In early 2017, we wrote Regular donations: last chance?. Fortunately, this turns out not to be as bad as it might seem. The Coalition Agreement already states that the tax arrangements relating to donations, ANBIs and SBBI will be maintained. This includes the option to claim tax relief on regular donations.
Charitable giving offers many opportunities
The tax deduction for charitable donations offers interesting opportunities. Unfortunately, these are by no means always widely known. For associations in particular (with full legal capacity and more than 25 members), the scheme offers excellent opportunities for fundraising. The tax authorities contribute towards the funding of the new hockey or football pitch or clubhouse. See the article mentioned above.
For the director-major shareholder (the DMS), the charitable donation allowance is one of the options available. You can read about these options in our article Tax relief on donations by the director and major shareholder.
People who make substantial annual donations can optimise their tax position by setting up their “own” charitable foundation.
Improper use
Because the rules governing the charitable donation allowance are so attractive, in practice they are also being used in ways not intended by the government. The significance of the charitable donation allowance is considerable. The 2018 Budget Memorandum shows that the charitable donation allowance accounts for a budgetary outlay of €374 million. Furthermore, the budgetary impact of the exemption for ANBIs and SBBI organisations from inheritance and gift tax amounts to €215 million.
That is reason enough to review the arrangements. The Government has recently responded to those reviews. In that comment The Government has put forward a number of suggestions for improvements to the rules on tax relief for charitable donations and to the conditions imposed on ANBIs and SBBI organisations. These suggestions will be discussed with the charitable sector in the coming period. It is therefore not yet clear exactly what form the changes will take.
Improvements to the charitable donation allowance
Two problems have been identified with regard to the charitable donation allowance. The scheme is too complex for the public. Furthermore, the Tax and Customs Administration’s monitoring of it is problematic.
As part of efforts to tackle the complexity of the scheme, consideration is being given to abolishing the tax deduction for cash donations and donations in kind. In addition, consideration is being given to whether the various thresholds can be harmonised. This could result in the introduction of a deduction threshold and ceiling for regular donations as well. The Government notes that these measures must take into account the implications for existing regular donations.
The information available to the Tax and Customs Administration for audit purposes needs to be improved. One idea under consideration is to make it compulsory to include the RSIN number of the ANBI or SBBI on the income tax return (this is already compulsory for regular donations). Consideration is also being given to imposing an obligation on organisations to report donations they receive to the Tax and Customs Administration. This information can then also be included in the pre-filled tax return (VIA) are involved.
ANBI
With regard to the rules governing ANBIs, consideration is being given to a (minor) extension of the obligation to provide information. In addition, with a view to facilitating audits by the Tax and Customs Administration, the introduction of a standard template for the information to be published by ANBIs is being considered.
Consideration is being given to whether the liquidation provision can be relaxed. The statutory rules governing the anti-hoarding requirement may also be relaxed.
The supervision of former ANBIs (of which there are now over 5,600) could be simplified by introducing a settlement or closure date.