The Tax and Customs Administration is running a programme under which ‘stivers’ are being audited much more thoroughly with regard to their tax obligations. Yes, you read that right: ‘stivers’. That’s an abbreviation standing for ‘foundations and associations’.
Stivers
In 2019, the programme will focus in particular on owners’ associations (VvE’s) and foundations and associations in the sports sector. A key priority for the Tax and Customs Administration is to step up the provision of information to (the boards of) these organisations. In addition, forms will be issued to these organisations, on the basis of which the Tax and Customs Administration will (re)assess their tax liability.
For most foundations and associations, the main focus is on:
- payroll tax;
- VAT (value added tax);
- corporation tax (CT).
We set out these taxes in detail in our comprehensive note Tax liability of foundation and association. Below, we briefly outline a number of points to bear in mind. The memo also contains an explanation of inheritance and gift tax.
Payroll tax
Many self-employed people apply the volunteer scheme. Does this scheme apply to them? And if so, are the rather strict conditions for applying this scheme being met? We explain the volunteer scheme in our factsheet Volunteer.
A foundation or association that employs staff must, of course, comply with the standard rules. Allowances and benefits in kind that are provided tax-free must meet all the relevant conditions.
Payroll tax is a withholding tax. You must take the initiative yourself to declare and pay the correct amounts of payroll tax at the correct times. If the Tax and Customs Administration discovers that a foundation or association has wrongly failed to pay payroll tax, this tax may be recovered for up to five years. In such cases, social security contributions are usually also payable in addition to the payroll tax.
VAT
The membership fees that an association receives from its members are subject to VAT, unless an exemption applies, such as the sports exemption.
Fundraising activities are also subject to VAT. In principle, it is irrelevant whether the funds are raised for the purpose of financing a charitable cause. The fundraising exemption does not apply in all cases by any means. Where this exemption does apply, the thresholds must be closely monitored. If the turnover from fundraising exceeds these thresholds, VAT must be paid.
VAT is also a tax payable. The tax authorities may impose additional VAT assessments for amounts wrongly not paid for up to five years.
With effect from 1 January 2019, the VAT exemption for sport has been broadened. This means that many sports structures, which were set up with VAT in mind, no longer apply. The VAT disadvantage can be offset through two subsidy schemes: the SPUK and the BOSA. The SPUK applies to local authorities. Charities and associations can apply for the BOSA. This may help to limit the financial loss, but it usually does have an impact on cash flow.
Corporation tax
Corporation tax applies if and to the extent that the foundation or association carries on a business. This may also be the case where it competes with businesses that are liable for income tax or corporation tax (for example, in the hospitality sector).
A foundation or association is exempt from corporation tax where:
- the profit for the year does not exceed €15,000, or;
- in any one year and, over the following four years, not exceeding a total of €75,000 (in years in which a loss is incurred, the profit is set at €0).
If you wish, you can choose not to apply the exemption. This may be worthwhile because the tax authorities will then recognise your losses so that they can be set off against profits in years when the exemption does not apply. You can read about this exemption in our article Corporate income tax liability of foundations and associations clarified.
Corporation tax is not a withholding tax, but a self-assessment tax. However, as a foundation or association, you are obliged, if you are liable for corporation tax, to ask the tax authorities to issue a tax return form. If you fail to do so, the tax authorities may make a back-dated assessment for corporation tax covering a maximum of five years.
Fines may be imposed in such cases, and tax interest is also charged. Under the Corporation Tax Act, the rate for this is as high as 8% on an annual basis. As a result, the tax interest can quickly mount up to very substantial amounts.
HELLUP!
The board of every foundation and association is responsible for ensuring that all tax obligations are met. VWG is happy to help you navigate the complex tax legislation.