COMMUNICATION FROM THE COMMISSION

on

PROMOTING THE ROLE OF VOLUNTARYORGANISATIONS AND FOUNDATIONS IN EUROPE

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I INTRODUCTION

PURPOSE

1 This Communication concerns one sectorof the social economy in the EuropeanCommunity - that of voluntary organisations andfoundations. These organisations are playing animportant role in almost every field of socialactivity. They contribute to employmentcreation, active citizenship, democracy, providea wide range of services, play a major role insport activities, represent citizens’ interests tovarious public authorities and play a major partin promoting and safeguarding human rights aswell as having a crucial role in developmentpolicies.

1.1 Over the years they have made anincreasing contribution to the development ofEurope which is something that should beencouraged and developed.

1.2 Given this importance, the EuropeanCommission carried out an extensive survey inorder to gain a better knowledge of the sectorand to identify issues to be addressed. Theresults of the survey are given in Annex 1.

1.3 The aim of the document is to illustratethe growing importance of the sector within theEuropean Union, to show what problems andchallenges these organisations are facing and toopen up a dialogue on the basis of a set of ideas,in order to favour their development atEuropean and national level, to improve theircapacity to meet future needs and maximisetheir contribution to European integration.

1.4 This document presents a series ofmeasures which could be taken at Member Statelevel, but does not seek to impose on MemberStates specific solutions or actions. It is up toindividual Member States to take on thedifferent issues as they see fit. However,conforming to the principles of subsidiarity andproportionality there are some objectives whichcan be dealt with at Community level. Theseideas are outlined in the “Conclusion”.

II. SCOPE

Voluntary organisations

2 Of the three sectors - co-operatives,mutual societies, and voluntary organisations -which go to make up the social economy, thatof voluntary organisations is by far the mostdifficult to delimit or define.2.1 At their most basic, voluntaryorganisations are simply groups of people whohave come together for some purpose or other.2.2 At one end of the spectrum, the world ofvoluntary organisations merges imperceptiblyinto the tissue of everyday social, community,and family life; at the other end can be foundgreat institutions of enormous national and eveninternational importance such as universities,hospitals, research and cultural institutions,which many people are accustomed(erroneously) to think of as straightforward"public" bodies. Others, in contrast, havehundreds of professional staff, thousands ofvolunteers and a turnover of many millions ofECU’s. Very many voluntary organisationswork closely with public authorities inconventional spheres like social work; othersmaintain a strong tradition of completeindependence and are concerned with radicalsocial programmes or "alternative" lifestyles.2.3 There is, however, some agreement thatvoluntary organisations share to varying degreesthe following features:a) they are distinguished from informal or adhoc, purely social or familial, groupings by somedegree, however vestigial, of formal orinstitutional existence.(b) they are non-profit-distributing, that isto say they have purposes other than to reapprofits for their management or members.(c) they are independent, in particular, ofgovernment and other public authorities, thatis to say free to govern themselves withoutinterference according to their own rules andprocedures.(d) they must be managed in what issometimes called a "disinterested" manner. The

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use of this term is meant to indicate not just thatvoluntary organisations must not themselves beprofit-seeking, but also that those who managethem ought not to do so in the hope of personalgain.(e) they must be active to some degree inthe public arena and their activity must beaimed, at least in part, at contributing to thepublic good.

2.4 The degree to which particular voluntaryorganisations share the above five features willvary considerably. Deciding, for example,whether a voluntary organisation is indeedindependent is not easy, and the notion of the"public good" is bound to be controversial. Thedefinition does, nonetheless, offer a degree ofcoherence in a complex area.2.5 This paper deals with all organisationswhich share, to some degree, the above fivefeatures. However, three very specific kinds oforganisation have been consciously excluded.These are political parties, which can bevoluntary organisations but are clearly a specialcase; religious congregations (that is, in thestrict sense, and not excluding organisations ofreligious inspiration active in work of generalpublic benefit); and trade unions and employers’organisations.

Foundations

3 Like voluntary organisations, foundationsalso undertake a wide range of activities. Insome countries the foundation is frequently thepreferred vehicle for pursuing purposesindistinguishable from those typically pursued inother countries by voluntary organisations.From the legal point of view, however,foundations form a more homogeneous groupthan do voluntary organisations, the onlyimportant distinction being between those thatare for essentially private, and those that are foressentially public, benefit. It is foundationswhich have some public purpose (even whileremaining private bodies) which are the focus ofthis Communication.

3.1 For present purposes foundations are thusbodies with their own source of funds whichthey spend according to their own judgementon projects or activities of public benefit. Theyare entirely independent of government orother public authorities and are run byindependent management boards or trustees.

Types of voluntary organisation

4 Voluntary organisations and foundationsare difficult to categorise and define. Part of thedifficulty at the European level lies simply in thedifferent national traditions which they reflect,and their strong tendency to combine severaldifferent objectives. Most voluntaryorganisations and foundations can, however, beconsidered as having one or more of thefollowing functions:(a) Service delivery or provision to provide totheir members or clients services such as socialservices, health care, training, information,advice or support.(b) Advocacy: i.e. organisations whosepurpose is to campaign, lobby, and otherwiseargue on behalf of some cause or group with theaim of changing public perception or policy.(c) Self-help or mutual aid: organisationstypically formed by groups of individuals withsome common interest or need in order toprovide mutual help, information, support andcooperation.(d) Resource and co-ordination: so-called"intermediary bodies" which co-ordinate theactivities of, or provide information and supportto, either individual organisations working in aparticular field or to the sector in general. Suchorganisations fulfil the important function ofproviding an interface between the sector andpublic authorities.4.1 Many voluntary organisations andfoundations are, of course, national and eveninternational in scope. The great majority,however, carry out their activities in regions orlocalities. In general, the narrower theirgeographical focus the greater the range offunctions voluntary organisations tend to fulfiland the more difficult it is to separate these

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functions one from another. Throughout Europethere are hundreds of thousands of autonomouslocal groups working at the level of theneighbourhood, city quarter, village, or smallrural area, whose aim is to improve the qualityof life for the local community. Suchorganisations in effect simultaneously fulfil,typically in an informal way, all the functionsdescribed above - providing services and mutualsupport, drawing attention to the needs of thecommunity or of particular groups within it, andproviding a mechanism through which thecommunity can make its aspirations known topublic authorities.

The legal and fiscal framework forVoluntary Organisations andFoundations

5 The importance of having clear, positivelegal and fiscal frameworks for voluntaryorganisations and foundations to work in cannotbe underestimated. Organisations find itdifficult to develop their work when suchframeworks do not exist, whether they be atnational or European levels. Annex II gives anoverview on the way that legal and fiscalframeworks for the sector are based in theEuropean Union.

III. THE ROLE AND IMPORTANCE OFVOLUNTARY ORGANISATIONS ANDFOUNDATIONS

6 It is clear from the results of theCommission’s survey that voluntaryorganisations and foundations, though oftenvery small, together command sizeable assetsand mobilise large human resources, bothsalaried and volunteer. Like other forms ofenterprise, and particularly small and mediumsized enterprises, many voluntary organisationsand foundations are also economically active -they sell products, provide services for whichthey are paid, and generate surpluses which arethen reinvested.6.1 The contribution of the sector to theeconomy is very considerable indeed. Just how

significant has recently been revealed by theresults of the first rigorous comparative surveyof the sector in four Member States (the UnitedKingdom, France, Germany and Italy) directedby the Johns Hopkins University, Baltimore1.These results are of considerable interest.6.2 The study found that:in Germany the sector accounts for 3.7% oftotal employment and 10% of total serviceemployment. That is no less than a millionpeople. The non-profit sector is especiallyimportant in health: 40% of the hospital patientdays are provided by the sector, as are 60% ofthe residential care facilities.in France 4.2% of the employed work in thesector or over 10% of the total employed in theservice sector. In all some 800,000 people areemployed. Non-profit organisations look afterover half of those in residential care and about20% of primary and secondary school students.Non-profits are especially prominent in socialservices and in sport where 80% of those withsporting interests belong to non-profit clubs.in Italy nearly 2% of the employed work in thesector or over 5% of those employed in theservice sector. In total the sector, which isprominent in social services, employs about400,000 people. Non-profits run 20% ofkindergartens and over 40% of residential carefacilities.In the UK 4% of the employed work in thesector or over 9% of those in the service sector.Altogether about 900,000 people are employedin the sector, which plays an especiallyimportant role in the provision of research andeducation: - all colleges are run by non-profits,as are 22% of primary and elementary schools.

6.3 Finally, the combined expenditures of thesector in these countries was no less than 127billion ECU (17 billion in Italy, 31.3 billion inFrance, 36.6 billion in the UK and 42.2 billion inGermany).

1 Published in 1994.

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The figures for non-profit operatingexpenditures as a percentage of grossnational product are no less impressive: 2%in Italy; 3.3% in France, 3.6% in Germany;and 4.8% in the UK6.4 Moreover it is in terms of employmentgrowth that the most interesting facts of allemerge. What the study found - in any event inFrance and Germany where figures wereavailable - was that over the decade from 1980to 1990 the sector has been a powerful creatorof employment. In France the sector accountedfor one out of every seven new jobs created inthat decade and in Germany one out of everyeight or nine. This is a very significant findingindeed.6.5 These figures should not, perhaps, comeas a complete surprise, given the growth of thesector in the recent past and the reasons whichseem likely to be behind it (see paragraphs I.4and I.5 of Annex I). Some of these reasons arelikely to be historical or to have been specific toparticular Member States. Other factors,however - the discovery of new needs and thedevelopment of new social preoccupations, andabove all the tendency of governments toengage voluntary organisations and foundationsin the delivery of services of which theythemselves were formerly both designers andproviders have been increasing throughout theCommunity.6.6 But such policy developments have notdeveloped evenly in all the Member States. Theextent to which they have been accompanied byclear constitutional or administrative changesdesigned to favour the involvement of voluntaryorganisations and foundations has varied. .6.7 The figures demonstrate clearly that thesector has shown itself capable of opening upnew opportunities contributing not just toimproving the quality of life but alsoemployment and economic growth. It is forthis reason that the sector should beencouraged to play a bigger part in the questfor job creation as stated in the“Employment Pact”, for example in thecontext of Local Employment Initiatives.

6.8 Throughout the Community manyvoluntary organisations and foundations areengaged in the training and retraining of theunemployed, sometimes as providers ofgovernment programmes but often on their ownaccount, as well as providing services for lessfavoured people - for people with disabilities,for alienated youth, for those who for onereason or another have repeatedly failed to gaina hold in the job market .6.9 Voluntary organisations and foundationsalso give valuable training to numerousvolunteers, many of whom later findemployment on the conventional jobs market asa result of the experience and expertise theyhave acquired. Volunteering is also for manypeople an invaluable means of preserving thework habit at a time when, particularly for thelong term unemployed, maintaining an orderedinterest in their lives may be very difficult. Thevoluntary sector is likely to provide enrichingopportunities for new experiences aiming atgaining social skills which will enhanceemployability and moreover, the feeling ofbelonging and citizenship among young people.The European Voluntary Service deals with thisissue and provides an educational experiencebased on the active involvement of youngpeople in a local project. Volunteering is alsovery important for older retired people who arelooking to continue to use their skills andmaintain an active role in society.

Social importance

7 There are no accurate figures of knowinghow many persons in the Union are members ofvoluntary organisations but, on the basis ofsome Member States’ estimates it is commonlyreckoned to be somewhere between a third anda half of the population, approximately ahundred million.

