A foundation that has been in existence for less than five years is not required to apply the threshold amount for the generic corporate tax exemption on a pro rata basis.
If and in so far as
A foundation (the same applies to an association) is liable for corporation tax if and to the extent that the foundation carries on a business. Conducting a business is also understood to mean competing with businesses that are liable for income tax or corporation tax.
Generic exemption
Foundations and associations that run a business are exempt from corporation tax if:
- the profit for the calendar year does not exceed €15,000, or;
- in the calendar year and the preceding calendar years combined, not exceeding €75,000.
In a year in which a loss is incurred, the profit is set at zero.
Charities and associations that do not wish to apply the generic exemption may request this from the Tax and Customs Administration no later than when they submit their corporation tax return. They will then be bound by this choice for five years. If, at the end of these five years, the choice is not revoked, it will automatically be extended for a further five years (and so on).
Not proportional to time
The Supreme Court has ruled in a case in which a foundation established in 2009 had realised the following profits:
- 2010: € 9.884
- 2011: € 28.443
- 2012: € 31.414
Only in 2010, therefore, did the foundation remain below the €15,000 threshold. In 2011 and 2012, profits remain below the €75,000 threshold, but the Tax and Customs Administration takes the view that this threshold must be applied on a pro rata basis. In that case, this threshold would be exceeded in 2011 and 2012:
- threshold 2011: 2/5 * €75,000 = €30,000 (profit: €9,884 + €28,443 = €38,327);
- 2012 threshold: 3/5 * €75,000 = €45,000 (profit: €38,327 + €31,414 = €69,741).
However, the Supreme Court has ruled that the threshold does NOT have to be applied on a pro rata basis. Consequently, the generic exemption applies in 2011 and 2012, and the foundation remains exempt from corporation tax.