publication requirements as any formal features is characteristic of the civil code other voluntary organisation, are then run tradition, and the second - that of delineating the according to such internal regulations as may be sphere of non-profit activity in the public laid down in the country from which the interest ("charity") by the purpose of the activity founders originate. itself - is the fundamental feature of the common law tradition. II.6 Many commentators draw a sharp

9 distinction between these two approaches, and it Article 16 of the ECHR permits derogations to the is certainly true that the legal traditions from right of association in the context of a political activity of non-national citizens. which they derive are very different. The practical effect of the difference in approach 10 This is in fact in contravention of Articles 6 and 52 can, however, be exaggerated. Many of the Treaty on European Union. jurisdictions contain special legal provisions for

26 voluntary organisations with certain aims list of (board) members. Incorporation (or, more regarded as of public interest which, combined accurately, the registration which is its with different levels of tax relief, means that in condition) may be refused on the grounds that practical effect organisations in many Member the statutes of the body are non-conforming. A States are defined in terms of both their formal refusal to register a voluntary organisation in structure and their objects. It is also true to say these circumstances is an entirely administrative that in practical terms the basic provisions of the matter and implies no political judgement on the law on foundations (and in particular the status of the organisation. It needs, therefore, to emphasis given to the preservation of assets, be carefully distinguished from the with all that that implies) in code countries are circumstances in which organisations may be also very similar to those found in common law refused special status for tax purposes (see jurisdictions. The clear link here is probably below, paragraph 5.14 and 5.15). The statutes historical. The common law on charity has (and often a full or partial list of members) are enjoyed an unbroken tradition and has never typically required to be registered with either the drawn a fundamental distinction between local court or with the responsible ministry, foundations and voluntary organisations - both regional or local authority. All foundations have are charitable trusts. Since foundations are the legal personality, which again is normally older form, it appears that the law was simply achieved by the publication of statutes etc.. applied later to voluntary organisations without Unlike voluntary organisations, however, any major adaptations. In contrast many code foundations are generally subject to some countries have not enjoyed the same continuity, degree of a priori control to ensure that the the result being that the law has diverged. statutes are in strict conformity to the law, that II.7 Voluntary organisations may be (since they are often intended to exist "in incorporated or unincorporated and both forms perpetuity") management succession has been are found in all jurisdictions. It seems likely that properly allowed for, and that their intended the majority of voluntary organisations in the assets are adequate to achieve their ends. Community are in fact unincorporated and thus II.9 In common law jurisdictions no special without legal personality. There are some form of incorporation is available for either disadvantages to being unincorporated: it is not voluntary organisations or foundations. Instead always easy for the voluntary organisations to bodies seeking the convenience or protection of acquire any assets it may need, and its individual incorporation have a number of different forms board members or trustees, in whose names the to choose from depending on the area of activity business of the voluntary organisation is carried in which they are engaged. By far the most on, may be uncomfortably exposed to liabilities. common is the so-called "company limited by In most places the law has, however, developed guarantee'" - in effect a non-profit-distributing ways of mitigating the difficulties - by the use of company - but there are other forms available the law of agency, for example, or by a common such as the "housing association" or the so- fund to which members contribute and to which called "friendly society". There are also creditors have first recourse, and in most (comparatively rare) examples of charitable jurisdictions the unincorporated voluntary voluntary organisations and foundations which organisation does not appear to be prevented have been incorporated by Royal Charter or by from taking part in legal process as a voluntary special Act of Parliament. organisation (that is to say under its own name II.10 Incorporation is available everywhere by rather than that of a responsible board member). one means or another, but the resulting degree II.8 In code countries the incorporation of of legal capacity is not always as great. In a voluntary organisations is generally achieved by number of Member States legal capacity is the publication of statutes conforming to the law effectively unlimited (in any event as long as the in the relevant official journal, together with a body concerned acts in accordance with its

27 statutes). In others, however, neither voluntary they may have to pay income tax instead. Some organisations nor foundations can receive gifts Member States allow partial or full exemption and legacies or own real property without the from property taxes on real property owned or express permission of the relevant public occupied by the voluntary organisation or authority. foundation. In addition there may, rarely, be II.11 There are differences too when it comes partial relief from employment taxes. to the difficult question of the degree to which II.13 If the principle of a degree of tax voluntary organisations and foundations (but in exemption for some voluntary organisations and particular voluntary organisations) are allowed foundations is universal, the approach adopted to engage in economic activity without the loss by Member States differs significantly, as does of tax privileges. Some degree of economic the extent to which relief is given to bodies activity is allowed in all Member States, the rule working in different spheres. In some generally applied being that such activity must jurisdictions, voluntary organisations and not be voluntary organisations' principal activity foundations are in principle subject to the same in the sense that it must be carried out not for its tax regime as companies and receive no relief own sake but for some non-profit aim, and must from direct taxation unless they are recognised be ancillary to the objects of the voluntary (either, as having certain objects, by law, or organisations in the sense that it must be directly individually by the relevant authorities) for tax tied to the voluntary organisation's objects and purposes. In others (and in particular those not simply designed to improve the where voluntary organisations and foundations organisation's general financial position. In line are defined as being in the public interest) tax with the non-distribution constraint under which relief is accorded as of right but may be lost if all voluntary organisations operate, any surplus the voluntary organisations is regarded as from economic activity has, of course, to be put carrying on commercial or lucrative activity towards the achievement of the voluntary outside the limits recognised by law or organisation's aims. In some jurisdictions, it is jurisprudence. In such circumstances the possible for a voluntary organisation or privileged tax status of the organisation may be foundation to supplement its income by creating removed altogether. Alternatively relief may be or acquiring an entirely separate commercial withdrawn only in respect of those activities company which then remits its income to the which are regarded as profit making in the parent body. relevant sense. As far as competition rules are concerned, all II.14 Besides these differences in approach competition rules will be adhered to, taking into there are significant variations in the way in account the specificities of the sector. which Member States delineate the sphere of Taxation activity that they regard as being in the public interest. There are thus considerable differences in the extent of tax relief for which voluntary II.12 All Member States allow some voluntary organisations and foundations working in organisations - broadly speaking, those which different fields are eligible. Some jurisdictions are regarded as having purposes in the public define the area of public interest for the interest - some degree of relief from direct purposes of tax relief very generally and taxation either by exempting them from taxes broadly, including, for example, any activity of imposed on companies and other forms of profit public utility or benefit. Such jurisdictions making enterprise, or by imposing a lower rate typically give full relief to all bodies meeting this than that paid by companies, or by establishing a broad criterion. Other Member States take a minimum income threshold below which tax is much more restrictive approach. In one, for not incurred. These forms of relief are not example, reliefs are presently available only for a necessarily mutually exclusive. Where voluntary small number of individual organisations named organisations are exempt from company tax

28 by the law. Yet other Member States take both within a specified period. In some Member a restrictive approach and one which also States the voluntary organisation or foundation discriminates between different sorts of bodies. may be charged tax on the gift received. Thus only very limited relief may be granted to II.17 Member States also take a different all non-profit bodies, fuller exemption being attitude when it comes to legacies. In some confined to bodies operating in a restricted Member States individuals are free to leave all number of fields - such, typically, as health, or part of their estate to a voluntary culture or social services - and subject to organisation or foundation of their choice and, stringent management and accountability while this appears to be a less common practice requirements. Such special tax status is subject than in the past, many still do so. Alternatively to administrative and political discretion and in they may create a new body - usually a some Member States appears to be increasingly foundation - with some cherished aim. Such rarely accorded. testamentary gifts are generally tax free both to Tax relief for donors the donor's estate and to the recipient body. In those countries where voluntary organisations II.15 All Member States grant a measure of tax and foundations have limited legal capacity, relief to donors to voluntary organisations or however, it may be impossible to leave anything foundations, whether they be individuals or but a notional part of an estate to a voluntary companies or other forms of organisation. organisation or foundation unless the recipient Reliefs may be granted up to a maximum body has received the required dispensation amount in any one tax year or, alternatively, up from the authorities. Willing an estate may be to a maximum proportion (expressed as a further complicated by strict laws governing percentage) of an individual's gross or after-tax inheritance or by requiring that considerable income. The arrangements for companies are assets be set aside before a foundation can be usually similar, relief generally being granted created. either up to a maximum amount or up to a Indirect tax proportion of profits before or after tax. Minimum amounts or proportions may be II.18 Article 13(A)(1) of the Sixth Directive imposed and, in the case of companies, the 77/388/EEC of 17 May 197711 requires Member permitted base for calculating the maximum gift States to exempt from VAT "certain activities in may be turnover rather than profits. the public interest". These include hospital and II.16 Some Member States grant some degree medical care, goods and services closely linked of tax relief to donors to any voluntary to welfare and social security work or the organisation or foundation active in the public protection of children and young persons, interest as broadly defined. In others, more education and training for young persons and so restrictive criteria are applied, relief to donors on.12 Many voluntary organisations and typically being restricted to gifts to those foundations are, of course involved in the voluntary organisations which are themselves provision of just such services and their granted special status for tax purposes. Indeed, unless they possess the required status, voluntary organisations in these Member States 11 Known as the "Sixth Directive", it governs the do not normally have the capacity to receive harmonisation of the laws of the Member States gifts at all (see paragraph 5.10 above). In relating to turnover taxes and introduces a common jurisdictions where voluntary organisations or system of VAT and a uniform basis for its foundations normally have limited legal assessment. capacity, voluntary organisations given a general 12 These exemptions are subject to certain conditions dispensation to receive gifts may nevertheless be (see Article 13.A.1b),g),h),i)) and are not given required to dispose of any gift of real property automatically.

29 transactions are exempt from VAT, provided that they obtain prior authorization from the Member State in which they are established, i.e. they are exempt from the need to file VAT returns, to charge VAT to their clients or to pay output tax. In addition, under Article 13(A)(2) Member States can make the granting of any of the listed exemptions to any body (other than those governed by public law) subject to a number of conditions designed in effect to ensure that exempt bodies are bona fide non- profit organisations whose activities will not affect the competitive position of taxed commercial enterprises. On the face of it the ability to impose conditions on the granting of exemptions would seem to leave a good deal of scope for variations in the treatment of voluntary organisations but in practice, with a few minor exceptions all Member States appear to have implemented the exemptions outlined in Article 13. II.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 III THE LEGAL AND FISCAL artistic, or educational objectives (Law FRAMEWORK FOR VOLUNTARY of 25 October 1919). ORGANISATIONS International Associations under foreign (ASSOCIATIONS) AND law (Associations Internationale de droit FOUNDATIONS 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 BELGIUM in Belgium). 5. Membership nationality requirements ASSOCIATIONS ASBL: Three-fifths must be of Belgian nationality or resident (established and LEGAL POSITION registered) in Belgium; otherwise the association will not be able to claim legal 1. Right of association guaranteed by law? status vis-à-vis third parties, who will themselves, however, be entitled to hold Yes - Article 27 of the Constitution as this against them; revised in 1994. IA(Belgian law): at least one 2. Basic definition administrator of Belgian nationality, no An association, in the strict sense of the requirements for ordinary members. term, is a contract via which several IA(foreign law): none people agree to pool certain material resources with an aim other than the 6. Legal personality, and how acquired. production or sharing of profits. ASBL - by publication of statutes, plus (associations involve a degree of the full names, trades/professions and permanence in the shared existence). addresses of the association's 3. Minimum number of founders administrators in the annexes to the "Moniteur". Three (for ASBLs). IA (Belgian law) - by Royal Decree Two for AIs formed under Belgian or (published by extract in the “Moniteur”); foreign law. legal personality effective vis-à-vis third 4. Main types of association parties ten days after publication of the De facto associations (not incorporated statutes plus the full names, in one of the forms laid down by law, trades/professions and addresses of the and not having a legal personality). association's administrators in the ASBL (Associations Sans But Lucratif) annexes to the "Moniteur". defined by the Law of 27 June 1921 as IA (foreign law) - legal personality organizations which do not engage in effective vis-à-vis third parties ten days industrial or commercial operations, and after publication of the statutes, plus the which do not seek to procure material same information as for IAs under gain for their members. Belgian law (including the address of the International Associations under Belgian office in Belgium). Such publication law (IA) (Associations Internationale de requires prior “recognition” by the droit belge) limited to associations with Government.. philanthropic, religious, scientific,