7.1 Historically the influence andachievements of voluntary organisations, andtheir sister organisations foundations, wouldbe difficult to overestimate. It is to voluntaryorganisations and foundations to which we owethe origins of many of the services such as

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education, health and social services which wetake for granted today. Their contribution to thedevelopment of social and political ideas, and tothe intellectual climate in which we now live,has been similarly immense. Voluntaryorganisations and foundations have played avital role in the dissemination of scientific ideasand of technological developments and haveprovided forums for the exchange of thinkingacross the whole range of human concerns.They have led the fight for the recognition ofhuman rights and the dignity of the humanperson, and for the preservation of our culturalheritage and of the natural environment. Manypromote a spirit of solidarity on behalf of theless favoured, the sick or people withdisabilities, the poor and the excluded, the agedand the young, and between those who havejobs and those who do not, between men andwomen, between generations, between the moreprosperous regions and the poor or strugglingregions. Voluntary organisations makeimportant contributions to the fight againstsocial exclusion, sexual exploitation of womenand children, as well as racism and xenophobia.They have played a major role in themobilisation of public opinion in favour ofdevelopment, promoted democracy, and haveestablished privileged links with therepresentatives of civil society in the developingcountries, as well as providing much neededemergency help and food aid in times of crisis,often showing heroism working in troubledregions.7.2 Today voluntary organisations andfoundations are active in every conceivable fieldof human interest or endeavour and theircontribution to the welfare and development ofour societies and to our diverse cultures remainsas essential as it has ever been, especially inview of the process of European integration. Atthe same time they continue to innovate, todiscover new needs and to experiment withways of responding to them.In this way voluntary organisations andfoundations continue, as they have alwaysdone, not just to provide the seed bed or"gene pool" from which future social andother policies may eventually grow but also

the political, social and intellectual climate inwhich change comes to be seen as desirableon a wider scale.

Political importance - Citizenship

8. For many people, membership of, orvolunteering for, voluntary organisations andfoundations, provides a vital means throughwhich they can express their sense ofcitizenship, and demonstrate an active concernfor their fellows and for society at large.8.1 The part that voluntary organisations playin strengthening a sense of citizenship andproviding a means for its expression is ofgrowing importance at the European level.Indeed, they have an active part to play increating a sense of European citizenship asmentioned in Article 8 of the Treaty onEuropean Union. Voluntary organisations andfoundations have long fostered internationalcontact and understanding between peoples andare now showing a keen interest in the partcitizens have to play in the forging of theEuropean Union and in giving substance to thecitizen's Europe. Their experience and basicphilosophy, together with their growingorganisation at the European level, fit them wellfor this role.

Political importance:Promoting Democracy

9. Voluntary organisations andfoundations foster a sense of solidarity and ofcitizenship, and provide the essentialunderpinnings of our democracy. In the lightof the challenges now facing the EuropeanCommunity, and indeed in the differentcountries of Central and Eastern Europe,these functions have never been more vital.9.1 There is no doubt that voluntaryorganisations and foundations make a profoundand indispensable contribution to the democraticlife of Europe. Indeed, the existence of a well-developed association and foundation sector isan indication that the democratic process has

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come of age. For many people participation in avoluntary organisation may be their onlyexperience of democratic processes outside ofthe normal electoral framework.9.2 Their contribution to the effectivenesswith which representative democracy functionsshould not, however, be underestimated. Aboveall, they now play an essential part asintermediaries in the exchange of informationand opinion between governments and citizens,providing citizens with the means with whichthey may critically examine government actionsor proposals, and public authorities in their turnwith expert advice, guidance on popular views,and essential feedback on the effects of theirpolicies.

9.3 That voluntary organisations andfoundations are important to the democraticprocess does not mean that they could ever takeon the role occupied by elected representatives.There are, indeed, some dangers in the sort of"single issue" lobbying which some voluntaryorganisations tend to espouse. Theirpreoccupation with particular causes or withparticular individuals or groups can make themunjustifiably impatient with the balance betweencompeting interests which all democraticallyelected governments seek to achieve There is aneed for greater understanding about theconstraints of policy decision making.

IV THE SECTOR AND THE EUROPEANINSTITUTIONS WORKING TOGETHER

9.4 The European Institutions have a longhistory of contacts and informal consultationwith the voluntary sector. This is the case withmany of the European Commission’s services,such as DGIB, DGVIII with DevelopmentAgencies and ECHO which have achieved anexperience of particular interest in theircooperation with humanitarian aid NGOs, DGVand the platform of European Social NGOsarising out of the Social Forum, DGXI andenvironmental organisations, DGXXIII and theConsultative Committee for Cooperatives,

Mutuals, Associations and Foundations. DGXin particular looks to the voluntary sector todisseminate information on European issues tothe citizens.

NGOs are involved in a significant number ofresearch projects funded within the 4thFramework Programme (1994-1998). Thetargeted Socio-Economic Research Programmewidely covers the issue of the role of the sectorin the economy and its importance for socialcohesion. It is intended to put even moreemphasis on this topic within the 5thFramework Programme (1999 - 2002).

The European Parliament also relies on a largenumber of voluntary organisations in order toobtain information and views on a wide range ofissues. The heterogenity of the sector is valued,in particular, for its knowledge and experienceof social policy, environmental, aid anddevelopment issues and for providing a vital linkwith citizens in their localities, especially tothose most vulnerable in society.

9.5 The increasingly pivotal role thevoluntary sector plays in a wide range of issuescentral to the construction of Europe, includingin particular, in many Member States, in themanagement and delivery of key aspects ofsocial welfare services, has been acknowledgedand reflected in the Commission’s mainstatements on social and employment policy, forinstance in the Green and White Papers onSocial Policy and the White Paper on Growth,Competitiveness and Employment.

9.6 However, for many years the contactsbetween the European Institutions and thevoluntary sector took place on a completely adhoc basis and it was not until the Treaty of theEuropean Union, in 1992, that the importanceof links with this sector was first formallyexpressed in the creation of Declaration 23which is annexed to the Treaty. 2

2 Declaration 23 states: “The Conference stresses theimportance, in pursuing the objectives of Article

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9.7 A high level of political commitment existsat European level to ensuring that moresystematic consultation with the voluntarysector is instigated, as regards both thedevelopment and implementation of policy,commensurate with their increasingly importantrole, especially in social policy, in the MemberStates3.

Subsequent to the creation of Declaration 23, anumber of developments have taken place whichmoved forward the process of consolidating co-operation with, and instigating more systematicconsultation of, NGO’s and other voluntarysector organisations. Key amongst thesedevelopments were:

• the holding of the first European SocialPolicy Forum in March 1996, which broughttogether over 1000 participants mainly fromNGOs, on the eve of the beginning of theIntergovernmental Conference. This saw thelaunch of a new policy objective: the buildingover time of a strong civil dialogue at Europeanlevel to take its place alongside the policydialogue with the national authorities and thesocial dialogue with the Social Partners. It isintended that the Forum be held every twoyears.

This emerging civil dialogue has two mainaims:

-to ensure that the views and grassrootsexperience of the voluntary sector can besystematically taken into account by policymakers at European level so that policies can betailored more to real needs, and;

117 of the Treaty establishing the EuropeanCommunity, of cooperation between the latter andcharitable associations and foundations asinstitutions responsible for welfare establishmentsand services”.

3 It should also be noted that the Commission has hada long standing dialogue with the sector in otherareas such as with Development NGOs through theEC-NGO Liaison Committee which receives 90% ofits funding from the Commission.

-to disseminate information from theEuropean level down to the local level so thatcitizens are aware of developments, can feel partof the construction of Europe and can see therelevance of it to their own situation, thusincreasing transparency and promotingcitizenship.

• the creation in 1995 of a Platform ofEuropean social NGO’s, representing a largenumber of organisations, in order to assist inthe preparation of the European Social PolicyForum and to facilitate the development of civildialogue.

• the setting up of a “Comité des Sages” in1995 to prepare a report on fundamental rightsto be discussed at the Social Policy Forum witha view to it providing an input to the IGCdiscussions on the revision of the EU Treaty.

This report which advocated a Europe of civicand social rights has also sparked off aEurope-wide debate through a series of nationalseminars involving, in particular, the voluntarysector and the Social Partners.

• the creation, in 1997, of a new budget line,B3-4101, to promote co-operation withNGO’s and other voluntary sectororganisations and to strengthen the capacityof these organisations to engage in civildialogue at European level;

9.8 In the context of the preparations for theIGC an ongoing dialogue was developedbetween the sector, the Commission and theEuropean Parliament.

Important issues relating to the sector have beendiscussed in the framework of the IGC. Theseinclude:

- a legal base for regulations concerningassociations at European level

- a legal base for incentive measures both inemployment and the social field

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- the integration of Declaration 23 into theTreaty and specific provision for theconsultation of, and dialogue with charitableassociations and foundations on all policymatters which concern them

- a modification of Article 8a to take (byco-decision) measures to facilitate freedom ofcirculation.

The Commission intends to make relevantproposals according to the outcome of the IGC.

With regard to future progress, in order toretain the maximum amount of creativity andfree expression, it is important not to over-bureaucratise or institutionalise consultation ofthe voluntary sector and to strive instead for aflexible but systematic approach in developingthe civil dialogue and relations between thevoluntary sector and the European Institutionswhich takes full account of the principle ofsubsidiarity and of the specificities of eachMember State.

9.9 The Commission has also attempted toopen up a wide range of funding programmes tothe sector. This includes the Structural Funds,the PHARE and TACIS programmes forCentral and Eastern Europe, the Leonardo daVinci Programme, Declaration 23 and the newThird Sector and Employment budget lines, theSME and Social Economy budget lines, as wellas the European Voluntary Service Programmewhich encourages transnational volunteering,the EDF for cooperation and development withthe LOME countries, and specific budget linesfor external actions, in particular cooperationwith the ALAMED countries, to name but afew.

It is estimated that overall some 800 millionECU (of which 196 MECU is in the form of co-financing) annually of EU developmentassistance is channelled through NGOs and theCommission looks to the sector in many policyissues towards developing countries.

The European Commission is also workingclosely with NGOs in the fight against sexualexploitation of children and women.

The Commission would like to see itscooperation with the sector developedfurther in view of deepening Europeanintegration. Proposals to this end are madein the “Conclusion”.

V PROBLEMS AND CHALLENGES FACING THE SECTOR

10. Voluntary organisations and Foundationsare working under enormous pressure andwithin a constantly changing environment. Insome cases organisations are taking on therunning of services that were hitherto providedby the public authorities. However, there arevery real problems and challenges facing thesector in the way that it can respond toproviding these new services. Organisationswhich have traditionally played the role ofproviding a back up for state run services,suddenly find themselves having to run thoseservices themselves. This may mean completelynew staffing arrangements, new managementstructures and needs, a complete change in thefinancing of the organisation, a change in theway that it works with the public authorities,and indeed with other voluntary organisationsand foundations. How will the organisation beresourced? Will funding come from publicauthorities in the form of long term grants orshort term contracts: indeed, will there beenough funding? Will an organisation be able toincreasingly draw on support from the public(individuals) or the corporate sector? Thischange may also mean a major rethink in theraison d’être of an organisation. Should anorganisation which was set up to promote theneeds of specific parts of the population (peoplewith disabilities, the socially excluded, ethnicminorities, etc.,) and to provide some back upservices, be asked to suddenly take on therunning of the mainstream service itself?

10.1 These are all areas that have majorimplications for organisations in the way that

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they are resourced and trained, and publicauthorities should be aware of the importance ofgiving voluntary organisations and foundationsthe resources and time to be able to adapt tonew needs.

10.2 Despite their increasing reliance onfoundations and voluntary organisations tocarry out a wide range of functions, publicauthorities have not on the wholeacknowledged their responsibility to ensurethat the sector is as well placed as possible tomake its distinctive contribution to thepublic good. The result is that in manyMember States the sector, as a sector,operates in what amounts, at least instrategic terms, to a policy vacuum. This lackof a coherent framework of public policy hasinhibited it from contributing, to theoptimum extent possible, to the solution ofthe problems which we face. It is time thiswas remedied.

10.3 One of the greatest problems facing policymakers is the present serious lack of informationabout the sector. In an important sense, policy-making has also been inhibited by the structureof government itself, and in particular by thehabit of public authorities of relating toassociations and foundations as suppliers ofservices to particular client groups or asinterlocutors in particular subject areas. Socialservice departments have contact withorganisations supplying social services,environment departments with those active inthe environmental field, and so on. Over aperiod of time, such departments and theirofficials can acquire a close and detailedknowledge of the particular organisations withwhich they deal. Within government as a whole,however, such knowledge as departments mayacquire remains fragmented. For the most part itis rare for public authorities to have an overviewof the sector as a whole or of its needs, or ofsignificant developments within it. The samephenomenon has no doubt also been one of thefactors which in a number of Member States hasinhibited the growth of a "broad sectoral"

consciousness amongst voluntary organisationsand foundations themselves.10.4 The urgent need now is for publicauthorities to complement their "vertical"approach and to begin to look seriously at"horizontal" issues affecting the sector as awhole with a view to developing appropriatepolicies. At the same time, the public role ofvoluntary organisations and foundationsneeds to be acknowledged and theacceptance of the sector as a full partner inthe debate on all policy and implementationmatters which concern them, needs to beactively encouraged at all levels.

