For a short while, there was talk of abolishing the tax relief on charitable donations. However, the Government has recognised the importance of this tax relief for philanthropy.
Improvement
However, many errors are made in tax returns under this scheme. Furthermore, the scheme is being abused. Proposals have therefore been drawn up to improve the scheme. These proposals are set out in a Chamber letter. On the one hand, they concern the charitable donation allowance, which taxpayers must include in their income tax returns. On the other hand, they involve an improvement to the rules that organisations must comply with in order to qualify as an ANBI (Public Benefit Organisation).
It is not yet clear when the changes will come into effect. This depends on the implementation assessment, which has yet to be carried out by the Tax and Customs Administration.
Gift deduction
For the deduction of donations, the income tax return currently contains a free-text field. This will be replaced by a so-called ‘smart’ field. This is a list of organisations with ANBI status from which a selection must be made. This will prevent an organisation that is not an ANBI from being listed by mistake. In this way, cultural ANBIs can also be selected.
The tax deduction for cash donations is to be abolished. These donations are currently deductible if the taxpayer can demonstrate that they have actually been paid. In practice, this has been exploited for fraudulent purposes, with receipts being issued for large sums. Another argument for abolishing the tax deduction for cash donations is that they are becoming increasingly rare.
Another way in which fraud is committed involves revocable donations. In one year, a substantial sum is donated to an ANBI, and in the following year this donation is revoked. The ANBI then refunds the amount received, but the generous donor forgets to correct the tax deduction. To combat this, ANBIs will report substantial donations that are revoked without good reason to the tax authorities.
An independent valuation is required for donations in kind. This condition does not apply to donations valued at up to €2,500.
A more robust ANBI scheme
The improvements to the ANBI scheme are aimed, amongst other things, at improving the service provided by the Tax and Customs Administration. This involves making the text on the website easier to understand and providing standard templates to help ANBIs meet their publication obligations.
An ANBI that is being wound up must, in accordance with its articles of association and other regulations, allocate any surplus from the liquidation to:
- an ANBI;
- with a purpose similar to that of the dissolved ANBI.
The requirement for a similar purpose will be abolished.
ANBIs must actually spend 90% or more of their annual income on their public-benefit purpose. This spending criterion is also known as the anti-oppoteis. An ANBI may not hold more assets than are necessary to ensure the continuity of its activities. The ‘no hoarding’ rule is relaxed in the following respects:
- it will be clarified that, in principle, impact investments need not conflict with the spending criterion;
- Securities contributed to the ANBI do not need to be valued periodically (this prevents the forced sale of these securities in the event of an increase in value);
- the uncertainty regarding the level of buffer capital to be maintained will be reduced;
- ANBI asset funds will be permitted to opt for a fixed distribution rate, provided that this is justified on the basis of historical data, and that, whilst it may deviate from the returns achieved in the short term, it is in line with them in the long term.