31 7. Legal capacity Immovable property All types of association are restricted to 10. Commercial activity the permanent ownership of only such Unclear. In theory not allowed, but in immovable property as is strictly practice acceptable so long as not the required for the fulfilment of their association's principal activity (i.e. not purposes (extension of legal capacity for carried out for its own sake but for a the "Notre-Dame de la Paix" university non-profit end) and ancillary to its main departments at Namur and the "Saint object. (Ancillary means directly tied to Louis" university department at the association's objects and not simply Brussels). designed to improve the association's Donations financial position, and any profits are put ASBL: acceptance of donations of towards the association's aims.) movable property (including cash) above 11. Disposal of assets on liquidation FBR 400 000 and of immovable To ends of no benefit to the individuals property must be authorized by Royal involved, in general as laid down in the Decree. statutes. IA: acceptance of any donation TAX POSITION (irrespective of its value) must be authorized by Royal Decree. INDIRECT TAX No authorization required for: goods transferred to one ASBL by another 12. Article 13 of 6th VAT Directive ASBL to promote activities similar to All exemptions of relevance to those of the donor, donations granted by Associations coming under Article 13 public bodies to an ASBL, proceeds of have been implemented. Organisations collections, etc. must meet the criteria set out in Article 8. Statutes 13(A)(2)(a). ASBL: There must be a written 13. Other specific exemptions document (authenticated or under No. There is a lower rate (6%) for private seal) which must contain certain vehicles for the transport of disabled, items of information, including the sick, injured or blind persons, daily or objective for which the association was weekly publications of general formed (Article 2 of the law of 1919). information and "produits de IA (Belgian law): idem (the statutes récupération". listed in Article 2 of the law of 1919 14. Zero Rates must be mentioned). DIRECT TAX IA (foreign law) - As for IA (Belgian law), plus the address of the office in 15. General position Belgium; otherwise can exercise in A. Income tax Belgium all the rights accorded by its national statute. Not generally subject to company tax unless considered to be carrying on 9. Registration requirements commercial/gainful activity outside the None as such, but see publication limits recognised by law (Article 182 of requirements above (para 6). A list of the Code des impôts sur les revenus: international associations is kept by the CIR) or case law. Associations are liable Ministry of Justice. for the more favourable taxes on legal 32 persons (CIR Articles 220-226), authorities and not spend more than including in particular: 20% of its budget on administration. income tax and capital gains tax, and to 18. Qualifying purposes for recognition property tax unless the building is used Apart from institutions recognised by for religious, educational, medical, social law, the activities of approved bodies work or charitable purposes. must fall within one of the following B. other taxes fields: cultural promotion (libraries, A "compensatory inheritance tax" of private radio and television stations, 0.17% is payable on the association's museums, sports groups, tourism and total assets held in Belgium. Tax on gifts leisure associations), scientific research, to Belgian associations is reduced to 8% development aid, or social work. (1.1% if the donor is another ASBL or 19. Gifts by individuals IA , a recognised mutual society, an Tax-deductibility provisions apply solely establishment of public utility or a to gifts to recognized bodies (including professional union). Inheritance tax on associations and foundations). Up to legacies made in their favour is reduced 10% of total taxable revenue up to a to 8.8%. limit of Bfr 10 million (index-linked) is 16. Recognition of associations for tax deductible. Gifts of major works of art purposes to museums are deductible at Under Article 104, paragraphs 1 and 3-5 government valuation. of the “Code des impôts sur les 20. Gifts by companies revenus”, gifts to certain institutions and Tax-deductibility provisions apply solely organizations - in particular those to gifts to recognized bodies (including established in the form of associations or associations and foundations). Up to 5% foundations to which approval has been of net operating profit up to a limit of granted by law or by Ministerial or Bfr 20 million (non index-linked) is Royal Decree - are tax-deductible. deductible. Approval by Royal Decree is granted for a maximum period of three years ACCOUNTS AND AUDITING (renewable). Officially approved institutions are generally exempt from 21. See paragraph 17 above for recognised capital gains and property taxes. In associations. certain cases, express authorization is Other forms of associations do not have required for the acceptance of to publish accounts. In general, internal tax-deductible donations by approved supervision by members, external institutions established in the form of verification by tax authorities. associations or foundations (cf. 7 To obtain authorization by Royal Decree above). to accept a gift, ASBLs must 17. Criteria for recognition nevertheless have been lodging their To qualify for recognition, an institution annual accounts with the civil court, must have legal personality, be of a where they are open to public non-profit-making nature, both in itself inspection, since their establishment or at and as regards its members, be able to least for the past ten years. 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

33 FOUNDATIONS (may be done retroactively to the act of constitution. LEGAL POSITION 26. Legal capacity 22. Constitution Cf. ASBL (7 above) Requires agreement of public authorities 27. Disposal of assets on liquidation to establishment and to statutes and By court-appointed receivers for the Royal Decree. The statutes together purpose laid down in the statutes of the with the names and addresses of foundation or, failing that, to ends as administrators must be published in the close as possible to those for which the annexes to the "Moniteur", and any body was founded. changes in the statute must also be approved and published. TAX POSITION 23. Basic definition 28. As for recognised associations. Assets irrevocably given over to one of the following non-profit ends: ACCOUNTS AND AUDITING philanthropic, religious, scientific, artistic or educational. No members 29. (Articles 27 et seq.of the Law of 27 June The Government has a duty to ensure that the 1921). foundation's funds go towards the purposes for 24. Nationality requirements? which it was created. All foundations must Not for administrators, but siège must be produce annual accounts and budgets and in Belgium. present them to the Government within two months of producing them. Both are published in the annexes to the "Moniteur". At the request 25. Legal personality and how acquired of the government ministry, administrators Yes, by Royal Decree approving the found guilty of fraud or mismanagement can be statutes (published by extract in the removed by the court. In such cases, new “Moniteur”) and publication of the administrators are appointed according to the statutes in the annexes to the "Moniteur" statutes or, at the request of the court, by the Government.

34 DENMARK 9. Registration requirements The following categories of association ASSOCIATIONS must be declared in the "Register of Foundations" within three months of LEGAL POSITION their creation: employers associations; trade unions and professional 1. Right to association guaranteed by law? associations which have as their principal aim the protection of the economic Yes - under constitution interests of the professional group to 2. Basic definition which their members belong; all private None: NB Associations are not law associations with assets of more necessarily "non-profit" organisations. than 250 000 Kroner (approx 31 000 3. Minimum number of founders ECUs) except those:- contracted to carry out legal social aid obligations on Not stipulated behalf of communes or departments; 4. Types of associations bodies holding property connected with Single the national church; legally recognised 5. Membership nationality requirements religious congregations; or educational establishments authorised by the state, None - anybody (legal person or provided such bodies have no other individual) residing permanently in powers or objectives. Denmark can form an association. 10. Commercial activity 6. Legal personality and how acquired Associations, like foundations (see Yes - by will of the members. Legal below) can engage in economic activity, personality is acquired as soon as but receipts from such activity are members have signed adequate statutes subject to the same taxes as those and nominated a management imposed on commercial companies. committee. (For requirements see below.) 11. Disposal of assets on liquidation 7. Legal capacity Freely determined by the association's statutes (but see paragraph 17 below). Unlimited TAX POSITION 8. Statutes in prescribed form? No. But statutes of unregistered associations must at least contain rules INDIRECT TAX governing relations between members 12. Article 13 of 6th VAT Directive and the methods for nominating their All exemptions of relevance to management bodies. The statutes of associations coming under Article 13 registered bodies must contain have been implemented. provisions required by law - e.g. the 13. Other specific exemptions name, head office, the number of Sales of second-hand goods in shops members charged with managing the owned by recognised associations and association and how they are nominated, special events organised by them. membership conditions and relations between members, the accounting period 14. Zero rates and method of presentation of accounts Newspapers. etc. Changes have to be notified to the register.

35 DIRECT TAX the Funds Tax Act, are covered by the Corporation Tax Act, § 1. 1 (6). 15. General position Associations are liable to pay tax only on their earned income. Similarly, Employers' associations, trade unions associations are entitled to deduct and other professional groupings whose operating expenditure only if it relates to main purpose is to look after the earned taxable income. economic interests of the occupational group to which its members belong Trade associations are also entitled to (labour market groupings) are taxable deduct allocations intended to meet under the Funds Tax Act. Other purposes which accord with their associations which simply look after Memorandum of Association, insofar as their members' professional and those purposes may be considered to be economic interests of a market-and charitable or non-profit. service-oriented nature (trade Associations may set aside provisions to associations) are similarly liable to tax fulfil charitable or non-profit purposes at under the Funds Tax Act. The principle a later date. behind this Act is that foundations and 16. Recognition of associations for tax associations must basically be subject to purposes the same rules as public limited By law or, for the purpose of receiving companies. The rate of tax is the same as tax-deductible gifts or annuities, at the for corporation tax, i.e. 34%. discretion of the tax authorities. When reporting their taxable income, Separate lists of bodies eligible to labour market groupings need to include receive gifts or annuities are published only earned income, unearned income each year by the tax authorities. and profits. Membership subscriptions Application may be made for inclusion in are thus not to be counted as taxable either or both of these lists. Exemption income. These groupings are entitled to from tax on legacies may be granted at deduct for tax assessment only that the discretion of the tax authorities. expenditure which relates to taxable Recognition for these latter purposes is, income. in practice, generally given to bodies Trade associations are taxed in full on listed as eligible to receive tax deductible earned income, but other income is gifts. taxed only if it exceeds DKr 200 000. 17. Qualifying criteria for recognition Trade associations and labour market Bodies qualified to receive tax benefits groupings are entitled to deduct amounts are structured as non-profit associations distributed for charitable or non-profit or foundations. Precluded bodies include purposes. They are also entitled to those performing solely political tasks. It deduct provisions set aside for is a condition that gifts (and legacies) be non-profit or charitable purposes. used solely for charitable or non-profit Trade associations are also entitled to purposes to the benefit of a fairly large deduct amounts distributed for purposes group of people, and that any surplus at which accord with their Memorandum of liquidation be distributed in accordance Association, provided that the recipient with those same principles. In addition, of any given distribution is liable to pay the body must be resident in Denmark tax on the relevant amount in Denmark. (i.e. the head office must be located in Other associations, corporations and Denmark and most of the management foundations (stifelser) not covered by functions must be carried out there). It

36 appears that the rules qualifying the Register) can require an association to receipt of tax deductible annuities are include in its statutes any provision stricter. deemed necessary, and can ask for any 19. Gifts by individuals information thought necessary to verify that the law has been complied with. Single tax deductible gifts can only be made to bodies on the list published by FOUNDATIONS the tax authorities (see above, paragraph 16). Each gift must be at least 500 Dkr. LEGAL POSITION up to a maximum of 5 000 Dkr. a year. 22. Freedom to establish? The first 500 Dkr. are not deductible. In addition, deductible gifts can be made Yes, but the amount of capital given through covenants (contractual over should normally be at least 250 000 annuities) up to a limit of 15% of earned Dkr. (approx ECU 33,000). Foundations income plus capital gains before tax, or with a smaller amount of initial capital up to a maximum of 15 000 Dkr., can be created with the agreement of the whichever is the greater. Covenants Ministry of Justice, so long as the must normally be for a minimum of ten amount is adequate for the ends years. foreseen. 20. Gifts by companies As for individuals, except that single Foundations which are constituted as gifts are deductible from taxable revenue companies must have a start-up capital and covenants are allowed up to a of at least 300.000DKR maximum of 15% of taxable profit (or 23. Basic definition 15,000 Dkr.). None in statute. Essentially, goods or ACCOUNTABILITY capital given over to some purpose AND SUPERVISION forming an entity with its own legal personality managed according to its 21. own statutes by an independent board. None laid down for unregistered No members. associations. Registered associations must produce accounts conforming to A Fund is a corporate fund if it passes good practice and have them examined over goods or incorporeal rights, and signed by one or more auditors. disburses services and similar things for These accounts must be sent to the which it normally receives payment, or if Registrar of Foundations within six it exercises a profession with real estate months of the end of the accounting selling or real estate demise, or if it can period. If, at the time it is drawing up its qualify as a holding fund. accounts, the association has assets of 24. Nationality requirements? more than (approximately) Foundations can be created by foreigners ECU 380,000, then at least one of the but they must be established in auditors must be professionally qualified. Denmark. In addition, at least half of the In this latter case, the audit must be a members of the managing board and all full one and the auditor must be given the foundation's administrators must be every facility by the association. Failure resident in Denmark. The authority to conform to registration or responsible for foundations may, management, accounting requirements is however, grant an exemption from the punishable by a fine. The Minister of residence requirement. In any event, the Justice (who is responsible for the