10.5 Over the past ten years the amount oftransnational work done by voluntaryorganisations and foundations has increaseddramatically. This is due to a growing numberof European funding programmes being openedup to the sector which encourage transnationalcollaboration, and an expanding number oforganisations who are interested in developingtheir services in other countries.

10.6 There is also a large and continuouslygrowing number of European-wide federationsor networks of voluntary organisations andfoundations. Some, such as the Red CrossLiaison Committee, act as a co-ordinatingorganisation for individual nationalorganisations which share the same aims andobjectives, as well as the same name. Otherssuch as the European Foundation Centre orCEDAG (the European Council for VoluntaryOrganisations) act as a focus point for lobbyingthe public authorities on behalf of the sector,and providing and developing examples of goodpractice within their - often - diversemembership.

10.7 There are also many development andemergency aid agencies which have a longtradition in working overseas, but which areworking more and more together at a Europeanlevel and with the European Commission.Indeed, the EC-NGO Liaison Committee ofDevelopment NGOs works closely with DGVIII

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(Development), with ECHO, DGIB and withother Dgs of the European Commission.

10.8 The ability of voluntary organisations tomake their full contribution in transnationalactivities in the social and employment field hasbeen limited by the suspension of someEuropean programmes since 1995 pending aEuropean Court of Justice ruling on the legalbasis of such measures. In its proposals to theIGC, the Commission has endeavoured toremedy this by proposing a legal base for thetransfer of best practice, networking andexchange of experience on a transnational basisin such fields as the fight against social exclusionand the promotion of equal opportunities andthe combating of discrimination on the groundsof gender, disability, race or age. This wouldenable the Community to adopt such incentivemeasures as have already been established foreducation, training and public health.

10.9 There are however, many otherproblems facing organisations trying todevelop their transnational European work:They include:

* difficulties finding like - mindedorganisations in other countries in order todevelop joint projects.

Although on paper an organisation may seem tohave the same aims and objectives, in reality itmay not. The role of an organisation workingwith a specific client group in one country maydiffer a great deal from one working in another.There are also difficulties in organisationsworking together which are often due todifferences in culture and language

* inability of organisations to accessEuropean funding4

Many organisations have troubleobtaining good up to date information on

4 Decision making for many European fundingprogrammes is frequently made at national ratherthan at European level.

European funding. They may also havedifficulties with Member States which arereluctant to allow voluntary organisations andfoundations access to specific European fundingprogrammes in which the Member States havea decision-making role.

* difficulties finding matching funding forprojects which are co-financed throughEuropean funding programmes

Matching funding for projects often comesfrom public authorities who may be puttingforward their own rival bids, or not be interestedin supporting the project.

* over-dependence on EuropeanCommunity Funds leading to difficulties inforward planning and continuity ofmanagement owing to the incompatability ofthe short term nature of this funding and thelong term core funding needs of voluntaryorganisations.

Difficulties in obtaining funds at nationallevel has led some organisations to look forEuropean funding which can be inappropriate totheir main aims and objectives. Failure tocontinue receiving these funds can underminetheir existence.

* difficulties faced by organisations due tolate payments of European funding.

Payments held up for various reasons atEuropean or national levels can often causeproblems for organisations carrying outtransnational projects.

* lack of legal recognition fororganisations in other countries.

This can cause serious problems fororganisations wishing to open offices in otherMember States, or provide services that arefinanced by public authorities from anotherMember State. The Commission has alreadyproposed certain measures (notably the Statutefor a European Association) aimed at giving

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organisations a legal personality in othercountries within the European Union.

* weak representativeness of organisationstaking part in consultation

In some cases European networks lack thestructure and adequate membership to ensurethat views of a wide spectrum of operatingorganisations at local, regional and nationallevels are taken into account.

* lack of understanding by some publicauthorities on what European work voluntaryorganisations and foundations wish to do.

Many organisations complain thatpublic authorities are not aware or beingsupportive of the transnational work that theyare trying to do. This often results intransnational projects being hindered.

* lack of adequate training.

Inadequate training can lead to poorly runorganisations and the inability to respond tochallenges and new needs.

* lack of access to networking techniques

Subsequent to poor training someorganisations are not able to develop links withother like minded organisations.

10.10 Not all these problems areinsurmountable, and indeed some of them arealready being dealt with by the EuropeanCommission and by some Member States.However, it should be stated that they are oftendealt with on an ad hoc basis, and not as part ofa coherent strategy and policy towards thesector. The following section presents a numberof ideas which can be addressed by the sectoritself, as well as at Member State and Europeanlevels.

VI CONCLUSION

MEMBER STATE LEVEL

The Commission believes that for the most partaction will need to proceed, in line with theprinciple of subsidiarity, at the level of theMember State or, where appropriate, at thelevel of the region or the locality.The Commission proposes that the MemberStates examine attentively the following areas:

acquiring a much deeper knowledge andunderstanding of the sector at all levelsThere is no doubt that policy making is atpresent severely hampered by the lack ofsystematic and reliable data about the sector.Indeed there are parts of the Community wherethe sector has had so little public profile thatpolicy makers appear to have been scarcelyaware of its existence. All concerned actors,European,national, regional, local authoritiesand the voluntary sector itself, need therefore toaddress the question of what practical steps theycould each undertake to map the extent andcontribution the voluntary sector makes.

the relationship ("partnership") betweenpublic authorities and the sectorVoluntary organisations are being asked to takeon an increasingly important role, by publicauthorities across the Community and by theEuropean Commission itself. It is thereforeimportant that voluntary organisations are giventhe opportunity to be involved in planningservices and policy making with publicauthorities at all levels. Relationships betweenvoluntary organisations and public authoritiesshould be clearer and new partnershipsdeveloped. Partnership between voluntaryorganisations and governments will involvecontractual arrangements between individualvoluntary organisations and public authoritieswhich will properly involve their ownconstraints. But whatever relationship they mayhave with governments, voluntaryorganisations and foundations areindependent of government and must remainso. Public authorities should review public

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policy and make proposals about what wouldneed to be done for policy to help thevoluntary sector to increase its capacity andwhere relevant to improve its skills in orderthat it can best fulfill the new roles it is beingcalled on to address.

the law governing voluntary organisationsand foundationsThe competent authorities should examine whatscope exists for clarifying and adjusting legalframeworks so that they are conducive to thevoluntary sector fulfilling its full potential atnational, regional and local levels.

the fiscal basis and competition rules onwhich the sector operatesThe taxation rules applicable to the sector haveto be clear and simple, and incentives as well asexemptions have to be studied attentively. Anyindividual tax treatment has to be justified inrelation to the constraints specific to this sectorand to its method of internal organisation whichdifferentiates it from traditional economicactors.

how the continued financial health of thesector is to be securedPositive legal and fiscal regimes are importantfor the growth of the sector in each country, aswell as to ensure public accountability.However, public authorities should also ensurethat the sector is seen positively by society andthat funding by public authorities, the corporatesector and private donations are all encouraged.

trainingThe growth of the sector has not been matchedby an increase in training to help voluntaryorganisations develop their skills and expertisein order to meet new needs. All too often,training budgets are the first to be hit whenfunding becomes difficult to obtain andvoluntary organisations are asked to cut costs.Public authorities should ensure that voluntaryorganisations are given adequate training inorder to provide the services and do the workthat is being increasingly asked of them.

information society developmentsVoluntary organisations and foundations have aclear interest in being associated closely with

information society developments. Theparticipation of voluntary organisations andfoundations in pilot projects, particularly in theapplications field, should be encouraged.

better access to programs co-financed bythe Structural FundsMany voluntary organisations are concernedabout access to finance from the StructuralFunds. Insofar as the implementation ofCommunity Support Frameworks andoperational Programmes is the responsibility ofMember States, the latter are encouraged toexamine and review current administrativepractice so as to facilitate access to informationand broader participation by the voluntarysector. The same applies insofar as thedesignation of beneficiaries for global grants isconcerned.

VOLUNTARY SECTOR ANDFOUNDATIONS LEVEL

It is important that voluntary organisations andfoundations make every effort to promotethemselves, through use of the media and newinformation technology. They should try to beopen and accessible in order that the public andpublic authorities understand their aims andobjectives and how they work. Organisationsshould encourage relevant training for their staffand volunteers, and when appropriate, shouldtry to develop good links with public authoritiesand the corporate sector.The sector should look to diversify its fundingbase in order not to become too dependant onany one source of funding. Networks oforganisations should also try to ensure that theirmembership base is as comprehensive aspossible in order for them to be trulyrepresentative.

EUROPEAN COMMUNITY LEVEL

In addition, the Commission proposes thefollowing at European Community level:

Voluntary organisations play an extremelyimportant role as interfaces between citizens andgovernment authorities, although in many cases

13

this role still does not receive properrecognition. Voluntary organisations are askingfor their work in this sphere to be recognised;they are no longer satisfied with a singlelobbying role, but are asking to be consultedsystematically and regularly by Communitybodies on all matters and on all decisions whichmight affect the work they do, how they do itand their efforts to achieve their objectives.

The Commission will maintain and furtherdevelop a continuous exchange of informationand points of view by establishing systematicand regular dialogue and consultation with thesector5. In this connection the Commissionwelcomes the establishment by theaforementioned movements of the ConsultativeCommittee for Cooperatives, Mutual Societies,Associations and Foundations, which aims toensure the consultation and the horizontal co-ordination of the sector. The Commission willalso look to develop its dialogue with the sectorthrough the European Social Policy Forum andthe new budget line promoting cooperation withcharitable associations, and will examine howthe representation of voluntary organisations onother existing advisory committees can, whereappropriate, be organised. The development ofthis dialogue and partnership will contributeto a better understanding and building ofEuropean integration at all levels. As well asthis, the revised treaty should include suchmeasures as the fight against exclusion, thepromotion of employment, and measures inareas such as non-discrimination andimmigration, which call for this strengthening ofdialogue.

The role of voluntary organisations inpresent-day society will not be recognisedwithout more knowledge of how this sectoroperates, and of its requirements andexpectations. As people are very far from beingfully aware of all this, particularly in all the

5 In this context it should be recalled that theEuropean Commission has published a directory onEuropean Non Profit organisations in order toenable officials to consult more systematically andas widely as possible.

Member States and at European level, an effortmust be made in this direction. One of the waysof making progress in this matter is to give ahigher profile to voluntary organisations andtheir work. For these reasons, and in order tosupport the effort to improve knowledge of thissector, the Commission will consider proposinga year of voluntary organisations andEuropean citizenship.

The Commission recognises theimportance of the role that voluntaryorganisations can play as disseminators ofinformation, and as bodies close to ordinarycitizens, and proposes to involve them moreclosely in its activities of disseminatinginformation. Voluntary organisations haveplayed an important role in the development ofpast “European years". This role has not alwaysbeen acknowledged. The Commission thereforeintends to ensure that the role of voluntaryorganisations is recognised and publicised inall “European Years" relevant to the sector.

The European Parliament has proposedthat studies be made on the expansion of thesector of co-operatives, mutual societies,voluntary organisations and foundations in theEuropean Community, in particular theestablishment of an observatory to followdevelopments in this sector in the single market.The Commission considers that for voluntaryorganisations and foundations, this task could beundertaken within the European observatory forSMEs, and proposes that the collection andanalysis of information, in the framework of theexisting structures, should be based on whatvoluntary organisations do and want to do attransnational level, and particularly on theproblems which they encounter in doing so, i.e.problems arising from differences in their legalforms in the various States, money transfers,leasing or purchasing premises in other states,obtaining subsidies, the effectiveness of themutual recognition of vocational qualifications,obstacles to sponsoring in the Member States,etc. It would also look to identify areas of goodpractice which could be promoted anddisseminated.

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• To undertake transnational activities,voluntary organisations need instruments whichare not yet widespread, but which are a sine quanon for any activity of this kind. Theseinstruments range from a knowledge oflanguages to familiarity with current differencesin the various Member States concerningtaxation, working methods, administrativeprocedures etc. There is great demand fortraining on the part of those voluntaryorganisations which are interested in expandingtheir transnational activities. The Commissionwill therefore give an impetus to promotingbetter access to European trainingprogrammes which officials of voluntaryorganisations wishing to expand into Europecould use.On the other hand the involvement of thevoluntary sector during the European year oflife long learning gives evidence of the actualand potential contribution of this sector to lifelong learning, including adult education which islargely managed by the voluntary sector. In theyears to come, this contribution is likely tobecome crucial to build a knowledge society forall.

Voluntary organisations often havedifficulty in finding partners or people to workwith outside their own Member States whocould help them in their transnational activities,and facilitate access for them to a number ofCommunity funds for which this is a conditionof eligibility. All the more because the numerousCommunity instruments and policies available toenterprises for finding partners at Europeanlevel (BC-Net, Europartenariat, BCC etc..) arenot always suited to the needs of voluntaryorganisations.6 Accordingly, the Commissionwill see that they are made easily accessible tovoluntary organisations, and that they meet theirspecific requirements.

6 The RECITE and ECOS/OUVERTUREprogrammes, and also the PACTE programme canfacilitate the internationalisation of voluntaryorganisations and foundations.

Voluntary organisations and foundationshave a clear interest in being associated closelywith information society developments. Aneffort should be made to raise their awareness ofthe opportunities and benefits that theinformation and communication technologies,services and applications can offer them. TheCommission has already set up the InformationSociety Project Office as a "one stop shop"within the Commission to facilitate access toinformation in this area. The InformationSociety Forum will seek to involve all partiesconcerned, including voluntary organisationsand foundations, in the policy debate. Theparticipation of voluntary organisations andfoundations in pilot projects, particularly in theapplications field, should be encouraged.

Many voluntary organisations are callingfor easier access to sources of finances,including to the Structural Funds as well asother sources. The complexity of applicationsystems and administrative procedures, whichoften lead to delays in payments can preventsmall, lean voluntary organisations from makingthe valuable contributions they have thepotential to make in the implementation of thevarious EU funding programmes.Insofar as the Structural Funds are concerned,the Commission will, in conjunction with theMember States, continue to actively exploreways of facilitating access to Communityfinance, including the possibility of pre-financingby the Member States and the increased use ofglobal grant finance. In general terms, it will beproposing ways of streamlining and simplifyingprocedures in the context of the reform of theStructural Funds which is due to take effectfrom the year 2000. Likewise, it will continueto encourage a broad interpretation of theconcept of partnership extended to economicand social partners7, compatible with the needfor proper and effective systems for monitoringthe management of public funds.

7 Article 4 of the Framework Regulation No. 2081/93on the Structural Funds.

15

The Commission will also explore ways ofpublicising more widely information on existingCommunity Finance which is available tovoluntary organisations and foundations.8

The results of activities financed under the newbudget line B3-4013 will help shed some lighton the employment dimension of the thirdsector. In particular the actual and potentialrole of the voluntary sector and foundations inthe employment development process and theirjob creation capacity will be examined andexamples of best practice identified. TheCommission will ensure that the resultinganalysis and conclusions are widelydisseminated.The European Commission’s support throughtraining and the use of information technologieswill improve their capacity to network in orderfor them to fully participate in EuropeanCommunity Programmes.

The survey has shown that there is agrowing interest by voluntary organisations indeveloping their transnational work. Voluntaryorganisations are keen to learn different modelsand ways of working from organisations in othercountries. Many organisations find this difficultto do, due to the lack of resources. TheCommission could help organisations such asfoundations to explore the possibility of themsetting up a special fund in order to facilitatethe transnational work of voluntaryorganisations. In particular, the fund wouldenable voluntary organisations to pre-financecertain projects for which grants have beenasked from public authorities, and also enablestudy visits, and the attendance of conferences,seminars and training events for organisationswhich normally lack the means to do so.

The numerous difficulties facing voluntaryorganisations when they contemplate

8 DGVIII (Development) already has a document“Digest of Community Resources available forfinancing the activities of NGOs and otherGovernmental and/or Decentralised Bodiesrepresenting Civil Society in the fields ofDevelopment C0-operation and Humanitarian Aid”.

transnational projects are often the result ofnational legislations which are ill-suited to thenew needs, but they can also arise from theeffect of measures taken at Community level,which, since they were drafted with otherobjectives in view, may turn out to be obstaclesfor voluntary organisations and foundations. Forthis reason the Commission proposes to studyand monitor closely the effects of Communitypolicies, actions and legislation on this sector.This follow-up and analysis should be carriedout systematically also through betterinter-departmental co-ordination, with the aimboth of monitoring the implementation ofCommunity rules in the sector and of promotingthe structures of voluntary organisations andtheir access to the Single Market.The Commission intends to conduct a broaddialogue involving the sector, the EuropeanParliament, the Committee of the Regions,the Economic and Social Committee,Member States and other interested partiesin order to fully discuss the issues containedin this document. The Commission intendsto hold a series of conferences and seminarsto discuss the Communication and issuesarising out of it.

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ANNEX I THE SURVEY

I How many voluntary organisations andfoundations are there? How are they financed?How many people belong to voluntaryorganisations? How many people do theyemploy? How many people work for voluntaryorganisations or foundations as volunteers?How big is the sector, and is it growing? How isit developing at the European level? What are itsneeds and aspirations for the future?I.1 Unfortunately, as has already been madeclear, there is a serious lack of informationabout the voluntary sector in Member States,and still more at the European level. This lack ofessential facts reflects not simply what has, untilfairly recently, been a lack of interest amongstscholars and policy makers, but also the absenceof any sort of convenient sampling frame.I.2 In an attempt to throw some light on thescene, the Commission therefore decided tocarry out a questionnaire study of voluntaryorganisations in all the Member States. Themethod used was to distribute questionnaires tovoluntary organisations throughout Europe viatheir representative organisations in Brusselsand at national level. The survey was carried outbetween June and October 1993 and altogethersome 2300 replies were received. This is asurprisingly good response and the Commissionis grateful to everyone involved. The responsemay itself be taken as an indication of thelively interest that voluntary organisations inthe different Member States have indevelopments at a European level.I.3 Given the method used, which was theonly one open to the Commission, the studymust be regarded as strictly exploratory and itsresults, which are not in any sense scientific,should be treated with caution. The findings are,however, of interest and are discussed below.

Growth of the sector

I.4 All the evidence suggests that theassociative sector has grown enormously sincethe end of the last war and the survey clearlyreflects this phenomenon, highlighting in

particular the very marked increase in thenumber of voluntary organisations in the lasttwenty or so years. The growth of the sector inthe last decade might justly be called explosive.Of the voluntary organisations which respondedto the questionnaire, some 75% were foundedafter 1961, about 65% after 1971 and about45% after 1981. There is no reason to believethat the sample was abnormally "young" nordoes growth appear to be slackening. There areminor differences between the sector in differentMember States - for example, for reasons whichwill be obvious, the sector appears to be onaverage younger in Spain and Portugal thanelsewhere in Europe (84% of the Spanish and85% of the Portuguese sample were foundedafter 1971 and 63% and 62% respectively after1981) - but the same basic phenomenon can beobserved everywhere in Europe.I.5 There are no doubt many reasons for thisvery marked growth but the following factorshave almost certainly been influential:

increases in prosperity following thesecond world war and latterly increased leisuretime (shorter working week, longer holidaysand two-day weekends)

the shift evident in most Europeaneconomies during the 80's towards theprovision of services

the increasing delegation to voluntaryorganisations of services (particularly socialservices) previously delivered by publicauthorities ("social privatisation")

changes in public preferences away fromuniform and relatively impersonal services of thekind typically provided by public authoritiestowards the more individual client-orientedapproach favoured by voluntary organisations

the identification of a whole range of newneeds and the growth of new socialpreoccupations (e.g. sexual equality, theenvironment and preservation of the biosphere,foreign aid to developing countries followingthe granting of independence to former coloniesin the 60's, peace etc.)

the employment crisis in the late 70's andearly 80's leading to the creation of

17

employment schemes involving voluntaryorganisations

historical reasons peculiar to particularMember States such as the release of pent-upassociative demand following political changesin Spain and Portugal or the movement to createstructures outside the purview of the statefollowing the social and political upheavals of1968

demographic changes taking place inEurope such as the increasing number ofretired/unemployed people leading MemberStates to offload services from the State to theprivate and associative sectors as a way ofcutting public expenditure

Numbers of members

I.6 One well-known voluntary organisation inthe Community has over 13 million members.Most voluntary organisations, however, aresmall, often having no more than a handful ofactive adherents. Because of the methods usedby the Commission, the sample contains adisproportionate number (30%) of "intermediaryorganisations" in the sense explained inparagraph 4 and of national organisations. Theresults will therefore have considerablyoverestimated the average size of voluntaryorganisations in the Community. (Mostintermediary organisations responding to thesurvey were federations - that is, umbrellabodies providing some centralised services (suchas information and combined lobbying) for anumber of separate voluntary organisations orbranches (usually with their own legal identity)working in the same field. Nonetheless thefigures are of interest.I.7 In the sample, about 40% of voluntaryorganisations had fewer than 100 members andmore than half had fewer than 200. The rangewas, however, very wide. Thus 13% of thesample had between 1 000 and 5 000 members,and 15% had over 5 000. As would beexpected, national organisations tended to havemore members than those with a regional focus- they appear, roughly speaking, to have twiceas many members as regional organisations.

I.8 Of the federations responding to thesurvey very nearly half represented more thanfifty organisations, with 9% representing over500. Such bodies do, of course indirectlyrepresent large numbers of members ofindividual voluntary organisations: in our sampleover half (55%) of federations indirectlyrepresented more than 10 000 members with32% representing over 100 000. The averagenumber of members indirectly represented wasover 1 300 000.I.9 The size of voluntary organisations andfederations appears to vary according to anumber of factors. Larger bodies tend to beolder, as do organisations working in fields ofobvious and enduring interest, such as socialservices and education. As has already beenremarked, voluntary organisations with widegeographical scope tend to be larger than thosewith a relatively parochial focus. The size of themembership also reflected to some degree thesize and relative wealth of the Member Stateand the relative maturity of the sector.

Employment

I.10 The numbers of staff employed byvoluntary organisations varies very widely -from none at all to many thousands. The greatmajority of voluntary organisations are, ineffect, small enterprises and, like theircounterparts in the conventional economy, mostemploy no more than a handful of staff. A few,however, are large organisations by anystandards, employing large numbers of full andpart-time salaried staff.I.11 The average voluntary organisation in oursample employed 40 full and 10 part-time staff.The equivalent average figure for intermediaryorganisations was a little higher. These averagesdo, however, conceal wide variations. Thussome 14% of our sample employed no paid staffat all, 17% employed over 50 people (full andpart-time), 6% between 101 and 500, and 4%over 501. The commonest number of employeeswas between 1 and 5. Full-time staff appear towork on average for 36 hours a week and part-timers for 20 hours. These figures varied lessfrom country to country than they did according

18

to the area in which the voluntary organisationwas active: for example, as might be expected,voluntary organisations active in the health orsocial services field tended to employ manymore salaried staff than those active in, say, civilrights.

Volunteers

I.12 Another very important source of supportfor voluntary organisations is, of course,volunteers. 81% of our sample said that theyemployed volunteers. Voluntary organisations insome countries appeared to make rather greateruse of volunteers than others, but in no countrydid the proportion of voluntary organisationswhich have volunteers working for them fallbelow 60%. Again, the numbers of volunteersemployed varied widely: 30% of voluntaryorganisations (including federations and otherintermediary organisations) told us that between1 and 5 volunteers were active in theirorganisation; about 18% reported that they weresupported by between 6 and 10 volunteers; 60%had over 51 volunteers, 10% had between 101and 500, and 7% had over 500. A few voluntaryorganisations (3%) were supported by over2 000 volunteers. On average each volunteerspent about nine hours a week working for theorganisation they supported.I.13 Although there did not appear to be majordifferences between the number of organisationsin different Member States using volunteers, theratios of salaried staff to volunteers variedwidely from country to country - from about 1:1to about 1:8. Such differences did not appear tobe related to the size or wealth of MemberStates or any other particular factor. It may bethat they simply reflect varying traditions, or theextent to which volunteering is, or is not,organised.I.14 The numbers of volunteers employed alsovaried markedly according to the voluntaryorganisation's main field of activity. Forexample, voluntary organisations workingmainly in the field of culture and recreation, orin human rights, clearly depended to a muchgreater extent on volunteer workers than didvoluntary organisations working in health,

education, or social services. However, whilethere was some tendency for voluntaryorganisations to rely on either salaried staff orvolunteers, it was not necessarily the case thatvoluntary organisations with few salaried staffhad few volunteers, or vice versa - the mixvaried a great deal.