37 requirement is waived if this provision TAX POSITION conflicts with international obligations. 25. Legal personality and how acquired 28. Newly-established foundations must Foundations covered by the Funds Act report to the Ministry of Justice (Civil or the Commercial Funds Act are Law Directorate) and the tax authorities taxable in accordance with the Funds (Inland Revenue) in the foundation's Taxation Act. The principle behind this home district within three months of latter Act is that funds and associations being set up. This is simply a formal must basically be subject to the same requirement and has no legal effect on rule as public limited companies. The the foundation's legal status. Corporate rate of tax is the same as for corporation funds acquire legal personality by tax, i.e. 34%. registration in the register of Corporate Earned income must be included in full Funds at the Danish Commerce and when taxable income is reported. The Companies Agency, for which the first Dkr 25 000 of other income is Minister of Industry, Trade and Shipping tax-free. is responsible. Foundations are entitled to deduct 26. Legal capacity amounts distributed for charitable or Unlimited non-profit purposes. They are also 27. Disposal of assets on liquidation entitled to deduct amounts distributed for purposes which accord with their Foundations can be merged or liquidated Memorandum of Association, provided if their assets are no longer that the recipient of any given commensurate with their objects. distribution is liable to pay tax on the Merger or liquidation - by distribution of relevant amount in Denmark. They are the capital - can take place after further entitled to deduct provisions set application by the foundation's aside for non-profit or charitable administrators and with the agreement of purposes. the Ministry of Justice, or can be imposed by the Minister. Bodies ACCOUNTABILITY authorised to receive gifts must agree to AND SUPERVISION distribute any surplus on liquidation to a For the most part as for registered similar institution. associations (see paragraph 21 above). Corporate funds can be merged or But in addition: the administrative liquidated if their assets are no longer authority responsible can remove commensurate with their objects or if members of the board who commit acts their purposes are no longer being which render them unworthy of their served. Merger or liquidation - by position, who do not fulfil the nationality distribution of the capital - can only take or residence requirements, who fail to place after application by the board of act in conformity with the statutes, or the corporate fund and with the who are demonstrably incapable of agreement of the Administration of the fulfilling their role; the administrative Corporate Funds, which normally is the authority can also appoint members of Danish Commerce and Companies the board (even in non-conformity with Agency, with consent from the Ministry the statutes); of Justice. bankrupt members of the board must resign;

38 founders and their relatives cannot form normally be resident in Denmark and the majority on the board without the must be absolutely independent of the permission of the administrative foundation, its board members and of authority. Nor, in the case of a any of its employees concerned with foundation created by a company, can accounting or the administration of its anybody who owns more than half the assets. The audit must be detailed and voting capital form, conjointly with the critical, and the auditor must abide by founder and his or her relatives, the any requirements imposed by the majority on the board without the relevant authority. He or she must be permission of the administrative given every facility by the foundation; authority; members of the board are responsible for board members cannot receive larger any damage to the foundation due to fees for their services than are their management, as if relevant are the considered normal for the type of work foundation's auditors and the companies, involved. if any, to which they belong; board members cannot take part in foundations can set aside reasonable debates in which they have an interest; sums to their reserves, but aside from all foundations must basically have their this their funds must be spent on their annual accounts audited, and if their own objects. The amounts allocated for capital in the preceding year was over 3 reserves or spending can be varied by the million Dkr, the auditor must be a authority responsible. chartered accountant. The auditor must

39 GERMANY 6. Legal personality and how acquired. By entry in the register of associations in ASSOCIATIONS (VEREINE) the court local to the head office (Article 21 BGB). LEGAL FRAMEWORK 7. Legal capacity. Unlimited 1. Right of association guaranteed by law? 8. Statutes Yes: Constitution, Article 9, paragraph For registered associations (BGB 57 and 1: German nationals have the general 58). right of association. The legal position of the association is governed by Article 21 9. Registration requirements. et seq. of the Civil Code (BGB) and by For associations wishing to acquire full the relevant provisions of the Law on legal personality. Association (VereinsG). 10. Commercial activities. 2. Basic definition A non-profit association may engage in No legal definition. In legal practice and commercial activities if they are purely theory an association is defined as a ancillary, do not constitute the main permanent and structured group of object of the association and play a very persons (natural or legal) who form an secondary role in relation to its main entity on a voluntary basis with a view to non-profit activity. If these commercial attaining a common object. The concept activities are not completely ancillary, of the communality of the members must they cannot constitute the association's be expressed at least by a common main or statutory activity. In principle, denomination and in a body which ancillary activities are allowed only if represents them. their purpose is to help in the 3. Minimum number of founders. performance of activities to which tax concessions are attached (not only fund Two founder-members. However, there raising) and if this purpose can be must be at least seven when the statutes attained only through this activity are registered with a view to obtaining (Articles 65 to 68 of the tax code). The legal personality. income, profits and assets arising from 4. Types of associations. other commercial activities of an The Civil Code governs non-profit association which is recognized as a associations (Idealvereine, Article 21 public utility are liable to ordinary tax. BGB) and commercial associations 11. Disposal of assets on liquidation which aim to make profits (wirtschaftliche Vereine, Article 22 Assets pass to the non-profit association BGB). However, the latter are of only named in the statutes. The statutes may marginal importance, and require lay down that the Annual General authorization by the public authority Meeting should nominate the non-profit concerned. The result, de facto, is that association authorized to receive the the concept of an association is more or assets, but in this case the authorization less restricted in Germany to non-profit of the tax authorities is required. organizations, irrespective of whether TAX POSITION they have legal status. 5. Membership nationality requirements INDIRECT TAX No restrictions. 12. Article 13 of the Sixth VAT Directive 40 All the exemptions applicable to Under Articles 52-54 of the Tax Code, associations under Article 13 apply. any association whose statutes and 13. Other specific exemptions actual management are exclusively inspired by altruism and the general None good and which is directly engaged in a 14. Zero rates philanthropic or religious activity is No recognized as being of public utility for tax purposes. DIRECT TAX In tax law, a distinction is made, with 15. General position regard to the financial activities of an association of public utility, between associations are liable for corporation activities strictly connected with the tax. If their income does not exceed declared object in order to enjoy tax DM 7 500 they are exempt from concessions and financial activities corporation tax (concession). unconnected with this object and 16. Associations which are recognized or therefore taxable. which enjoy tax concessions. Activities strictly connected with the Tax concessions are granted to declared object are those for which the associations whose statutes and effective receipts are wholly allocated to the management are inspired exclusively by object which the association has altruism and the general good and which declared in order to enjoy tax are directly engaged in a philanthropic or concessions. There are no limits on these religious activity (Articles 51 to 68 of activities, which are deemed to be the tax code). Tax concessions are not without profit aim, and which enjoy tax confined to associations, but are granted concessions. on the same conditions to any legal On the other hand, activities not directly persons within the meaning of Article 1 related to the declared object are of the law on corporation tax. taxable. These are mainly commercial 17. Criteria for recognition activities engaged in by the association It must be clearly apparent from the through enterprises engaged to raise statutes and the association's funds to be used to attain the object for administration that in its actions it is which the association has applied for tax pursuing an objective for the public concessions. These activities are taxed in good. The statutes must state very the same way as any other commercial precisely: activity, but do not entail the loss of - the object; non-profit status provided that they do not take over from the main activity of - the way in which the object is the association (first paragraph of Article attained; 55 of the Tax Code). - the non-profit activity aimed solely 19. Gifts by individuals and directly at this object; Gifts made by a natural or legal person - that if the association were to be liable to tax in Germany with the aim of wound up or deprived of its status as a promoting charitable, ecclesiastical or public utility, its assets would remain in religious activities for activities which the public utility field; are recognized as being for the general - that the effective management must good to an association recognized by the be in accordance with the statutes. tax authorities as being of public utility 18. Recognized bodies can be deducted from the donor's taxable 41 income up to certain ceilings; the forwarded either to the Ministry of ceilings vary, depending on the purpose Internal Affairs, which is empowered to of the gift, by between 5% and 10% of dissolve an association covering more the donor's total taxable income. than one “Land”, or - if the association 20. Gifts by companies does not cover more than one Land - to the senior government authority in the Companies may deduct gifts up to 0.2% Land concerned . of the sum of total turnover and salaries and wages paid. FOUNDATIONS (STIFTUNGEN) 20(a). Gifts to non-resident associations 22. Constitution Such gifts are not deductible. By a Memorandum of Association ACCOUNTS AND AUDITING subscribed to by any person, physical or legal, inter vivos (in which case it can be 21. Accounts revoked up to the date of approval), or through a will. The memorandum must The association must produce an annual state the object of the foundation, the profit and loss account. This resources available for pursuing this accountancy obligation vis-à-vis object and the governing body or bodies. members is laid down in Articles 27 (3) The resources provided must be and Article 666 of the Civil Code, and adequate for pursuing the object which vis-à-vis the tax authorities (for the the foundation has set itself. An purposes of establishing the non-profit application for authorization must be nature of the social object), in Article 63 made to the Land in which the (3) of the Tax Code. foundation has its head office (under the If the association is engaged in a law of the Länder). An appeal against commercial activity, it is required by refusal of authorization may be made commercial law to keep accounting only on the basis that the administration records in the same way as businesses. had not applied its own criteria. In all cases, two sets of accounts must 23. Definition be presented, one for taxable activities and the other for non-taxable activities. Assets to which a legal personality attaches. Auditing 24. Nationality requirements The administrators are responsible to the Annual General Mmeeting for keeping Any person may be a founder. proper accounts. The statutes may 25. Acquisition of legal personality provide for a supervisory body and also Through approval by the competent for its powers. If a supervisory body authority. (Aufsichtsrat) is set up, the provisions 26. Legal capacity applicable to GmbH and AG forms of companies are not applicable. The The maximum capacity required to attain responsibilities of such a body are the object of the foundation. It may do determined by the statutes. all that is necessary, or even simply useful, in pursuing its objective. The task of auditing associations has passed to the tax inspectorate. It 27. Disposal of assets on liquidation comprises the process of regularly If it has become impossible for the recognizing and checking their foundation to accomplish its object, or if non-profit status. As soon as a non-fiscal the foundation is jeopardizing the public infringement is detected, the file is 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 final and the association is entered in the register of that court. ASSOCIATIONS 7. Legal capacity Full legal capacity except for acts LEGAL FRAMEWORK inherent to physical persons. 8. Statutes 1. Right of association guaranteed by law? They must be drawn up in writing and Yes. Article 12 of the 1975 Constitution are subject to rules on publicity. protects non-profit associations and 9. Registration requirements unions provided that they conform to the laws of the State, which cannot make the Registration constitutes acquiring legal exercising of this right subject to prior personality. authorization. 10. Commercial activities 2. Basic definition Making a profit occasionally in order to Article 61 of the Civil Code. A union of obtain resources for the association is persons with legal personality, formed authorized. with a view to pursuing a given object, 11. Disposal of assets on liquidation as well as a collection of goods assigned Article 77 of the Civil Code. The assets to serving a given object. of a legal person which has been wound 3. Minimum number of founders up pass to the State, unless provided Twenty otherwise by law, the charter or the statutes, or by the decision of the 4. Types of associations competent authority. The State is bound Common law associations to pursue the object formerly pursued by Special associations the legal person, using these assets. The Unions of persons (without legal assets of the association wound up may personality and to which the provisions not under any circumstances be shared relating to companies apply if no other among the members. provision is made). TAXATION 5. Membership nationality requirements The right of association is extended to INDIRECT TAXATION non-nationals under Article 11 of the 12. Article 13 of the Sixth VAT Directive European Convention for the Protection Application of the exemption laid down of Human Rights and Fundamental in Article 13. Freedom 13. Other exemptions 6. Legal personality and how acquired Specific rate (4%) for associations Following the application to the Court of pursuing an object for the public good. First Instance in the area of the administration's office (the 14. Zero rates Memorandum of Association and the No statutes must be appended), the legal DIRECT TAXES authorities verify that the provisions of the law are complied with (check on 15. General position legality). The association acquires legal personality once the Court's decision is 44 Income tax. The basis of taxation for If the amount exceeds DR 100 000 in legal persons not pursuing a one year, it must be deposited in a loan profit-making object is constituted by and deposit fund. the net taxable income arising from the 20. Gifts by companies leasing of buildings or land and Tax-deductible provided that they have securities. The tax is not payable on been deposited in a loan and deposit other income or receipts necessary for fund. pursuing the association's object, such as members' regular subscriptions. In the 20(a). Gifts to non-resident associations case of foreign associations, only Not tax-deductible. receipts necessary for pursuing the ACCOUNTS AND AUDITING association's object are not taxed. 16. Recognition of association for tax 21. Accounts purposes The auditing authority is generally the Associations with an object which is for local authority. the public good enjoy exemption from tax on income arising from the leasing of FOUNDATIONS land and real estate and from securities. There is also exemption from paying 22. Constitution inheritance tax and taxes on gifts made Concession system. Act of foundation (act to legal persons which do not have a intra vivos before a notary or a sworn profit-making object, are legally statement - unilateral act by the founder) constituted in Greece and pursue an and presidential decree which approves object of a national, religious, the will of the founder and is issued by philanthropic, pedagogic or artistic the competent Minister, depending on nature or for the public good. The the objects of the foundation. exemption covers all non-national legal 23. Definition persons with the same characteristics regarding assets which they might inherit Set of goods intended to implement a in Greece, subject to the principle of project for the public good (in principle) reciprocity. and with a non-profit object. 17. Criteria for recognition 24. Nationality requirements A very broad concept of the public 25. Acquisition of legal personality good. Covers any object which is not of Concession system. Acquisition occurs strictly private interest and concerns the on the day of publication in the Greek interests of large groups of persons Official Journal of the decree granting (philanthropic, religious, social, artistic, authorization. educational). 26. Legal capacity 18. Qualifying objects for recognition Full. Acquiring legal personality does The competent authority for granting not automatically imply acquisition of exemption is the tax inspectorate in the the assets assigned. region of the association's head office. 27. Disposal of assets on liquidation 19. Gifts by individuals TAXATION Tax-deductible from taxable income, but the donor must have Greek nationality. 28. As for associations.