Assets

I.15 The voluntary organisations andfederations in our sample had:

financial assets amounting to 2,208thousand ECU;

property amounting to 702 thousandECU;

equipment amounting to 1,102thousand ECU;

other assets amounting to 835thousand ECU;

total assets of 10,068 thousandECU.

These averages conceal wide variations betweenvoluntary organisations themselves and betweencountries. By and large it is, as would beexpected, voluntary organisations in the richerMember States which have on average biggerassets, though the variation in even thesecountries is as wide as anywhere. Voluntaryorganisations in Member States where there arestill remnants of the old mortmain laws, orwhere the laws governing inheritance are stillrelatively rigid, have discernibly fewer assets inthe form of property.

Expenses

I.16 Data on organisations' annual expenditurewas broken down into salaries and wages,administrative costs, and other costs. Onaverage the costs incurred by our sampleorganisations amounted to the following:

salaries and wages: 27,743thousand ECUadministrative costs: 465thousand ECU

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other costs: 1,044thousand ECUtotal costs 31,149thousand ECU

There were minor differences betweencountries: broadly voluntary organisations frombetter off Member States spent more thanaverage on wages and salaries. Not surprisinglylarger organisations spent rather more onadministration than did federations, which weregenerally more expensive to run than simplevoluntary organisations.

Sources of Income

I.17 Very many voluntary organisationsdepend to some degree on external subsidies ofone kind or another, typically from publicauthorities, but often from individuals or otherprivate donors. Many others are virtually self-supporting, obtaining their income frommembership fees or by the sale of services orother products. To get an idea of how theyfinanced their expenditures, we asked voluntaryorganisations in our sample to state whatproportion of their income was from their ownresources and what proportion came from so-called external sources, such as gifts andsubsidies.I.18 For the purposes of the study, incomefrom the sale of services (whether to membersor non-members) or products (e.g.publications), membership fees, investmentincome and income from contracts, were allcounted as "own resources". Under "Externalresources" were included subsidies fromgovernment bodies and other public authorities,and support from individuals, internationalbodies, foundations and companies.I.19 On average membership fees (30%) andthe sale of services (30% of which 20% were tomembers and 10% to non-members) made thelargest contribution to voluntary organisations'"own resources", followed by contracts (17%),

sales of products (15%), and investment income(8%). To put the matter in another way, onaverage a typical European voluntaryorganisations derives some 62% of its "ownresources" from economic activity of one formor another - i.e. from selling services directly orunder contract, or from selling products such aspublications. Again these averages did,however, conceal wide variations in the amountsthat voluntary organisations gained from varioussources and in their relative importance. Forexample, in two Member States the mostimportant source of income in the "ownresources" category was sales to non-members;and in another membership fees apparentlycontributed little in comparison with contractswith public authorities.I.20 There was less variation apparent whenwe looked at "external resources". By far themost important source of external income forvoluntary organisations in all but one MemberState was reported to be subsidies from publicauthorities (52%). This was followed by supportfrom individuals (22%), support frominternational bodies (10%), grants fromfoundations (9%), and lastly support fromcompanies (7%). Again to put these averagesinto perspective, grants from foundations weregenerally not an important source of income(between 3% and 6%) in all but two MemberStates, as were supports from business.I.21 Of all the sources of internal and externalincome, subsidies were clearly the mostimportant, followed by membership fees. Thefollowing diagram compares all the sources ofinternal and external income and gives theirmean percentages of the total.

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Subsidies

Membership-Fees

Support Individuals

to members

Contracts

Sales of Products

Grants

Support International Organsations

to non-members

Support Companies

Investment Income

Res

ourc

e

0,00 0,05 0,10 0,15 0,20 0,25 0,30 0,35

average part in %

Own and External Resources

I.22 Additional information was also soughtfrom voluntary organisations and federationsabout the balance of "own" to "external" incomeover the last three financial years. The ratio ofown resources to external resources was onaverage about 45:55, with no significantfluctuations over the three years. In each year,however, there were some voluntaryorganisations/federations claiming that 100% oftheir income was derived exclusively either fromtheir own or from external resources. In otherwords most voluntary organisations appear togenerate a little under half their incomethemselves, relying for the remainder mainly onsubsidies of one kind or another; but there arenumbers of voluntary organisations which areeither wholly self-sufficient or alternatively,wholly dependent on external aid.

Sphere of Activity

I.23 The questionnaire used the following tenmain spheres of activity with which to classifyvoluntary organisations/federations:

I.24 The figures in brackets indicate theproportion of respondents naming each of theseareas as one in which they were active. Thesefigures take account of the fact that, as hasalready been made clear, many voluntaryorganisations are active in a number of fields atonce. This is clearly revealed by the followingdiagram showing the proportions of voluntaryorganisations whose main activity may lie in onefield but which are also active in others. Therewere, as would be expected, differencesbetween countries, though it is noteworthy thatsocial 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%)

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Business and Professional Voluntary organisations ( 8%)

Business

Ph i lan thropy

Env i ronmen t

Civ i l R ights

Hea l th

In ternat iona l ac t iv i t ies

Educat ion and Research

Deve lopmen t /Hous ing

Cul ture and Recreat ion

Socia l Serv ices

Are

as o

f Act

ivity

/ Mai

n A

reas

of A

ctiv

ity

0 1 0 2 0 3 0 4 0 5 0 6 0

frequencies in %

Areas of Activity and Main Areas of Activity - frequencies in %

but two countries (it is unlikely that this findingsimply reflects our particular sample). Greaterdifferences appeared, however, when we lookedin more detail at the type of social servicesprovided where voluntary organisations indifferent countries appear to specialise indifferent sub-areas such as family care, youthwork or services to elderly people or peoplewith disabilities. The latter three groups were, infact, most often mentioned. This may reflect thefact that governments most often turn tovoluntary organisations to provide services forthese particular groups.

I.25 Looking in a little more detail at thefigures on, for example, "culture andrecreation", reveals that 41% of voluntaryorganisations whose main activity lies in thisfield are also involved with other cultural andartistic activities - 37% with sport, 29% withrecreational and entertainment clubs and 27%with the media and communication. Voluntaryorganisations which gave another area as theirmain field of activity were also active in "cultureand recreation".I.26 A further example is provided by "health":36% of voluntary organisations which claimedthat health was their main area of activity were

involved in rehabilitation, 35% were involvedwith public health services, and 26% were activein nursing homes. Nursing homes were alsomentioned by, for example, 29% of voluntaryorganisations which gave "Philanthropy andVoluntarism" as their main area of activity; and17% of voluntary organisations who weremostly involved in "social services" were alsoinvolved in "rehabilitation".I.27 This "multi-functionality" is typical of thephilosophical approach adopted by voluntaryorganisations and often also reflects theircircumstances as key sources of aid orinformation in a particular locality. Voluntaryorganisations in this sense are rarely entirely"subject-oriented": their focus is above all onpeople and their problems. In this spirit, manyvoluntary organisations provide what is, ineffect a "one-stop-shop" either for theinhabitants of a particular area, or for the groupwhich is their special concern. Thus a voluntaryorganisation dealing with, for example, peoplewith disabilities, will deal not simply with theimmediate results of a particular disability, butwill tend to occupy itself also with theinformation and advice needs of its clients andwith the whole range of concerns affectingthem, including, most importantly, their rights as

22

citizens. This latter is a particularly importantpoint: as a glance at the diagram will show:while only 6% of our sample regardedthemselves as primarily concerned with humanrights, 35% gave it as a field in which they wereactive. The same multi-functionality is evidentthroughout the diagram.I.28 When we looked at the expenditure andassets of voluntary organisations working indifferent fields we found that bodies concernedwith social services and health had the highestexpenditure. The voluntary organisations andfederations whose main concern was with civilrights and advocacy had the lowest costs andthe smallest assets. Environmental voluntaryorganisations/federations and those whose mainobjective was education and research were bestoff from the point of view of assets.I.29 As regards the "own resources" ofvoluntary organisations, the most importantsource of income for bodies in the field ofculture and recreation was the sale of services tomembers and membership fees, both providing29%. In the fields of education and research andinternational activities, contracts, (25% and27% respectively) were the most importantsource of self-generated income, while in thearea of health it was membership fees (36%).Voluntary organisations providing socialservices also said that membership feesconstituted a significant part of their "ownresources" (33%), as did those dealing with civilrights (38%), development and housing (31%)and the environment (35%). In contrast, charityorganisations obtain the bulk of their ownresources by selling services to members (28%)and non-members (26%). For business andprofessional organisations, membership fees areby far the largest element in the "own resources"category.I.30 As regards external sources of income,organisations working in all fields are largelysupported by subsidies of one kind or another.Subsidies provide from 31% of total externalincome of charitable voluntaryorganisations/federations to 73% of suchincome for business and professional bodies. Ashas already been noted, support from individuals

is also an important source of income.Charitable voluntary organisations andfederations, for example, said that support fromindividuals represented 37% of their externalincome. Environmental voluntary organisationsclaimed the proportion to be 29%, and in thefields of social services, education and researchand international activities, it represented a fifthof external resources. The major exception tothis picture was provided by business andprofessional voluntary organisations, whichderived only 2% of their external income fromindividuals.

Geographical scope

I.31 In asking about the geographical areacovered by voluntary organisations, we werechiefly interested in gaining an impression ofwhat sort of proportion of our sampleconsidered Europe as a significant, if not theonly, focus of their organisation. The resultsvaried surprisingly widely: in one country only4% of respondents regarded their scope asextending to Europe, compared to 35% inanother country. They should, however, beconsidered together with our findings (reportedbelow) on the number of actual or intendedpartnerships or other activities undertaken byvoluntary organisations at the European level.Interestingly, there appears to be littlecorrelation between how important a focusorganisations consider Europe to be and theirpropensity to form European partnerships.I.32 The scope of a voluntary organisation'sinterest is not, of course, necessarily closelyrelated to its organisational structure. Forexample, an internationally active voluntaryorganisation may well be locally based, whereasone which may be active at a national levelwithin a particular Member State may lack anyinterest in Europe. As a broad rule, however,the greater an organisation's geographical scopethe more it appears to play an active role at alllevels. Thus most national organisationsconsidered that they were also active at localand regional level, but few local organisationsconsidered that their scope extended to nationallevel. In line with this, most of the voluntary

23

organisations that are active at the Europeanlevel are, in fact, nationally organised.

Target groups and beneficiaries

I.33 We asked voluntary organisations whichparticular groups of people their organisationworked with or was concerned with and toindicate to whom, or to which bodies theyoffered services and on what basis. The greatmajority of voluntary organisations andfederations defined their target public widely -46% of respondents said that they served the"general public" or alternatively "young people"(37%) or "adults" (35%). In contrast, very fewvoluntary organisations mentioned morenarrowly-defined groups as their particularconcern. It may be doubted whether there ismuch significance in this finding. Sincevoluntary organisations were not, in practice,confined to one choice from the list provided inthe questionnaire, the likelihood is that mostrespondents whose activity was directed on theone hand at a specific group of people e.g."drug addicts" or "veterans" and, on the otherhand at the population as a whole (whether todraw attention to their work or to canvass forsupport) indicated both the specific group and"general public".I.34 When we asked voluntary organisations towhom they provided services the answer was,again, most often the "general public" (39%),followed as the next most frequent categories bythe "target group" (38%) and members. (36%),governments or other public bodies (22%). Theextent to which these services were providedfree or in return for payment varied according tothe country concerned and to whom the servicewas provided. Free services were most oftenprovided to the general public and to members,and paying services to the voluntaryorganisation's particular target group or clientsor to public authorities.I.35 Overall, more free goods or services wereprovided by voluntary organisations/federationsthan goods and services against payment. Notsurprisingly, voluntary organisations andfederations that mainly offer their services freerely more heavily on support from outside than

do bodies which charge. To what extentservices are provided free or, alternatively, haveto be paid for depended heavily on the voluntaryorganisation's field of action. For example, thesupport of the homeless is likely to involve theprovision of free (or at least very cheap) goodsor services whereas it may be reasonable tocharge for, say, adult education. Similarly,sports clubs, where perhaps relatively costlyequipment is needed, or which are prestigious,will provide fewer free benefits than thosevoluntary organisations involved in socialservices, especially of a relatively informal kind.These findings, together with those onvoluntary organisations' sources of incomeare a clear indication of the importantredistributive effect which these bodies have.

European Community-wide partnershipsbetween voluntary organisationsand foundations

I.36 Because of the method we used, oursample undoubtedly contained a greaterproportion of voluntary organisations which areactive at the European level than would beexpected in a more scientific sample. The figuresare nonetheless impressive evidence of theextent to which the sector is already beginningto come together throughout the Community:50% of those voluntary organisations answeringthe relevant question, or nearly a quarter of thetotal sample, said that they were alreadyinvolved in cross-border activities in some formof partnership with nationals or organisationsfrom other Community countries.I.37 Given that the inspiration for the majorityof the well-known networks already working atEuropean level came from countries in the northof the Community, it might have been expectedthat the tendency to form partnerships might beless marked in the south than in the north. In theevent, the findings did not support thishypothesis: there were differences betweencountries, which are not altogether easy toexplain, but no clear division was discerniblebetween the overall picture north and south.I.38 Looking ahead, 46% of our respondentssaid that they envisaged entering into cross-

24

border partnerships at some time in the future.Interestingly, an analysis by country showed, ineffect, that it is voluntary organisations in thosecountries that have hitherto formed a below-average number of partnerships which have thestrongest future intentions. In other words,when it comes to operating on the Europeanstage, voluntary organisations in countries nowlagging behind appear to have every intention ofcatching up.I.39 Of voluntary organisations already inpartnerships, 27% were active in "socialservices", 14% in the field of "culture andrecreation", 13% in "international activities".11% in "education and research" and 10% in"development and housing". Again, there wasevidence that voluntary organisations workingin some fields where few partnerships have yetbeen formed have stronger future intentions asregards cross-border work: for example, nofewer than 75% of our sample voluntaryorganisations which are active in the field of"development and housing" said that they wereplanning partnerships for the future. On theother hand, only 22% of voluntary organisationsactive in the health field said that they wereplanning to enter into partnerships. This maywell reflect the fact that many voluntaryorganisations supply what are, in effect, publicservices - and furthermore in a highly regulatedfield. In these sorts of circumstance,partnerships may simply offer voluntaryorganisations less and thus be less attractive.

Problems in forming partnerships

1.40 Just over half the voluntary organisationsinvolved in them said that they had metproblems in forming or running theirpartnerships. The broad findings were asfollows:

fiscal 21%legal 19%administrative 29%communication 51%other 35%

The figures in brackets indicate the proportionof respondents encountering each kind ofproblem. Few differences were apparentbetween national, regional or localorganisations, though there was a tendency forsmaller organisations to be less preoccupiedwith difficulties. The outstanding finding is, ofcourse, the extent to which "communication"has caused difficulties, though the extent oflegal and fiscal problems is also noteworthy. Itseems likely that the legal difficulties, at least,will be largely removed by the proposed Statutefor a European Association. Language isprobably the most important impediment to"communication" but it is likely that there areother complicating cultural factors at work aswell, such as misunderstanding of role andimportance of the sector in different countries,misunderstanding of how organisations work,the lack of understanding of cultural, legal andfiscal backgrounds, the existence of differentways of working etc..

Main future needs of voluntary organisations

I.41 We asked respondents to tell us what theyfelt were their voluntary organisation's mainneeds for the future. The results are givenbelow.

25

Other Needs

A d v i c e o n M a n a g e m e n t

In fo rma t ion

Tra in ing

Capi ta l

M ore vo lun teers

M ore pa id s ta f f

M ore funds

Mai

n ne

eds

0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0

frequencies in %

M ain needs of European associations/foundations

It is clear from the results that the perceivedneed for more funds and more staff, and aboveall the former, is more or less universal. Thesame demand exists in the sector in all theMember States, though there is a tendency forvoluntary organisations in poorer countries,where the sector tends to be less welldeveloped, to feel their comparative lack offunds more keenly. Voluntary organisations arenot, on the whole, capital-intensive, and it is notsurprising, therefore, that there should not bethe same desire for more capital. Nonethelessalmost a quarter of our respondents mentionedcapital as a need.I.42 The desire for more paid staff appears tobe felt most by older voluntary organisations(those founded between 1945 and 1950):younger voluntary organisations, in contrast,appear in relatively greater need of informationand management advice. The desire for morevolunteers was very widespread but particularlyevident amongst voluntary organisationsworking in the fields of "health" and, forobvious reasons, in "philanthropy andvoluntarism". The need for more training wasmentioned by almost a quarter of respondentsand appears to be felt by voluntary organisationsworking in all fields regardless of their age.

Points for the Commission:development of the sector atthe European level

I.43 Finally, we invited respondents to let usknow of any points which they would like tobring to the attention of the Commission and toput forward any suggestions they might haveabout how the Commission might help thedevelopment of the sector at the European level.The answers we received ranged widely fromsimple demands for "recognition" in a quitegeneral sense (either of the non-profit sector orof some particular organisation) to relativelycomplex suggestions for changes in, orextensions to, European Community policies.

26

ANNEX IIOVERVIEW OF THE LEGAL ANDFISCAL FRAMEWORK FORVOLUNTARY ORGANISATIONS ANDFOUNDATIONS

II.1 The following is an overview of the legaland fiscal basis on which foundations andvoluntary organisations operate in each of theMember States. Following the definition givenin paragraph 2.3 no account is taken of"economic" associations which exist in someMember States and which can engage incommercial or other profit making activities, norof the several varieties of private foundation.

Legal basis

II.2 The freedom to establish or join, or indeedto leave, a voluntary organisation is nowadays aright (normally guaranteed under theconstitution) in all Member States of theCommunity. The right of association is, ofcourse, also guaranteed under the EuropeanConvention on Human Rights.9 Generallyspeaking it is possible for nationals of anyMember State to establish a voluntaryorganisation or foundation anywhere in theCommunity, although some Member Statesstipulate that there should be a minimumnumber of their own citizens or residentsinvolved10. Some Member States have however,special statutes precisely to enable foreignnationals to establish voluntary organisationswhich, though subject to the same nationalregistration or publication requirements as anyother voluntary organisation, are then runaccording to such internal regulations as may belaid down in the country from which thefounders originate.

9 Article 16 of the ECHR permits derogations to theright of association in the context of a politicalactivity of non-national citizens.

10 This is in fact in contravention of Articles 6 and 52of the Treaty on European Union.

II.3 Generally speaking, where jurisdictionsmake the distinction between private and publiclaw both voluntary organisations andfoundations are entities of private law. Not allMember States define either voluntaryorganisations or foundations explicitly, and notall make a fundamental legal distinction betweenvoluntary organisations on the one hand andfoundations on the other. For present purposes,however, voluntary organisations can be takenas groups of private individuals who have cometogether for some non-profit end in the publicinterest. In contrast, foundations are entitieswhich have charge of assets set aside forpurposes in the public interest in the form of anendowment or of a regular dedicated source ofincome.II.4 That part of the sector of interest here is,therefore, neither wholly private nor whollypublic in nature. It follows that fundamental tothe law must be some means of demarcating itsproper sphere of operation from the territoryoccupied by purely private activity, bygovernment, or by commercial companies andother forms of profit making enterprise. Withinthe Community this has been achieved eitherformally - by setting out the basic features ofinternal organisation and governance to whichnon-profit organisations must conform; or byobjects - by laying down what spheres ofactivity count as in the public interest and byestablishing other rules defining how the non-profit status of the organisation is to be secured.II.5 Broadly speaking the first of theseapproaches - that of defining non-profits by theirformal features is characteristic of the civil codetradition, and the second - that of delineating thesphere of non-profit activity in the publicinterest ("charity") by the purpose of the activityitself - is the fundamental feature of the commonlaw tradition.II.6 Many commentators draw a sharpdistinction between these two approaches, and itis certainly true that the legal traditions fromwhich they derive are very different. Thepractical effect of the difference in approachcan, however, be exaggerated. Manyjurisdictions contain special legal provisions for

27

voluntary organisations with certain aimsregarded as of public interest which, combinedwith different levels of tax relief, means that inpractical effect organisations in many MemberStates are defined in terms of both their formalstructure and their objects. It is also true to saythat in practical terms the basic provisions of thelaw on foundations (and in particular theemphasis given to the preservation of assets,with all that that implies) in code countries arealso very similar to those found in common lawjurisdictions. The clear link here is probablyhistorical. The common law on charity hasenjoyed an unbroken tradition and has neverdrawn a fundamental distinction betweenfoundations and voluntary organisations - bothare charitable trusts. Since foundations are theolder form, it appears that the law was simplyapplied later to voluntary organisations withoutany major adaptations. In contrast many codecountries have not enjoyed the same continuity,the result being that the law has diverged.II.7 Voluntary organisations may beincorporated or unincorporated and both formsare found in all jurisdictions. It seems likely thatthe majority of voluntary organisations in theCommunity are in fact unincorporated and thuswithout legal personality. There are somedisadvantages to being unincorporated: it is notalways easy for the voluntary organisations toacquire any assets it may need, and its individualboard members or trustees, in whose names thebusiness of the voluntary organisation is carriedon, may be uncomfortably exposed to liabilities.In most places the law has, however, developedways of mitigating the difficulties - by the use ofthe law of agency, for example, or by a commonfund to which members contribute and to whichcreditors have first recourse, and in mostjurisdictions the unincorporated voluntaryorganisation does not appear to be preventedfrom taking part in legal process as a voluntaryorganisation (that is to say under its own namerather than that of a responsible board member).II.8 In code countries the incorporation ofvoluntary organisations is generally achieved bythe publication of statutes conforming to the lawin the relevant official journal, together with a

list of (board) members. Incorporation (or, moreaccurately, the registration which is itscondition) may be refused on the grounds thatthe statutes of the body are non-conforming. Arefusal to register a voluntary organisation inthese circumstances is an entirely administrativematter and implies no political judgement on thestatus of the organisation. It needs, therefore, tobe carefully distinguished from thecircumstances in which organisations may berefused special status for tax purposes (seebelow, paragraph 5.14 and 5.15). The statutes(and often a full or partial list of members) aretypically required to be registered with either thelocal court or with the responsible ministry,regional or local authority. All foundations havelegal personality, which again is normallyachieved by the publication of statutes etc..Unlike voluntary organisations, however,foundations are generally subject to somedegree of a priori control to ensure that thestatutes are in strict conformity to the law, that(since they are often intended to exist "inperpetuity") management succession has beenproperly allowed for, and that their intendedassets are adequate to achieve their ends.II.9 In common law jurisdictions no specialform of incorporation is available for eithervoluntary organisations or foundations. Insteadbodies seeking the convenience or protection ofincorporation have a number of different formsto choose from depending on the area of activityin which they are engaged. By far the mostcommon is the so-called "company limited byguarantee'" - in effect a non-profit-distributingcompany - but there are other forms availablesuch as the "housing association" or the so-called "friendly society". There are also(comparatively rare) examples of charitablevoluntary organisations and foundations whichhave been incorporated by Royal Charter or byspecial Act of Parliament.II.10 Incorporation is available everywhere byone means or another, but the resulting degreeof legal capacity is not always as great. In anumber of Member States legal capacity iseffectively unlimited (in any event as long as thebody concerned acts in accordance with its

28

statutes). In others, however, neither voluntaryorganisations nor foundations can receive giftsand legacies or own real property without theexpress permission of the relevant publicauthority.II.11 There are differences too when it comesto the difficult question of the degree to whichvoluntary organisations and foundations (but inparticular voluntary organisations) are allowedto engage in economic activity without the lossof tax privileges. Some degree of economicactivity is allowed in all Member States, the rulegenerally applied being that such activity mustnot be voluntary organisations' principal activityin the sense that it must be carried out not for itsown sake but for some non-profit aim, and mustbe ancillary to the objects of the voluntaryorganisations in the sense that it must be directlytied to the voluntary organisation's objects andnot simply designed to improve theorganisation's general financial position. In linewith the non-distribution constraint under whichall voluntary organisations operate, any surplusfrom economic activity has, of course, to be puttowards the achievement of the voluntaryorganisation's aims. In some jurisdictions, it ispossible for a voluntary organisation orfoundation to supplement its income by creatingor acquiring an entirely separate commercialcompany which then remits its income to theparent body.As far as competition rules are concerned, allcompetition rules will be adhered to, taking intoaccount the specificities of the sector.