45 ACCOUNTS AND AUDITING 29. Accounts Audit board. 30. Auditing The operations of the foundation are monitored by the State.

46 SPAIN property owners, political parties, sports associations, students etc.). ASSOCIATIONS Associations with social, educational, cultural or sporting objects, or those seeking more generally to promote the LEGAL FRAMEWORK public good, may be recognized as 1. Right of association guaranteed by law? "public utilities" by the Spanish Council - Articles 22 (on associations) and 34 of Ministers, on a proposal from the (on foundations) of the Constitution. Minister for the Interior, which gives - Law 191/1964 of 24 December them several advantages, including tax 1964 governing associations and advantages. Supplementary Decree of 20 May 1965. 5. Membership nationality requirements - Law 30/1994 of 24 November 1994 Non-nationals legally resident in Spain on foundations and tax advantages for have the right of association and may private persons engaged in activities for exercise it in conformity with the laws the public good. and regulations. (organic law 7/1985 on - Several laws of Autonomous the rights and liberties of non-nationals Communities. in Spain) 2. Basic definition 6. Legal personality Group or union of several natural Article 25 of the Civil Code grants the persons with legal capacity which carries status of legal person to corporate out the wish of this group to pursue on a bodies, associations and foundations for permanent basis a given permissible the public good recognized by the law, object laid down by the statutes of the and to associations with specific association (definition in the strict interests, whether civil, commercial or sense). industrial, to which the law grants their 3. Minimum number of founders own personality independent of that of its members. The law of 1964 specifies a meeting at which "several persons" agree, without In accordance with the legal practice of anywhere stating the number of persons the supreme tribunal, legal personality or founder members required. arises from a contract of association. In Nevertheless, the usual practice is to Article 22 (3) the Constitution states require a minimum of three persons. that associations are entered on the appropriate register "for publicity 4. Types of association purposes only". 1 - Associations governed by the Law 7. Legal capacity of 24 December 1964 (which does not govern public or private foundations, Article 38 of the Civil Code grants legal civil or commercial organizations or capacity to legal persons, which includes corporate bodies). associations which are recognized in law. They may therefore acquire and 2 - Associations governed preferentially possess goods, and contract debts or by special statutes (associations of engage in civil or criminal proceedings. cannon law, associations established by the state to attain specific objects, trade Nevertheless, associations which are not unions and similar associations, recognized as public utilities may not associations of civil servants and military acquire premises which are not strictly personnel, administrative associations of necessary for achieving their object, and

47 they must obtain authorization for DIRECT TAXES certain private donations. 8. Statutes 15. General position Article 3.2 of the Law of 1964 lists the Associations which have been information which must be given in the recognized as public utilities and which statutes. fulfil the conditions laid down in Article 9. Registration requirements 42 of the Law on Foundations and Tax Concessions for Private Participation in Entry in a register is obligatory. The Activities for the Public Good have procedures for such registration vary several tax advantages. depending on the current provisions in the autonomous region of the head 1 - They are exempt from corporation office of the association. For tax in respect of the activities which associations subject to the Law of 1974, constitute their social or specific object, there is a register for each province and including additions to assets derived a national register. from acquisitions or transfers of cash bonds. They are also exempt in respect There are also special registers for of any profit from commercial activity, certain associations governed by specific provided this corresponds to the entity's systems. object or specific purpose. 10. Commercial activities Income from commercial activities or Authorized from capital is not exempt, but is also 11. Disposal of assets on liquidation eligible for certain concessions, in The procedure for disposing of assets in particular the tax band, which is a fixed the event of the association being rate of 10%. disbanded must be specified in the 2 - They are exempt from most local statutes. taxes. TAXATION 16. Associations which are recognized or which enjoy tax concessions INDIRECT TAXATION Associations which have been recognized public utilities and which 12. Article 13 of the Sixth VAT Directive: fulfil the conditions laid down in Article exemptions provided for in Article 13. 42 of the Law on Foundations and Tax Concessions for Private Participation in Law 37/1992 of 28 December 1992 on Activities for the Public Good, and in VAT does not exempt associations particular the following conditions: directly, in that the different rates do not depend on the legal form of the entity - they must pursue objects for the but on the nature of its activities. public good (social assistance, civic However, it provides for numerous matters, educational, cultural, sporting, operations common to associations health, development cooperation, which are exempt or are eligible for a environmental protection, promotion of deduction. the "économie sociale" , voluntary social work or research work etc.); 13. Other specific exemptions - they must allocate at least 70% of See 12. their net income to these objects; 14. Zero rates - they must submit their accounts No annually to the competent body in good order; 48 - in the event of liquidation, they must In addition, participation by businesses assign their assets to achieving objects in activities for the public good, and - in for the public good; particular - the acquisition of works of - their statutory representatives must art to be offered as a gift and be honorary officials. expenditure on promoting and developing certain arts also attract tax 17. Criteria for recognition as a public utility. concessions. These are given in Article 4 of the Law 20(a) Gifts to non-resident associations on Associations of 1964, as amended by the Law on Foundations and Tax There is no legislation governing Concessions for Private Participation in associations on this point (for Activities for the Public Good. The main foundations cf. 24). criteria are: ACCOUNTS AND AUDITING - the statutory objects must be for the public good; 21. Accounts - activities must be open to all and not Article 11 of the decree of 20 May 1965 restricted to members; provides that associations must keep - the association must be non-profit, accounts which show all receipts and any profits must not be shared out, and expenditure. These accounts must be no fees must be paid to the committee sent to all members of the association, for carrying out its duties; and then submitted annually to the Annual General Meeting, with a budget - it must possess the human and for the following year. material resources necessary for achieving its statutory objects. Lastly, they must be sent to the provincial authorities in the case of - it must have been in operation associations in an Autonomous continuously for two years prior to Community which has no regulations on submitting its application. this matter, or to the Ministry of Justice 18. Types of associations recognized in the case of associations which have cf. 16 and 17. been recognized public utilities. 19. Gifts by individuals Auditing Donors who are natural persons may The law of 1964 provided for the deduct from their taxable income auditing of associations by the donations or gifts to bodies which enjoy government authorities, but this was tax concessions, under certain conditions implicitly repealed by the 1978 and with certain limitations. Normally, Constitution. this deduction will be 20% of the value Associations recognized as public of the gift. However, total tax-deductible utilities must submit an annual report of expenditure must not exceed 30% of their activities during the previous taxable income. financial year to the Ministry of Justice. 20. Gifts by companies FOUNDATIONS Organizations with a legal personality may under certain circumstances deduct 22. Constitution gifts made to bodies which enjoy tax A foundation may be constituted concessions. This deduction may not "inter vivos" or "mortis causa". In the exceed 10% of taxable income in most first case, there must be a notarized cases. written act, and in the second case, its

49 constitution must be stipulated in the foundation, in accordance with the will. statutes. Notwithstanding, Article 19 of Entry in a register of foundations, which the above law sets limits to the disposal falls within the competence of the of the goods of the foundation and Ministry of Justice, is compulsory and makes several transactions subject to the constitutes official formation of the prior authorization of government foundation. authority. 23. Definition In addition, foundations may not have shares in trading companies in which Article 1 of the Law on Foundations of they are liable to be responsible 1994 defines foundations as themselves for the company's debts. organizations constituted on a non-profit They may, however, hold shares in joint basis which, at the wish of their stock companies. founders, have their assets assigned permanently to an object for the public 27. Disposal of assets on liquidation good. Goods and assets resulting from 24. Nationality requirements liquidation of the foundation must be assigned to private non-profit bodies and Non-nationals may set up a foundation foundations pursuing objects for the in Spain. public good which are specified in the In addition, like Spanish foundations, charter or in the statutes of the foreign foundations can also engage in foundation. In the absence of such activities in Spain which relate to their stipulations, the governing body or object and can enjoy the concessions government authorities will decide which granted to Spanish foundations, of these organizations will assume these provided they are represented on rights. Spanish territory and are entered in the Nevertheless, by derogation to these register of foundations. provisions, the act establishing the Registration may be refused if their foundation or its statutes may provide object is not for the public good or if that these goods must be assigned to they are not legally constituted in other public bodies pursuing objects for accordance with their national legislation the public good (Article 31 of the above (Article 5 of the above law). law). 25. Acquisition of legal personality TAXATION Foundations assume a legal personality once they are entered in the register of 28. the charter. Registration may be refused Foundations legally entered in the if this act is not in conformity with the register which fulfil the conditions laid above law. down in Article 42 of the above law 26. Legal capacity enjoy the same tax concessions as The assets of the foundation may consist associations (cf. 15-20). To do so, they of any kind of goods and assets which must be accredited by the Ministry of can be valued in financial terms. The Finance and must expressly apply for foundation must be the owner of these them. and an inventory of them must appear in the register. The assets are managed and disposed of by the body which manages the 50 ACCOUNTS AND AUDITING

29. Accounts The management of the foundation must draw up an inventory, a balance 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.