Taxation

II.12 All Member States allow some voluntaryorganisations - broadly speaking, those whichare regarded as having purposes in the publicinterest - some degree of relief from directtaxation either by exempting them from taxesimposed on companies and other forms of profitmaking enterprise, or by imposing a lower ratethan that paid by companies, or by establishing aminimum income threshold below which tax isnot incurred. These forms of relief are notnecessarily mutually exclusive. Where voluntaryorganisations are exempt from company tax

they may have to pay income tax instead. SomeMember States allow partial or full exemptionfrom property taxes on real property owned oroccupied by the voluntary organisation orfoundation. In addition there may, rarely, bepartial relief from employment taxes.II.13 If the principle of a degree of taxexemption for some voluntary organisations andfoundations is universal, the approach adoptedby Member States differs significantly, as doesthe extent to which relief is given to bodiesworking in different spheres. In somejurisdictions, voluntary organisations andfoundations are in principle subject to the sametax regime as companies and receive no relieffrom direct taxation unless they are recognised(either, as having certain objects, by law, orindividually by the relevant authorities) for taxpurposes. In others (and in particular thosewhere voluntary organisations and foundationsare defined as being in the public interest) taxrelief is accorded as of right but may be lost ifthe voluntary organisations is regarded ascarrying on commercial or lucrative activityoutside the limits recognised by law orjurisprudence. In such circumstances theprivileged tax status of the organisation may beremoved altogether. Alternatively relief may bewithdrawn only in respect of those activitieswhich are regarded as profit making in therelevant sense.II.14 Besides these differences in approachthere are significant variations in the way inwhich Member States delineate the sphere ofactivity that they regard as being in the publicinterest. There are thus considerable differencesin the extent of tax relief for which voluntaryorganisations and foundations working indifferent fields are eligible. Some jurisdictionsdefine the area of public interest for thepurposes of tax relief very generally andbroadly, including, for example, any activity ofpublic utility or benefit. Such jurisdictionstypically give full relief to all bodies meeting thisbroad criterion. Other Member States take amuch more restrictive approach. In one, forexample, reliefs are presently available only for asmall number of individual organisations named

29

by the law. Yet other Member States take botha restrictive approach and one which alsodiscriminates between different sorts of bodies.Thus only very limited relief may be granted toall non-profit bodies, fuller exemption beingconfined to bodies operating in a restrictednumber of fields - such, typically, as health,culture or social services - and subject tostringent management and accountabilityrequirements. Such special tax status is subjectto administrative and political discretion and insome Member States appears to be increasinglyrarely accorded.

Tax relief for donors

II.15 All Member States grant a measure of taxrelief to donors to voluntary organisations orfoundations, whether they be individuals orcompanies or other forms of organisation.Reliefs may be granted up to a maximumamount in any one tax year or, alternatively, upto a maximum proportion (expressed as apercentage) of an individual's gross or after-taxincome. The arrangements for companies areusually similar, relief generally being grantedeither up to a maximum amount or up to aproportion of profits before or after tax.Minimum amounts or proportions may beimposed and, in the case of companies, thepermitted base for calculating the maximum giftmay be turnover rather than profits.II.16 Some Member States grant some degreeof tax relief to donors to any voluntaryorganisation or foundation active in the publicinterest as broadly defined. In others, morerestrictive criteria are applied, relief to donorstypically being restricted to gifts to thosevoluntary organisations which are themselvesgranted special status for tax purposes. Indeed,unless they possess the required status,voluntary organisations in these Member Statesdo not normally have the capacity to receivegifts at all (see paragraph 5.10 above). Injurisdictions where voluntary organisations orfoundations normally have limited legalcapacity, voluntary organisations given a generaldispensation to receive gifts may nevertheless berequired to dispose of any gift of real property

within a specified period. In some MemberStates the voluntary organisation or foundationmay be charged tax on the gift received.II.17 Member States also take a differentattitude when it comes to legacies. In someMember States individuals are free to leave allor part of their estate to a voluntaryorganisation or foundation of their choice and,while this appears to be a less common practicethan in the past, many still do so. Alternativelythey may create a new body - usually afoundation - with some cherished aim. Suchtestamentary gifts are generally tax free both tothe donor's estate and to the recipient body. Inthose countries where voluntary organisationsand foundations have limited legal capacity,however, it may be impossible to leave anythingbut a notional part of an estate to a voluntaryorganisation or foundation unless the recipientbody has received the required dispensationfrom the authorities. Willing an estate may befurther complicated by strict laws governinginheritance or by requiring that considerableassets be set aside before a foundation can becreated.

Indirect tax

II.18 Article 13(A)(1) of the Sixth Directive77/388/EEC of 17 May 197711 requires MemberStates to exempt from VAT "certain activities inthe public interest". These include hospital andmedical care, goods and services closely linkedto welfare and social security work or theprotection of children and young persons,education and training for young persons and soon.12 Many voluntary organisations andfoundations are, of course involved in theprovision of just such services and their

11 Known as the "Sixth Directive", it governs theharmonisation of the laws of the Member Statesrelating to turnover taxes and introduces a commonsystem of VAT and a uniform basis for itsassessment.

12 These exemptions are subject to certain conditions(see Article 13.A.1b),g),h),i)) and are not givenautomatically.

30

transactions are exempt from VAT, providedthat they obtain prior authorization from theMember State in which they are established, i.e.they are exempt from the need to file VATreturns, to charge VAT to their clients or to payoutput tax. In addition, under Article 13(A)(2)Member States can make the granting of any ofthe listed exemptions to any body (other thanthose governed by public law) subject to anumber of conditions designed in effect toensure that exempt bodies are bona fide non-profit organisations whose activities will notaffect the competitive position of taxedcommercial enterprises. On the face of it theability to impose conditions on the granting ofexemptions would seem to leave a good deal ofscope for variations in the treatment ofvoluntary organisations but in practice, with afew minor exceptions all Member States appearto have implemented the exemptions outlined inArticle 13.II.19 In addition to the exemptions mentionedabove, a number of Member States "zero rate"certain supplies. This can benefit non-profits byallowing them to reclaim input tax.

31

BELGIUM

ASSOCIATIONS

LEGAL POSITION

1. Right of association guaranteed by law?Yes - Article 27 of the Constitution asrevised in 1994.

2. Basic definitionAn association, in the strict sense of theterm, is a contract via which severalpeople agree to pool certain materialresources with an aim other than theproduction or sharing of profits.(associations involve a degree ofpermanence in the shared existence).

3. Minimum number of foundersThree (for ASBLs).Two for AIs formed under Belgian orforeign law.

4. Main types of associationDe facto associations (not incorporatedin one of the forms laid down by law,and not having a legal personality).ASBL (Associations Sans But Lucratif)defined by the Law of 27 June 1921 asorganizations which do not engage inindustrial or commercial operations, andwhich do not seek to procure materialgain for their members.International Associations under Belgianlaw (IA) (Associations Internationale dedroit belge) limited to associations withphilanthropic, religious, scientific,

artistic, or educational objectives (Lawof 25 October 1919).International Associations under foreignlaw (Associations Internationale de droitétranger) with the same aims asassociations under the IA Belgian law(cf. Article 8 of the Law of 25 October1919, which entitles an association withits head office abroad to open an officein Belgium).

5. Membership nationality requirementsASBL: Three-fifths must be of Belgiannationality or resident (established andregistered) in Belgium; otherwise theassociation will not be able to claim legalstatus vis-à-vis third parties, who willthemselves, however, be entitled to holdthis against them;IA(Belgian law): at least oneadministrator of Belgian nationality, norequirements for ordinary members.IA(foreign law): none

6. Legal personality, and how acquired.ASBL - by publication of statutes, plusthe full names, trades/professions andaddresses of the association'sadministrators in the annexes to the"Moniteur".IA (Belgian law) - by Royal Decree(published by extract in the “Moniteur”);legal personality effective vis-à-vis thirdparties ten days after publication of thestatutes plus the full names,trades/professions and addresses of theassociation's administrators in theannexes to the "Moniteur".IA (foreign law) - legal personalityeffective vis-à-vis third parties ten daysafter publication of the statutes, plus thesame information as for IAs underBelgian law (including the address of theoffice in Belgium). Such publicationrequires prior “recognition” by theGovernment..

ANNEXE III THE LEGAL AND FISCALFRAMEWORK FOR VOLUNTARYORGANISATIONS(ASSOCIATIONS) ANDFOUNDATIONS

32

7. Legal capacityImmovable propertyAll types of association are restricted tothe permanent ownership of only suchimmovable property as is strictlyrequired for the fulfilment of theirpurposes (extension of legal capacity forthe "Notre-Dame de la Paix" universitydepartments at Namur and the "SaintLouis" university department atBrussels).DonationsASBL: acceptance of donations ofmovable property (including cash) aboveFBR 400 000 and of immovableproperty must be authorized by RoyalDecree.IA: acceptance of any donation(irrespective of its value) must beauthorized by Royal Decree.No authorization required for: goodstransferred to one ASBL by anotherASBL to promote activities similar tothose of the donor, donations granted bypublic bodies to an ASBL, proceeds ofcollections, etc.

8. StatutesASBL: There must be a writtendocument (authenticated or underprivate seal) which must contain certainitems of information, including theobjective for which the association wasformed (Article 2 of the law of 1919).IA (Belgian law): idem (the statuteslisted in Article 2 of the law of 1919must be mentioned).IA (foreign law) - As for IA (Belgianlaw), plus the address of the office inBelgium; otherwise can exercise inBelgium all the rights accorded by itsnational statute.

9. Registration requirementsNone as such, but see publicationrequirements above (para 6). A list ofinternational associations is kept by theMinistry of Justice.

10. Commercial activityUnclear. In theory not allowed, but inpractice acceptable so long as not theassociation's principal activity (i.e. notcarried out for its own sake but for anon-profit end) and ancillary to its mainobject. (Ancillary means directly tied tothe association's objects and not simplydesigned to improve the association'sfinancial position, and any profits are puttowards the association's aims.)

11. Disposal of assets on liquidationTo ends of no benefit to the individualsinvolved, in general as laid down in thestatutes.

TAX POSITION

INDIRECT TAX12. Article 13 of 6th VAT Directive

All exemptions of relevance toAssociations coming under Article 13have been implemented. Organisationsmust meet the criteria set out in Article13(A)(2)(a).

13. Other specific exemptionsNo. There is a lower rate (6%) forvehicles for the transport of disabled,sick, injured or blind persons, daily orweekly publications of generalinformation and "produits derécupération".

14. Zero Rates

DIRECT TAX

15. General positionA. Income taxNot generally subject to company taxunless considered to be carrying oncommercial/gainful activity outside thelimits recognised by law (Article 182 ofthe Code des impôts sur les revenus:CIR) or case law. Associations are liablefor the more favourable taxes on legal

33

persons (CIR Articles 220-226),including in particular:income tax and capital gains tax, and toproperty tax unless the building is usedfor religious, educational, medical, socialwork or charitable purposes.B. other taxesA "compensatory inheritance tax" of0.17% is payable on the association'stotal assets held in Belgium. Tax on giftsto Belgian associations is reduced to 8%(1.1% if the donor is another ASBL orIA , a recognised mutual society, anestablishment of public utility or aprofessional union). Inheritance tax onlegacies made in their favour is reducedto 8.8%.

16. Recognition of associations for taxpurposesUnder Article 104, paragraphs 1 and 3-5of the “Code des impôts sur lesrevenus”, gifts to certain institutions andorganizations - in particular thoseestablished in the form of associations orfoundations to which approval has beengranted by law or by Ministerial orRoyal Decree - are tax-deductible.Approval by Royal Decree is granted fora maximum period of three years(renewable). Officially approvedinstitutions are generally exempt fromcapital gains and property taxes. Incertain cases, express authorization isrequired for the acceptance oftax-deductible donations by approvedinstitutions established in the form ofassociations or foundations (cf. 7above).