51 FRANCE 7. Legal capacity An association declared in this way may ASSOCIATIONS acquire, possess or administer “only such premises as are intended for LEGAL FRAMEWORK management of the association and meetings of its members, and only such 1. Right to association guaranteed by law? buildings as are strictly necessary for the accompishment of its stated aim” Yes - (by the preamble to the (Article 4 of the law of 1901). It may Constitution of 1958 containing the receive gifts and legacies only if it has as principles laid down in the Declaration its exclusive purpose the provision of of the Rights of Man and of the Citizen assistance and welfare services or of 1789) and by the Constitutional scientific or medical research, or if it is a Council (Decision of 16 July 1971, cultural or family association or an French Journal Officiel, 18 July 1971). association affiliated to a federation 2. Definition recognised as a public utility. An association is the convention An association which is recognized as a whereby two or more persons have in public utility has a somewhat wider common, on a permanent basis, their capacity, since the term "strictly" is not knowledge or activities for a purpose applied. It may also acquire woodlands other than sharing profits (Article 1 of and land for forestry, and it can receive the law of 1901). gifts and legacies. If it receives as a gift 3. Minimum number of founders or legacy from a will a building which is Two not necessary for its operation, it must sell it and keep the proceeds. The 4. Types of associations charitable works proposed must be Non-recognized or de facto associations authorized by the authorities in each Recognized associations case and in advance. Associations recognized as a public 8. Statutes utility (no legal definition, this No prescribed form for the statutes, recognition is a discretionary act by the which constitute the law of the parties. State). 9. Registration requirements 5. Membership nationality requirements None, see point 6 of declaration No particular conditions procedure. 6. Legal personality and how acquired 10. Commercial activities Non-recognized associations - not Not prohibited, either in the law of 1901 applicable or in legislation. Profits can be made. Recognized associations - by declaration 11. Disposal of assets on liquidation to the local authorities of the name of The balance of the assets must not be the association, its objects, its premises assigned to the members; in accordance and the name, profession, domicile and with the statutes and/or the Annual nationality of each of the directors, with General Meeting, it is generally made two copies of the statutes. This over to a non-profit organization which declaration must be published in the pursues a similar purpose. French Journal Officiel.

52 TAX POSITION public services, i.e. engaging in hunting or fishing, organizing official sporting competitions etc. INDIRECT TAX Associations recognized as public 12. Article 13 of the Sixth VAT Directive. utilities All the exemptions applicable under Application for recognition is made to Article 13 seem to be included in the the Ministry for the Interior and granted, General Tax Code. under certain circumstances, by decree 13. Other specific exemptions by the Conseil d'État. This recognition Certain exemptions from the registration imposes certain obligations but gives taxes. broader entitlement to receive gifts and 14. Zero rates acquire and possess premises. None 17. Criteria for recognition as a public utility DIRECT TAXES Must be a recognized association, and have operated regularly as such for three years, must pursue an object for the 15. General position public good, cover more than the local When they are exempt from VAT and area, have at least 200 members, and are non-profit, associations are not liable must adopt model statutes drawn up by to corporate taxes, such as corporation the Conseil d'État. tax, apprenticeship tax and trading tax. 18. Criteria for recognition When they are not liable to the taxes levied on businesses at the ordinary rate Recognition is conferred by the state, ,they are liable to tax on their assets. which assigns tasks concerned with public services to associations. These All associations are liable to local taxes, associations receive various types of aid, i.e. accommodation tax (except for which are subject to administrative unfurnished premises and those open to constraints and rigorous monitoring. For the public) and property tax payable by instance, the "ordonnance" of 8 August all owners of premises (except low-cost 1985 gives sporting federations the accommodation). monopoly for organizing competitions. When they are exempt from VAT they 19. Gifts by individuals are liable to a payroll tax. If they have more than 10 employees, they are liable Private gifts are tax-deductible at the to the contribution paid by employers for rate of 1.25% of taxable income for ongoing vocational training and the recognized associations, and 5% for employers' contribution to the building foundations and associations recognized effort as public utilities. These gifts give eligibility to a reduction in tax equal to They are liable to tax on income from 40% of the value of the gift (50% when their assets. they are for free meals or 16. Recognition of associations accommodation for people in difficult If an association wishes to engage in circumstances). Only gifts which are certain specific activities, it must obtain made to a French association or a official approval, e.g for tourism and foreign association operating in France leisure activities, certain "authorized" are tax-deductible. activities in the field of health, social work or medical/social work, activities recognized as being of the nature of 53 20. Gifts by companies Business foundation (Law of 4 July Gifts from companies are tax-deductible 1990). There is no need for these to be at the rate of 37% or 42% of the taxable recognized as public utilities. They are profit up to 2‰ of turnover for gifts to established for a given period - generally recognized associations, and 3‰ for 5 years renewable - and their action gifts to recognized public utility programme is approved by the associations and to foundations. administrative authorities. Only gifts which are made to a French 23. Basic definition association or a foreign association Irrevocable assignation of goods, rights operating in France are tax-deductible. and resources to work for an object for the public good which is non-profit. ACCOUNTS AND AUDITING 24. Nationality requirements 21. Accounts By definition, one-third of the Only associations recognized as public administrative committee is composed of utilities, associations subsidized by local eligible persons representing the authorities and associations engaged in government authorities and designated commercial activities above certain persons. To engage in activities thresholds (concerning their budget, permanently in France or to have the balance or number of employees) have a same capacities as a French foundation, legal obligation to provide accounts in a a foreign foundation must be recognized standardized form. as a public utility. FOUNDATIONS 25. Acquisition of legal personality This is acquired once the decree of recognition as a public utility has been LEGAL FRAMEWORK approved by the Conseil d'État and 22. Constitution published in the French Official Journal. Public utility foundation. The draft must 26. Legal capacity be submitted to the Minister for the Interior and then to the Conseil d'État, Same conditions for accepting gifts as which in granting recognition as a public for an association recognized as a public utility authorizes the foundation to utility, but a wider entitlement to possess receive its working capital. The statutes assets including premises. must be drawn up in accordance with the 27. Disposal of assets on liquidation model statutes issued by the Conseil As for associations recognized as public d'État, which lay down the composition utilities (cf. 11), but the administrative of the administrative committee. This authority's agreement must be obtained. usually follows the principle of thirds, one third of its members being TAXATION nominated by the founders, one third being members ex officio representing 28. As for associations the public authorities, and one third ACCOUNTS AND AUDITING being nominated by the "conseil d'administration" - management Auditing and the obligation to produce committee. accounts are the same as for associations Sheltered foundation: set up within a recognized as public utilities. public utility foundation without creating a new legal entity (rare).

54 IRELAND are no shares in the company and the members simply guarantee to pay a ASSOCIATIONS certain (usually nominal) amount towards the debts of the company if it is wound up. LEGAL POSITION (c) Industrial and provident society. This 1. Right of association guaranteed by law? type of structure is frequently used by co-operatives. In practice, many of the The general right to form associations is rules in relation to the industrial and guaranteed by Article 40.6 of the Irish provident society are quite similar to the Constitution. The more specific right to company limited by guarantee. form associations for non-governmental However, there is one important organisations is set out in the Companies difference in that whereas a group can Acts and in the Industrial and Provident become a limited company for any legal Societies legislation. purpose, in order to be registered as an 2. Basic definition IPS, a society must be formed "for There is no specific definition of carrying on any industries, businesses or "associations" or similar term in Irish trades". law. The specific form which an There are also various other types of association takes on is determined by the structure which may be of relevance to type of legal structure which it opts for. non-governmental associations including This is discussed further below. Trusts, Friendly Societies, etc.. 3. Types of association However, the above three are the main There are three main types of structure types of structure which would be used relevant to non-governmental in Ireland. organisations: 4. Minimum number of founders (a) Unincorporated bodies. Such bodies Both the company limited by guarantee may have a written Constitution. This and the industrial and provident society would set out the aims and objectives of must have at least seven members. There the organisation and possibly details of is no legal minimum to form the membership and Management unincorporated bodies. Committee. In legal terms, the 5. Membership nationality requirements Constitution is a contract or binding There are no specific nationality agreement between the members of the requirements in relation to any of the group to abide by the terms of the main three types of legal structure. agreement, i.e. to try to achieve the aim set out in the Constitution to carry out 6. Legal personality and how acquired their activities in accordance with the The unincorporated body has no Constitution, etc.. However, while the separate legal personality. Both the Constitution is legally binding as company limited by guarantee and the between the members of the group, it industrial provident society do have has no effect in relation to non members. separate legal personalities. This is Thus the group does not have a legal acquired by submitting the Constitution personality of its own. of the body in the required form to the (b) A company limited by guarantee. relevant government organisation which This is a variation on the standard form is authorised to certify the particular of legal personality for business firms in body. The Constitution can then be Ireland. In this type of company there 55 inspected by members of the general purposes only", i.e. the Constitution or public. Rules of the group must contain a 7. Legal capacity binding clause which guarantees that any money received by the group will be The legal capacity of the body is set out used only for charitable purposes. In in its Constitution. In the case of the addition, it is unlikely that a Constitution company limited by guarantee, this is which contained elements of a known as the Memorandum and commercial nature would be considered Articles. In the case of the industrial and to be charitable by the Revenue provident society. this is known as the Commissioners. Rules. There are no specific limitations on legal capacity in relation to non- 11. Disposal of assets on liquidation governmental associations other than The Companies Acts and the Industrial those generally laid down by law in and Provident Societies legislation do relation to legal structures generally. not contain any general restrictions in 8. Statutes in proscribed form? relation to disposal of assets on liquidation. Again, where a company In the case of the company limited by wishes to be recognised as charitable by guarantee, the statutes must be drawn up the revenue Commissioners, the in a form acceptable to the Companies Commissioners will normally insist that Office which is the relevant registration on being wound up, any assets will be body. Sample memorandum and Articles transferred to another body of a are published in the Companies Acts, charitable nature. and these or some variation on these would generally be utilised by such TAX POSITION companies. In the case of the industrial and provident society, again the Rules INDIRECT TAX must be acceptable by the Registrar of 12. Article 13 of the 6th VAT Directive Friendly Societies, who is the relevant registration body. There is no official Article 13 has been implemented in form of prescribed rules but the Ireland. Registrar has approved rules drawn up 13. Specific exemptions by various non-governmental Specific exemptions of relevance to organisations, and these or some NGOs (including those required by the variation on them are generally utilised. 6th VAT Directive) include: 9. Registration requirements (a) school or university education and As set out above, both bodies must be vocational training or re-training; registered with the relevant registration (b) hospital and medical care or authority. Other than this, there is no treatment provided by a hospital, nursing specific registration requirement. home, clinic or similar establishment; 10. Commercial activity (c) services for the protection or care of There is no specific limitation on the children and young persons; ability of these types of body to carry on (d) supply of goods and services closely commercial activity. However, where a related to welfare and social security by body wishes to obtain exemption from non-profit organisations; certain taxes from the Revenue (e) supply of services and goods for the Commissioners on the basis of its benefit of their members by non profit charitable activities, it must be "the making organisations whose aims are subject of a binding trust for charitable primarily of a political, trade union, 56 religious, patriotic, philosophical, In addition to satisfying the above, the philanthropic or civic nature. company must keep annual audited 14. Zero rates accounts and make these available to the Revenue Commissioners on request; it Items which are zero-rated include must prohibit the payment of fees and/or medical equipment and appliances, i.e. salaries (other than out-of-pocket invalid carriages and other vehicles, expenses) to officers and directors for orthopaedic appliances, etc., walking services rendered; it must also satisfy the frames and crutches and similar items. other criteria discussed, including those DIRECT TAX in relation to the winding up of the organisation. 15. General position The taxes from which an organisation The Companies Acts and the Industrial may be exempt include income tax, provident Societies legislation do not corporation tax (in the case of contain any general exemption from companies), capital gains tax, deposit taxation in relation to non-governmental interest retention tax, capital acquisition organisations. tax and stamp duty on a transfer or lease 16. Recognised associations of land. It is possible for either a company There is no exemption in relation to limited by guarantee or, more value added tax, and employees of a exceptionally, an industrial and charity are liable to income tax under the provident society, to seek exemption PAYE system and Pay Related Social from various taxes from the revenue Insurance. Commissioners on the basis of its 18. Gifts by individuals and companies charitable status. In order to qualify as In some circumstances, gifts by charitable, the objects and powers of the individuals and companies may be company or society must be so framed subject to tax relief. One of the main that every object to which its income or reliefs of relevance to the non- property can be applied is charitable and, commercial sector is that gifts of as set out above, its main objects and the between £100 and £10,000 to certain application of its income or property educational establishments may be must be bound by a binding trust. This entitled to relief. means that it must be obliged by law to advance only its stated main objects and ACCOUNTABILITY to apply its income and property to these AND SUPERVISION objects exclusively. 19. 17. Qualifying criteria for recognition There is no specific supervision of In order to qualify as a charity, the unincorporated bodies. Companies are object of the company must fall under subject to reporting and accounting one of the following headings: requirements to the Companies office. Annual returns and accounts must be (a) advancement of education; submitted and records must be kept (b) advancement of religion; concerning changes in members, (c) relief of poverty, or management, etc.. Broadly similar (d) other works of a charitable nature reporting requirements are imposed on beneficial to the community. industrial and provident societies (reporting to the Registrar of Friendly Societies). In extreme cases,

57 investigators can be appointed to investigate the operation of these bodies. Bodies which regularly fail to make returns will be struck off. Generally, 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.

58 ITALY is considered to be the condition for the acquisition to produce its effects. The ASSOCIATIONS constraints on non-recognized associations consist of restricted autonomy on assets, in that persons who LEGAL FRAMEWORK have acted in the name and on behalf of the association are also responsible for 1. Right of association guaranteed by law? the debts of the association Law No 52 Articles 2 and 18 of the Constitution. of 27 February 1985 now allows Articles 14 to 22 of the Civil Code. Law non-recognized associations to acquire of 27 February 1985, Law No 266 of 11 fixed assets. Non-recognized association August 1991 on voluntary organizations. and committees may take legal action. 2. Definition Voluntary organizations which are The law does not give a definition. In entered in the register, even if they have common practice it is any stable the form of non-recognized associations, organization of a number of persons may acquire the goods necessary for pursuing a common interest, other than their activities and receive gifts and profit. legacies. 3. Minimum number of founders 8. Statutes No The Memorandum of Association must 4. Types of association be in the form of a public act for recognition to be granted. There are Recognized associations certain minimum requirements. Non-recognized associations 9. Registration requirements Committees No obligation, but if the association is 5. Membership nationality requirements not registered, the administrators are No restrictions jointly and severally responsible, with 6. Legal personality the legal person, for its debts (Article 33 of the Civil Code). Only for recognized associations, following the decree of recognition by 10. Commercial activities. the government authorities. A condition Associations may engage in commercial for such recognition is to have sufficient activities. Such activity should not be assets to pursue the statutory objects. aimed at making a monetary profit, but The faculty of recognizing legal persons exclusively at obtaining their purposes. may be assigned to the President of the If, on the other hand, the commercial Italian Council of Ministers, the Region activities are autonomous in relation to or the Prefects, depending on the the purpose of the association, the territorial coverage of their activities. association may be considered as a de There are certain constraints on facto company, with important taxation non-recognized associations (cf. 7). and social consequences. Article 24 of the Civil Code provides that members 7. Legal capacity have no right to profit-sharing. Private legal persons may not acquire 11. Disposal of assets on liquidation fixed assets or accept gifts or inheritances, or even legacies without The remaining assets are disposed of in government authorization. Authorization accordance with the provisions of the

59 Memorandum of Association or the The IRPEG is reduced by 50% for statutes. In the absence of specific historical, literary, scientific, provisions, the decisions of the Annual experimental and research societies General Meeting which has decided on pursuing essentially cultural objects. the winding up are implemented. In the Profits from marginal trading and absence of such decisions, the production activities earned by voluntary government authorities decide. organizations are not taxable, provided TAXATION they are used for the institutional purposes of the organization. INDIRECT TAXATION 17. Criteria for recognition 12. Article 13 of the Sixth VAT Directive Must have legal personality in the first case and be a voluntary organization Yes. within the meaning of Law No 266/91. 13. Other specific exemptions 18. Criteria for obtaining tax concessions Goods and services provided by For voluntary organizations, exemption voluntary organizations are exempt from must be laid down by the criteria VAT. Exemption from registration tax established by an inter-ministerial decree and taxes relating to the Memorandum (involving the Ministry of Social Affairs of Association and all acts relating to the and the Ministry of Finance), which is activities of voluntary organisations. being drafted. Exemption from the taxes on gifts, transfers, land registry and INVIM (tax 19. Gifts by individuals on the increased value of fixed assets) Gifts for the public good, humanitarian, for the associations which receive the religious or political objects may be gifts. This also applies to legacies and deducted up to a limit of 2%. inheritances. This limit may be exceeded when the gift 14. Zero rates is going to organizations for promoting study, research, dissemination of No information, the acquisition, DIRECT TAXES maintenance or restoration of part of the cultural heritage or to institutions which 15. General position organize fairs and exhibitions with a Recognized and non-recognized particular cultural or scientific interest associations are liable to tax on the with the authorization of the Ministry of income of legal persons (IRPEG), which Culture. is proportional to the sum of the income Gifts for the central institute for the received as land revenue, revenue of a support of the clergy of the Italian land-income nature, income from capital Catholic Church, and those for helping or income arising from engaging in a people in developing countries, may be commercial activity, whether occasional deducted up to a ceiling of or not. Amounts paid by members as LIT 2 million. contributions or associations’ Gifts to voluntary organizations which subscriptions are not included in the are entered in the register are no longer taxable amount. tax-deductible. The only deduction 16. Recognition of associations for tax possible at present is that concerning, on purposes the one hand, an organization subject to corporation tax or, on the other hand, a

60 voluntary organisation with legal TAXATION personality. Entry in the regional register of voluntary organizations is therefore Historical, literary, scientific, no longer sufficient. experimental and research foundations 20. Gifts by companies with exclusively cultural objects within As in the case of private persons, gifts the meaning of Article 6 of Presidential for purposes concerning the public good, Decree No 601/73 enjoy a reduction of or humanitarian, religious, or political 50% on taxable income on legal persons. purposes, can be deducted up to a Imports of goods for foundations with ceiling of 2%. the object of giving assistance or carrying out charitable works, education, 20(a). Gifts to non-resident associations training, study and research are exempt For associations with their head office in from VAT. Italy, the system is the same, provided In addition, as a general principle, that they are entered in a regional foundations which are not engaged in register on Italian territory. commercial agricultural activities or ACCOUNTS AND AUDITING trade activities are not liable to VAT within the meaning of Article 4 of 21. The administrative authority has the Presidential Decree No 633/72. power to audit and monitor. ACCOUNTS AND FOUNDATIONS MONITORING

22. Constitution 29. Accounts Act of foundation (unilateral act No inter-vivos in the form of a public act or 30. Monitoring will). The government authorities have powers 23. Definition to monitor foundations, which consist Private legal person with assets assigned essentially of the power to amend the to an object. objects of the foundation when these 24. Nationality requirements have been attained, or have become impossible or meaningless. They have No. the power to coordinate the foundations 25. Acquisition of legal personality and may group foundations together By government authorization in the form when their assets have become of a decree of the President of the Italian insufficient. 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.

61 LUXEMBOURG The Memorandum of Association must be registered. The statutes and the full ASSOCIATIONS names, trades/professions and addresses of the administrators and the head office must be deposited with the register of LEGAL FRAMEWORK trade and businesses. Any amendments must also so be lodged. An alphabetical 1. Right of association guaranteed by law? list of members must be deposited with Yes, under Article 26 of the Constitution the chancellery of the court for the place of 17 October 1868 as amended, the in which the association has its offices in Law of 21 April 1928 on non-profit the month when the statutes are associations and foundations, and the published. They must be updated Law of 11 May 1936 guaranteeing annually. freedom of association. 10. Commercial activities 2. Basic definition Profit-making activities are not Article 1 of the Law of 21 April 1928 prohibited but they must nevertheless be defines a non-profit association as one occasional and ancillary to the main which does not engage in industrial or activity. trading activities, and which does not 11. Disposal of assets on liquidation seek to obtain material gain for its members. If the statutes contain no provisions, the decision is taken by the Annual General 3. Minimum number of founders. Meeting. If the meeting cannot make a Three decision, the receivers decide on a 4. Types of association method of disposal which is as close as Non-profit associations (ASBL) possible to the social purpose. De facto associations TAXATION 5. Membership nationality requirements No restrictions. INDIRECT TAXATION 12. Article 13 of Sixth VAT Directive 6. Legal personality and how acquired Yes Acquired on the date when the statutes are published. 13. Other specific exemptions 7. Legal capacity Operations with an educational purpose organized by public or private An ASBL may possess, as its own establishments, operations carried out by property or otherwise, only the premises youth hostels, the organizers of sporting necessary for attaining its statutory or scientific, cultural, educational, purposes. There is no limitation on economic or professional events when furniture. the income is intended mainly to cover Gifts exceeding LUF 500 000 must organizational costs, theatrical always be authorized by Grand-Ducal representations, conferences, medical Decree. and paramedical services, provided that 8. Statutes these exemptions do not distort Written act duly authenticated or under competition. private seal. 14. Zero rates 9. Registration requirements No

62 DIRECT TAXES of 10% of total income or Flux 10 000 000. Any gifts must be to 15. General position recognized organizations for the public good and other bodies recognized as In accordance with Article 159 of the such in law. Luxembourg Fiscal Code, ASBLs are liable to tax on corporate bodies (IRC). 20. Gifts by companies Any person liable to the IRC tax is also The same rules apply to companies in liable to a wealth tax. Article 25 of the Luxembourg law of 29 December 1971 lays down the 20(a). Gifts to non-resident associations rights of registration and the rights of succession and transfer on death. For These are not tax-deductible gifts inter vivos and legacies, the rate is ACCOUNTS AND AUDITING 6%. 16. Recognition of associations for tax 21. Accounts purposes The annual accounts must be lodged Article 161 of the Fiscal Code provides with the registry of the civil court on the for an exemption from IRC for establishment of the association, or at organizations pursuing directly and least the accounts for the past ten solely charitable or cultural purposes or financial years, to obtain authorization to purposes for the public good. However, accept gifts. they are still liable to tax if they engage FOUNDATIONS in industrial or commercial activities. Only disinterested activities of ASBLs 22. Constitution are exempt from tax and not any Assignment of assets by authenticated ancillary or occasional profit-making document or by will, with approval by activities. Grand Ducal "Arrêté". 17. Criteria for recognition 23. Definition Non-profit associations pursuing Foundations are circumscribed by law, charitable or religious purposes, or since the only establishments recognized purposes for the public good (public as foundations are those which are health, youth and sport, sciences, arts, engaged in philanthropic, religious, culture) may be recognized as being for scientific, artistic, educational, social, the public good. tourism or sporting activities, using 18. Qualifying purposes for recognition revenue arising mainly from capital Application must be made to the acquired either at the time when they Ministry of Justice. Purposes must be were founded or subsequently, to the non-profit, and recognized as being for exclusion of the pursuit of material gain. the public good in conformity with the 24. Nationality requirements statutes. A Grand-Ducal "Arrêté", None adopted with the assent of the Conseil d'Etat, confers the status. Tax 25. Acquisition of legal personality concessions are then awarded on the Simultaneously with approval of the basis of tax law. statutes by the Grand Ducal arrêté. 19. Gifts by individuals 26. Legal capacity Gifts totalling over Flux 5 000 per As for associations annum are tax-deductible up to a ceiling

63 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 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.

64 NETHERLANDS Limited: associations whose statutes are not incorporated in a notarized act. ASSOCIATIONS Entry of such an association in the register of associations has the effect of limiting the responsibility of the LEGAL FRAMEWORK directors, which will be invoked only if the other party claims that the 1. Right of association guaranteed by law? association has not met its obligations. Yes - the right of association is Foreign associations: the Netherlands recognized for any person resident follows the principle of incorporation. within the territory of the Netherlands This means that an association (Articles 1 and 8 of the Constitution). constituted abroad is recognized within 2. Basic definition the Netherlands, and that the foreign law In accordance with Article 2.26 of the applicable (which determines whether BW (Burgerlijk Wetboek - Civil Code), legal personality can be granted) governs an association is a legal person the association under Netherlands law. composed of members and constituted 7. Legal capacity for a precise purpose other than that laid Associations whose statutes are down for cooperatives and mutual 13 incorporated in a notarized act have full societies . It is constituted by a legal capacity, they may contract debts, multilateral legal act. It cannot share receive legacies and acquire fixed assets profits among its members. without restrictions. Associations whose 3. Minimum number of founders. statutes are not incorporated in a Two notarized act (with limited personality) 4. Types of association cannot acquire registered goods or receive legacies. Associations under private seal 8. Statutes Associations by notarized act No obligatory form, except for statutes Stateless associations (international incorporated in a notarized act, for associations not under any specific legal which the content is laid down. jurisdiction, not provided for in law but recognized by the law) 9. Registration requirements 5. Membership nationality requirements None, except for associations constituted by notarized act or No conditions recognized in a notarized act. The act 6. Legal personality and how acquired must be entered in the register held for Full: associations whose statutes appear this purpose by the Chamber of in a notarized act (incorporation of the Commerce and Industry in the area of statutes in a notarized act can also be the head office. done during the life of the association). 10. Commercial activities Such an association must be entered in An association may engage in the register of associations; 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 13 These are types of associations in Dutch law. the members.

65 11. Disposal of assets on liquidation corporation tax, in respect of the profit The statutes of an association which it obtains from this activity. constituted by notarized act must specify Tax on fixed assets: Associations with a how the assets are to be disposed of on real title to fixed assets or the users of liquidation or the procedure for such assets must pay a local tax. determining such disposal (BW - Civil 16. Recognition of associations for tax Code - and Article 2: 27 (f). Once purposes creditors have been paid, the balance of No exact definition. Article 24(4) of the the assets is assigned to all parties who law on estate duty provides for tax are entitled to them under the statutes, exemptions for recognized organizations pro-rata to their rights, otherwise to the which exist for the public good. members. If no-one has a claim to the remaining assets they pass to the state, An association for the public good is which will assign them in accordance completely exempt from corporation tax with the object of the legal person as far if the profits in any one year are less than as possible BW, Article 23b (1). HFl 13 000 or if the profit for the past four years is less than HFl 65 000, TAXATION provided that there is no profit motive, or that the profit motive is secondary INDIRECT TAXATION and the profits are used solely for the 12. Article 13 of Sixth VAT Directive public good (Article 5 of the law on corporation tax and "arrêté" of 20 All exemptions concerning associations August 1971). Charitable institutions, apply. libraries, retirement funds, institutions 13. Other specific exemptions for the preservation and management of There are several exemptions for goods land for nature preservation purposes and services supplied by associations, and certain other institutions on specific and special exemptions for the provision land. of services and related goods by Tax on income from fixed assets: associations to their members, provided Associations not liable to corporation that the exemptions do not produce tax may apply for reimbursement of the restrictions on competition and that the fixed assets deduction, which is organization does not attempt to deducted at source on dividends or distribute the profits to the members. interest. 14. Zero rates There are provisions for exemptions No. (inter alia on buildings used for religious DIRECT TAXES purposes) from property taxes. 17. Criteria for recognition 15. General position The relevant legislation does not give a Income tax. In general, associations are definition of the public good. The law on subject to the common law regarding estate duty specifies that a precise order taxes. There is no special tax for in respect of a legacy or a gift precludes associations (legal persons). An their being for the public good. association may be subject to According to the law, the public good is corporation tax (Vpb) if it is carrying on the opposite of the good of an individual a business which brings it into or of a restricted group. competition with businesses liable to

66 18. Criteria for obtaining approval or documents are signed by the directors empowerment and other officials. Recognition by the registration and Auditing estate duty inspectorate. Internal: The statutes may provide that 19. Gifts by individuals the association will have a college of Gifts made to approved Dutch commissaires. In the absence of such a associations are tax-deductible at a rate college, and of an accountant within the of between 1% and 10% of taxable meaning of Article 2.393 (1) attesting income on sums exceeding HFL 120 per the veracity of the documents, every annum and per donor. Gifts made under year the Annual General Meeting shall contracts in authenticated form for at appoint a commission of at least two least five years are tax-deductible in full members who cannot be members of the in all cases where they are for the benefit administrative council. of a Dutch association composed of at External: by declaration of a qualified least 25 members (in which case public accountant attesting the reliability of the good is not a criterion), provided that documents. There is no obligation to such gifts are in the form of an annuity, publish accounts. that the association has full legal FOUNDATIONS (STICHTING) capacity and that it is not liable for corporation tax. 22. Constitution 20. Gifts by companies By authenticated act containing the Gifts made to associations or statutes. These statutes must be entered foundations registered in the in the special foundations register of the Netherlands which have an academic, Chamber of Trade and Industry in the religious, charitable, cultural object or area of the head office. one for the public good (including 23. Definition political parties) are tax-deductible when they exceed a total of HFL 500 up to a A legal person created by a legal act maximum of 6% of taxable income. which has no members and which has the aim of pursuing the object laid down 20(a). Gifts to non-resident associations in the statutes using the goods assigned The same regulations apply to to this object. associations registered abroad, which are 24. Nationality requirements specifically mentioned by the Minister for Finance. The head office must be in the Netherlands, although foundations may ACCOUNTS AND AUDITING have offices abroad. 25. Acquisition of legal personality 21. Accounts By notarized act. Within six months of the end of the financial year, the administrative council 26. Legal capacity forwards to the Annual General Meeting Foundations have full legal capacity an annual report on the situation and 27. Disposal of assets on liquidation management of the association. It submits the balance and the profit-and- According to the procedures laid down loss account, together with comments, in the statutes. If there are no claimants to the meeting for approval. These to the remaining assets, they revert to the state, which will allocate them in

67 accordance with the object of the legal person as far as possible. 28. Taxation As for associations ACCOUNTS AND AUDITING

29. Accounts 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.

68 AUSTRIA legal personality. The notice of intention to create an association must be ASSOCIATIONS submitted to the competent authorities and be accompanied by a draft of the statutes. If no prohibition against LEGAL FRAMEWORK forming an association is issued within six weeks, or if the authorities declare 1. Right of Asociation guaranteed by law? that they do not prohibit its formation, Yes, under Article 12 of the basic the association may begin to function. At national law (Staatsgrundgesetz - least three members must decide at an StGG): Austrian citizens have the right initial general meeting to form an to form associations. “Legal” association on the basis of statutes which associations are more specifically have not been rejected by the authorities. governed by the 1951 Law on The association acquires its legal Associations. personality by virtue of this decision. It 2. Basic definition acquires its legal capacity by electing No legal definition. The following representatives as laid down in the definition is based on legal practice and statutes. case law. An association is (1) 7. Legal capacity voluntary, (2) intended to be permanent Full legal personality after it has been (3) a structured association of several constituted. L. persons (4) intended for attaining a 8. Statutes given permissible purpose for the public good (5) through continuous communal The statutes, as provided for under the activity. law of 1951, must state that the association is registered in accordance 3. Minimum number of founders with Article 12 of the law of 1951. One founder (a person who declares himself willing to form an association) is TAX POSITION sufficient. Subsequently, the association must have at least three members (cf. INDIRECT TAX also 6). 12. Article 13 of 6th VAT Directive 4. Types of association Vereine enjoy the same exemptions in Austrian legislation distinguishes Austria as listed in Article 13 of the 6th between “ideelle Vereine” (non-profit VAT directive. associations), which are governed by the 13. Other specific exemptions 1951 Law on Associations, and There are no specific exemptions associations set up with profit in mind covering a wider scope than defined in (Associations Charter of 1852). Article 13. 5. Membership nationality requirements 14. Zero Rates Non-nationals, even when not resident in Zero rates do not exist in Austria. Austria, are entitled to become members of an association in Austria. DIRECT TAX 6. Legal personality and how acquired 15. General position Every association founded in accordance Also subject to Corporation Tax with the 1951 Law on Associations has a (Körperschaftssteuer) are "nichtrechts- 69 fähige Personenvereinigungen, Anstalten, There are two different forms of Stiftungen" and ändere foundation. 1) Foundation in accordance Zweckvermögen". with the Bundes-Stiftungs-und-Fonds 16. Exempted from taxation Gesetz (law on foundations) or general national legislation: with permanent Non-profit organizations for the general assets for pursuing objects for charitable public, for the public welfare, churches purposes or the public good. 2) Private (§§ 34 - 47 Bundesabgabenordnung), foundation, with legal personality, which small insurance associations (60.000 has been provided with funds by the ATS), associations in the field of founder to be used, managed and applied agricultural activities for the purpose of to pursue a permissible object using common equipment (Weidw und determined by the founder. Maschinengenossenschaften), etc., private foundations, unions which are 24. Nationality requirements legal professional representatives, None financing associations for small and 25. Acquisition of legal personality medium-sized enterprises. Type 1 foundations (cf. 23 above): these 17. Qualifying criteria have legal personality, which is acquired The most important criterion for when the appropriate authorities decide recognition is the object defined in the that the foundation can be authorized. statutes of the association, such as Type 2 foundations: these have legal charity, non-profit, public welfare, other personality, acquired on entry in the specific purposes. "Firmenbuch" (register of companies). 18. Qualifying objects 26. Legal capacity Religious communities recognized by Both forms of foundation have legal public law, "pensions - und personality, i.e. they can complete legal Unterstützungskassen"under specific formalities and be a party to legal conditions (§ 6 KSTG). proceedings. The exemptions do not apply to limited 27. Disposal of assets on liquidation taxable persons. Type 1: to be stated in the winding-up 19. Gifts by Individuals notice of the authorities concerned with Gifts by individuals to religious foundations. institutions (up to 1.000 - ATS p.a.), Type 2: assets pass to the ultimate high schools, associations in the field of beneficiaries named in the research and development can be "Stiftungserklärung" (declaration). If this deducted from income tax. The amount is revoked, they pass to the founder or of deductable gifts is limited to 10% of to the Republic of Austria. the total incomes the year before. FOUNDATIONS

LEGAL POSITION

22. Constitution Free to create 23. Basic definition

70 PORTUGAL 7. Legal capacity Associations have legal capacity subject ASSOCIATIONS to the ultra vires rule. In accordance with this rule, associations are LEGAL FRAMEWORK recognized as having not only the rights and obligations which are necessary but 1. Right of association guaranteed by law? also those which are appropriate for attaining their object. Only rights and Article 46 of the 1976 Constitution, obligations inherent to a human person Civil Code, Articles 158 to 166 and 167 are excluded. to 184, and Decree-Law 594/74 of 7 November 1974. 8. Statutes 2. Basic definition Yes. As for the Memorandum of Association, i.e. the notarized act. There The law does not give a definition. In is an obligatory basic minimum. accordance with general practice, a group of individuals who pool certain 9. Registration requirements goods or services for an object which For associations under the general excludes making a personal profit. scheme, registration has the sole 3. Minimum number of founders function of publicity, and has no constitutive function. No minimum. 10. Commercial activities 4. Types of association Associations may have a financial object, Private associations under the general not excluding financial advantages for scheme the associates, provided that these are Private associations under a special not in the form of a profit as such. scheme (e.g. cooperatives and social 11. Disposal of assets on liquidation solidarity organizations) In the case of goods bequeathed or Associations without legal personality donated with instructions or intended for (non-recognized associations and special a certain purpose, they must be assigned committees) to another legal person, with the same 5. Membership nationality requirements instructions or object. In the case of Unless the statutes provide otherwise, other goods, Article 162-2 of the Civil non-nationals can be members of an Code authorizes members in accordance association with the statutes or by decision of the 6. Legal personality and how acquired general meeting to decide on their assignment. Standard recognition, granted on condition that the act of establishing the TAXATION foundation is authenticated by a notary and that its content is in conformity with INDIRECT TAXATION Article 167-1 of the Civil Code. 12. Article 13 of Sixth VAT Directive Publication of extracts of the act of establishing the foundation and the Yes. statutes in the Portuguese Official 13. Other specific exemptions Journal makes the association Medical or paramedical care, educational recognizable in law by a third party. establishments, artistic activities, insurance and social assistance services 71 14. Zero rates 15% of their net taxable income. This Foodstuffs, newspapers, reviews and also applies to legal persons with cultural books, pharmaceutical products non-profit objects belonging to, or and the like, passenger transport, established by, religious denominations, medical services, entertainments. teaching or educational associations, scientific research or culture, literary, DIRECT TAXES artistic etc. 20. Gifts by companies 15. General position Legal persons may deduct gifts given as Income tax for legal persons - IRC - cultural sponsoring or to organizations (20% of taxable income) which is such as teaching or educational, payable on total income less certain scientific research or cultural, literary or expenses. Subscriptions paid by artistic associations from their taxable members and subsidies to finance the profits up to a total value equal to 0.2% attainment of the association's objects of turnover, and 50% of any sum in are not considered as income. excess of that. Tax on assets. 20(a). Gifts to non-resident associations 16. Recognition of associations for tax purposes Legal persons of an administrative public ACCOUNTS AND AUDITING utility (religious communities, voluntary firemen's associations etc.) are exempt 21. Accounts from IRC, as well as ordinary public The conseil de surveillance - supervisory utilities pursuing exclusively scientific or council - is the body responsible for cultural objects, or performing charitable monitoring the activities of the or social work; specific institutions for administrative body. It ensures that the social solidarity (IPSS) and persons accounts of the association are properly legally similar to these. kept. 17. Criteria for recognition The accounts of associations which In the first two cases, the organizations enjoy tax concessions must always be must cooperate with the government available to the tax authorities. authorities, at national, regional or local FOUNDATIONS level. IPSSs and similar bodies must be registered with the regional social 22. Constitution security department. Nevertheless, the By an act inter vivos or a will. The decision is at the discretion of the notarized form of the act is required, authorities. The extent of the exemption except in the case of a non-public will. may vary depending on the objects. The charter establishing the foundation 18. Qualifying objects for recognition must state the object of the foundation Exemptions are granted by the Ministry and specify the goods allocated to it. of Finance at the request of applicants by The statutes must always be in means of a decision (despacho) authenticated form. published in the "Diáro da República 23. Definition 19. Gifts from individuals There is no legal definition. In Natural persons may deduct gifts to the accordance with general practice, the organization specified in Article 56 of foundation is an organization pursuing a the law on the IRS up to a value equal to 72 permanent object to which assets have been assigned. 24. Nationality requirements 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.

73 FINLAND associations made up of Finnish citizens or foreigners residing in Finland. ASSOCIATIONS Members of the Board: The chairman and at least half of the members of the LEGAL FRAMEWORK board must be resident in Finland if the Ministry of Trade and Industry has not 1. Right of association guaranteed by law? granted an exception. Yes. Article 10a of the Constitution Act 6. Legal personality and how acquired as amended in 1995 and Article 1 of the Yes. According to the Associations Act, Associations Act of 1989. legal personality is acquired by 2. Basic definition registration. Only registered associations can have legal personality. The members A contract by which several people act of a registered association shall not be together for the common realisation of a personally liable for the commitments of non-profit purpose. (The association is a the association. permanent body in the sense that it is not momentary 7. Legal capacity 3. Minimum number of founders A registered association has full legal capacity as a legal person. A registered Three association may obtain rights, make 4. Types of association commitments and appear before a court A. Registered associations: or another authority as a party. Non- - non profit associations registered associations do not have legal capacity - economic associations (for example co- operative societies established before the 8. Statutes entry into force of the Act on co- Yes. operative societies of 1954) 9. Registration requirements - associations subject to permission Registration is not compulsory as such. (provided by the Associations Act) If registration is wanted, requirements of - associations organised by a legal registration are provided in the act/statute (for example the Finnish Associations Act. Advocates Associations) A notification of formation shall be B. Non-registered associations which do recorded in a Memorandum of not have legal capacity Association which shall include the rules 5. Membership nationality requirements of the association and the name and domicile of the chairman of the board Associations Act: none and the persons who have the right to Exceptions: if the primary purpose of the sign for the association. The notification association is to exercise influence over of formation shall be signed by the State affairs, it may have as members chairman of the board only Finnish citizens, foreigners residing 10. Commercial activities in Finland and associations whose members are Finnish citizens or A non-profit association may only foreigners residing in Finland or practise a trade or other economic associations who have member activity that has been provided in the association's rules or that otherwise relates to the realisation of its purpose or 74 that is to be deemed economically public good) are liable to company tax insignificant. only on their income for business For economic associations there are no activities, and communal tax (12,04% of general statutes (see types of association taxable income) on their income from n. 4) real property used for other than non- profit purposes. 11. Disposal of assets on liquidation The National Board of Taxation may After liquidation, the remaining assets grant exemption from tax on income should be used as required in the rules of from business or real property if the the association. In the absence of such a operation of associations is socially rule the liquidators must put the significant remaining assets at the State's disposal to be used to promote the same or 17. Criteria for recognition similar objects as the liquidated Associations operate exclusively and association directly for the public good in a material, spiritual or social sense; their activities TAX POSITION do not concern only a limited group of persons; members must not get INDIRECT TAX economic benefits (shares of profit etc.) from the operation 12. Article 13 of Sixth VAT Directive 18. Qualifying objects for recognition Corporations for the public good Dividends, interests and capital gains are (charitable organisations, sport not subject to income tax unless the associations etc.) are liable to tax it their property belongs to a business activity. income is deemed to be income from Business income does not contain, inter business activities according to the alia: Income Tax Act. This means that in practice all exemptions of relevance to - sales proceeds and other proceeds from associations coming under Article 13 occasions arranged for financing the have been implemented operation of associations; proceeds from membership bulletins and other 13. Other specific exemptions publications directly serving the None operation of associations 14. Zero rates 19. Gifts by individuals Printing services for membership Gifts given to non-profit associations are publications of associations for the not taxable income. Gifts are not public good are subject to zero rate deductible in income taxation of DIRECT TAX individuals 20. .Gifts by companies 15. General position Gifts given to non-profit associations are Generally subject to company tax (28% not taxable income. In company of taxable income) on all their income; taxation, gifts are, within certain limits liable to real estate tax on taxable value (FIM 5000-150.000), deductible if given of land and buildings for scientific or artistic purposes to 16. Recognition of associations for tax associations nominated by The National purposes Board of Taxation According to the Income Tax Act, non- profit associations (associations for the 75 20(a). Gifts to non-resident associations do not provide for their use, they shall pass to the State, which shall without delay transfer the assets to be used to ACCOUNTS AND AUDITING further a purpose related to that of the foundation 21. Accounts TAX POSITION FOUNDATIONS 28. 22. Constitution See references above to the tax position According to the Act on Foundations, as for associations amended in 1995, the establishment of a foundation is subject to a permission ACCOUNTS AND AUDITING granted by the National Board of Patents and Registration. 29. Accounts 23. Basic definition Foundation must have a minimum of two auditors and two deputy auditors to A foundation is established with a deed audit their accounts and administration of foundation which must include the purpose of the foundation and its 30. Auditing property. The Ministry of justice ensures that the A foundation is governed by an administration of the foundation independent administration, the board of complies with the law and the by-laws of which shall be set out in the by-laws of the foundation. 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 76 SWEDEN 10. Commercial activities In principle not allowed. The association ASSOCIATIONS may, however, carry on some business activity as long as it is not commercially LEGAL FRAMEWORK organised 11. Disposal of assets on liquidation 1. Right of association guaranteed by law? The assets are divided in accordance Yes. Chapter 2, Articles 2 and 20 in the with the statutes. If the statutes do not Constitution of 1974 regulate this matter, the assets may be 2. Basic definition divided among the members An association (ïdeell förening") is a TAX POSITION legal person in which several persons act together for a certain purpose. The INDIRECT TAX association may not have any economic aims or at least no commercially 12 - 14. General position organised activity Associations with charitable purposes 3. Minimum number of founders are generally not subject to indirect tax. Not regulated Other associations are subject to indirect 4. Types of association tax on the same conditions as other legal persons. Ideell förening which is not regulated by statutory law DIRECT TAX 5. Membership nationality requirements 15. General position No special requirements Normally not subject to income tax or to 6. Legal personality and how acquired the net wealth tax. Non-profit The association is considered to have a associations pay no income tax for legal personality if there are statutes and business with a natural connection to the a board non-profit activity. Income from other 7. Legal capacity business activities are taxable. The association is able to acquire rights 19. Gifts by individuals and obligations, to sue etc., without any Gifts over 10 000 SEK are normally special restrictions subject to gift tax. With the exception of 8. Statutes religious communities and associations No, but the statutes have to be as serving educational, medical, national complete as necessary for the aim of the defence, research, social work or association charitable purposes, the gift is not deductible for the donor. 9. Registration requirements 20. Gifts by companies There are no general requirements. An association with an economic activity The same as 19. sometimes has to be registered in the ACCOUNTS AND AUDITING Trade Register 21. Accounts No special supervision for associations.

77 FOUNDATIONS Foundations are generally supervised by a local government authority. 22. Constitution All physical and legal persons can create a foundation. 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

78 UNITED KINGDOM 6. Legal personality and how acquired Company limited by guarantee-obtained ASSOCIATIONS by registration with register of (Voluntary Organisations) Companies. Industrial & provident Society-obtained LEGAL FRAMEWORK by registration with Registrar of Friendly 1. Right of association guaranteed by law? Societies. There is no written right to associations Incorporated by Royal Charter-obtained although there exists freedom of through Royal Charter. association. There is a freedom to create Incorporated by Act of trusts although in some cases trusts with Parliament-obtained through Act of non-charitable objects may be void. Parliament. 2. Basic definition Unincorporated associations-No. There is no single generally accepted Trust no; however, the body of trustees legal definition of an association. In its can obtain legal personality through widest sense, an association is one Certificate of incorporation issued by formed by two or more people who of Charity Commission. their own volition join together in a 7. Legal capacity common purpose which is not in pursuit There are no restrictions in statute; of financial gain. however, in some areas capacity will be 3. Minimum number of founders derived from the objects and powers In practice two. included in the governing document. 4. Types of association 8. Statutes Unincorporated associations No. Trust 9. Registration requirements Company limited by guarantee Registration with the Charity Industrial and Provident society Commission for charities in England and Wales. For other associations, Incorporated by Royal Charter registration will depend on the legal Incorporated by Act of Parliament. structure. Registration with the Registrar 5. Membership nationality requirements of Friendly Societies for Industrial and Provident Societies, registration with the No requirements for associations as Registrar of Companies for companies such. In the case of a charity in England limited by guarantee. and Wales, the Charity commission will only register if within jurisdiction. This is 10. Commercial activities normally construed to mean that in the There is a restriction on the commercial case of an unincorporated charity a activities of charities. They can engage majority of the trustees should be in primary-purpose trading but not in resident in England and Wales, in the permanent trading as a means of fund- case of a company registration within the raising. Charities that wish to trade to jurisdiction is sufficient. any substantial degree must set up a separate trading subsidiary which can then covenant its profits back to the

79 parent charity and the tax can be Charities are exempt from most forms of recovered. direct taxation including income tax, 11. Disposal of assets on liquidation corporation tax, capital gains tax, inheritance tax. In associations, this will be in accordance with the governing 17. Criteria for recognition document. To qualify for the exemption, the income In the case of charities, to other charities or gains must be applied to charitable with similar purposes. If the governing purposes only and trading income other document does not include provisions than primary-purpose trading will often dealing with this, the Charity be subject to corporation tax. Commission may give directions by 18. Qualifying objects for recognition Order or Scheme. 19. Gifts by individuals TAX POSITION When an individual or corporation executes a deed of covenant promising INDIRECT TAX to pay a particular sum to a charity for a 12. Article 13 of Sixth VAT Directive period to exceed three years, a sum representing tax at the basic rate must be Not all exemptions of relevance to deducted and the Inland revenue refunds charities have been implemented. to the charity the basic rate of income or 13. Other specific exemptions corporation tax on that sum. (a) The supply of education or Additionally, if the individual is a higher- vocational training otherwise than for rate tax payer, he can receive further tax profit. relief trough the adjustment of his tax code. A company can claim a deduction (b) The provision of nursing and from its profit for the gross amount, and medical care in an approved institution. obtains tax relief at its marginal rate. (c) The provision of welfare services Similarly, since 1990 individuals have otherwise than for profit. been able to make one-off payments (d) Fund-raising events. under Gift Aid. Currently the minimum 14. Zero rates donation is £250 in monetary form These include sales of donated goods, 20. Gifts by companies supply of advertising for fund-raising or 20(a). Gifts to non-resident associations educational purposes, certain aids for disabled people, vehicles and ambulances ACCOUNTS AND AUDITING for disabled people, certain medicines and medical equipment supplied to 21. Accounts 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

80 EN/23/95/00891100.W00 (EN) 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

81