17. Criteria for recognitionTo qualify for recognition, an institutionmust have legal personality, be of anon-profit-making nature, both in itselfand as regards its members, be able toprovide documentary evidence of itsaccounts, be active in the country or oneof the cultural communities, keep its listof donors open to inspection by the tax

authorities and not spend more than20% of its budget on administration.

18. Qualifying purposes for recognitionApart from institutions recognised bylaw, the activities of approved bodiesmust fall within one of the followingfields: cultural promotion (libraries,private radio and television stations,museums, sports groups, tourism andleisure associations), scientific research,development aid, or social work.

19. Gifts by individualsTax-deductibility provisions apply solelyto gifts to recognized bodies (includingassociations and foundations). Up to10% of total taxable revenue up to alimit of Bfr 10 million (index-linked) isdeductible. Gifts of major works of artto museums are deductible atgovernment valuation.

20. Gifts by companiesTax-deductibility provisions apply solelyto gifts to recognized bodies (includingassociations and foundations). Up to 5%of net operating profit up to a limit ofBfr 20 million (non index-linked) isdeductible.

ACCOUNTS AND AUDITING

21. See paragraph 17 above for recognisedassociations.Other forms of associations do not haveto publish accounts. In general, internalsupervision by members, externalverification by tax authorities.To obtain authorization by Royal Decreeto accept a gift, ASBLs mustnevertheless have been lodging theirannual accounts with the civil court,where they are open to publicinspection, since their establishment or atleast for the past ten years.

34

FOUNDATIONS

LEGAL POSITION

22. ConstitutionRequires agreement of public authoritiesto establishment and to statutes andRoyal Decree. The statutes togetherwith the names and addresses ofadministrators must be published in theannexes to the "Moniteur", and anychanges in the statute must also beapproved and published.

23. Basic definitionAssets irrevocably given over to one ofthe following non-profit ends:philanthropic, religious, scientific,artistic or educational. No members(Articles 27 et seq.of the Law of 27 June1921).

24. Nationality requirements?Not for administrators, but siège must be in Belgium.

25. Legal personality and how acquiredYes, by Royal Decree approving thestatutes (published by extract in the“Moniteur”) and publication of thestatutes in the annexes to the "Moniteur"

(may be done retroactively to the act ofconstitution.

26. Legal capacityCf. ASBL (7 above)

27. Disposal of assets on liquidationBy court-appointed receivers for thepurpose laid down in the statutes of thefoundation or, failing that, to ends asclose as possible to those for which thebody was founded.

TAX POSITION

28. As for recognised associations.

ACCOUNTS AND AUDITING

29.The Government has a duty to ensure that thefoundation's funds go towards the purposes forwhich it was created. All foundations mustproduce annual accounts and budgets andpresent them to the Government within twomonths of producing them. Both are publishedin the annexes to the "Moniteur". At the requestof the government ministry, administratorsfound guilty of fraud or mismanagement can beremoved by the court. In such cases, newadministrators are appointed according to thestatutes or, at the request of the court, by theGovernment.

35

DENMARK

ASSOCIATIONS

LEGAL POSITION

1. Right to association guaranteed by law?Yes - under constitution

2. Basic definitionNone: NB Associations are notnecessarily "non-profit" organisations.

3. Minimum number of foundersNot stipulated

4. Types of associationsSingle

5. Membership nationality requirementsNone - anybody (legal person orindividual) residing permanently inDenmark can form an association.

6. Legal personality and how acquiredYes - by will of the members. Legalpersonality is acquired as soon asmembers have signed adequate statutesand nominated a managementcommittee. (For requirements seebelow.)

7. Legal capacityUnlimited

8. Statutes in prescribed form?No. But statutes of unregisteredassociations must at least contain rulesgoverning relations between membersand the methods for nominating theirmanagement bodies. The statutes ofregistered bodies must containprovisions required by law - e.g. thename, head office, the number ofmembers charged with managing theassociation and how they are nominated,membership conditions and relationsbetween members, the accounting periodand method of presentation of accountsetc. Changes have to be notified to theregister.

9. Registration requirementsThe following categories of associationmust be declared in the "Register ofFoundations" within three months oftheir creation: employers associations;trade unions and professionalassociations which have as their principalaim the protection of the economicinterests of the professional group towhich their members belong; all privatelaw associations with assets of morethan 250 000 Kroner (approx 31 000ECUs) except those:- contracted tocarry out legal social aid obligations onbehalf of communes or departments;bodies holding property connected withthe national church; legally recognisedreligious congregations; or educationalestablishments authorised by the state,provided such bodies have no otherpowers or objectives.

10. Commercial activityAssociations, like foundations (seebelow) can engage in economic activity,but receipts from such activity aresubject to the same taxes as thoseimposed on commercial companies.

11. Disposal of assets on liquidationFreely determined by the association'sstatutes (but see paragraph 17 below).

TAX POSITION

INDIRECT TAX12. Article 13 of 6th VAT Directive

All exemptions of relevance toassociations coming under Article 13have been implemented.

13. Other specific exemptionsSales of second-hand goods in shopsowned by recognised associations andspecial events organised by them.

14. Zero ratesNewspapers.

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DIRECT TAX

15. General positionEmployers' associations, trade unionsand other professional groupings whosemain purpose is to look after theeconomic interests of the occupationalgroup to which its members belong(labour market groupings) are taxableunder the Funds Tax Act. Otherassociations which simply look aftertheir members' professional andeconomic interests of a market-andservice-oriented nature (tradeassociations) are similarly liable to taxunder the Funds Tax Act. The principlebehind this Act is that foundations andassociations must basically be subject tothe same rules as public limitedcompanies. The rate of tax is the same asfor corporation tax, i.e. 34%.When reporting their taxable income,labour market groupings need to includeonly earned income, unearned incomeand profits. Membership subscriptionsare thus not to be counted as taxableincome. These groupings are entitled todeduct for tax assessment only thatexpenditure which relates to taxableincome.Trade associations are taxed in full onearned income, but other income istaxed only if it exceeds DKr 200 000.Trade associations and labour marketgroupings are entitled to deduct amountsdistributed for charitable or non-profitpurposes. They are also entitled todeduct provisions set aside fornon-profit or charitable purposes.Trade associations are also entitled todeduct amounts distributed for purposeswhich accord with their Memorandum ofAssociation, provided that the recipientof any given distribution is liable to paytax on the relevant amount in Denmark.Other associations, corporations andfoundations (stifelser) not covered by

the Funds Tax Act, are covered by theCorporation Tax Act, § 1. 1 (6).Associations are liable to pay tax only ontheir earned income. Similarly,associations are entitled to deductoperating expenditure only if it relates toearned taxable income.Trade associations are also entitled todeduct allocations intended to meetpurposes which accord with theirMemorandum of Association, insofar asthose purposes may be considered to becharitable or non-profit.Associations may set aside provisions tofulfil charitable or non-profit purposes ata later date.

16. Recognition of associations for taxpurposesBy law or, for the purpose of receivingtax-deductible gifts or annuities, at thediscretion of the tax authorities.Separate lists of bodies eligible toreceive gifts or annuities are publishedeach year by the tax authorities.Application may be made for inclusion ineither or both of these lists. Exemptionfrom tax on legacies may be granted atthe discretion of the tax authorities.Recognition for these latter purposes is,in practice, generally given to bodieslisted as eligible to receive tax deductiblegifts.

17. Qualifying criteria for recognitionBodies qualified to receive tax benefitsare structured as non-profit associationsor foundations. Precluded bodies includethose performing solely political tasks. Itis a condition that gifts (and legacies) beused solely for charitable or non-profitpurposes to the benefit of a fairly largegroup of people, and that any surplus atliquidation be distributed in accordancewith those same principles. In addition,the body must be resident in Denmark(i.e. the head office must be located inDenmark and most of the managementfunctions must be carried out there). It

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appears that the rules qualifying thereceipt of tax deductible annuities arestricter.

19. Gifts by individualsSingle tax deductible gifts can only bemade to bodies on the list published bythe tax authorities (see above, paragraph16). Each gift must be at least 500 Dkr.up to a maximum of 5 000 Dkr. a year.The first 500 Dkr. are not deductible. Inaddition, deductible gifts can be madethrough covenants (contractualannuities) up to a limit of 15% of earnedincome plus capital gains before tax, orup to a maximum of 15 000 Dkr.,whichever is the greater. Covenantsmust normally be for a minimum of tenyears.

20. Gifts by companiesAs for individuals, except that singlegifts are deductible from taxable revenueand covenants are allowed up to amaximum of 15% of taxable profit (or15,000 Dkr.).

ACCOUNTABILITYAND SUPERVISION

21.None laid down for unregisteredassociations. Registered associationsmust produce accounts conforming togood practice and have them examinedand signed by one or more auditors.These accounts must be sent to theRegistrar of Foundations within sixmonths of the end of the accountingperiod. If, at the time it is drawing up itsaccounts, the association has assets ofmore than (approximately)ECU 380,000, then at least one of theauditors must be professionally qualified.In this latter case, the audit must be afull one and the auditor must be givenevery facility by the association. Failureto conform to registration ormanagement, accounting requirements ispunishable by a fine. The Minister ofJustice (who is responsible for the

Register) can require an association toinclude in its statutes any provisiondeemed necessary, and can ask for anyinformation thought necessary to verifythat the law has been complied with.

FOUNDATIONS

LEGAL POSITION22. Freedom to establish?

Yes, but the amount of capital givenover should normally be at least 250 000Dkr. (approx ECU 33,000). Foundationswith a smaller amount of initial capitalcan be created with the agreement of theMinistry of Justice, so long as theamount is adequate for the endsforeseen.

Foundations which are constituted ascompanies must have a start-up capitalof at least 300.000DKR

23. Basic definitionNone in statute. Essentially, goods orcapital given over to some purposeforming an entity with its own legalpersonality managed according to itsown statutes by an independent board.No members.A Fund is a corporate fund if it passesover goods or incorporeal rights,disburses services and similar things forwhich it normally receives payment, or ifit exercises a profession with real estateselling or real estate demise, or if it canqualify as a holding fund.

24. Nationality requirements?Foundations can be created by foreignersbut they must be established inDenmark. In addition, at least half of themembers of the managing board and allthe foundation's administrators must beresident in Denmark. The authorityresponsible for foundations may,however, grant an exemption from theresidence requirement. In any event, the

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requirement is waived if this provisionconflicts with international obligations.

25. Legal personality and how acquiredNewly-established foundations mustreport to the Ministry of Justice (CivilLaw Directorate) and the tax authorities(Inland Revenue) in the foundation'shome district within three months ofbeing set up. This is simply a formalrequirement and has no legal effect onthe foundation's legal status. Corporatefunds acquire legal personality byregistration in the register of CorporateFunds at the Danish Commerce andCompanies Agency, for which theMinister of Industry, Trade and Shippingis responsible.

26. Legal capacityUnlimited

27. Disposal of assets on liquidationFoundations can be merged or liquidatedif their assets are no longercommensurate with their objects.Merger or liquidation - by distribution ofthe capital - can take place afterapplication by the foundation'sadministrators and with the agreement ofthe Ministry of Justice, or can beimposed by the Minister. Bodiesauthorised to receive gifts must agree todistribute any surplus on liquidation to asimilar institution.Corporate funds can be merged orliquidated if their assets are no longercommensurate with their objects or iftheir purposes are no longer beingserved. Merger or liquidation - bydistribution of the capital - can only takeplace after application by the board ofthe corporate fund and with theagreement of the Administration of theCorporate Funds, which normally is theDanish Commerce and CompaniesAgency, with consent from the Ministryof Justice.

TAX POSITION

28.Foundations covered by the Funds Actor the Commercial Funds Act aretaxable in accordance with the FundsTaxation Act. The principle behind thislatter Act is that funds and associationsmust basically be subject to the samerule as public limited companies. Therate of tax is the same as for corporationtax, i.e. 34%.Earned income must be included in fullwhen taxable income is reported. Thefirst Dkr 25 000 of other income istax-free.Foundations are entitled to deductamounts distributed for charitable ornon-profit purposes. They are alsoentitled to deduct amounts distributedfor purposes which accord with theirMemorandum of Association, providedthat the recipient of any givendistribution is liable to pay tax on therelevant amount in Denmark. They arefurther entitled to deduct provisions setaside for non-profit or charitablepurposes.

ACCOUNTABILITYAND SUPERVISION

For the most part as for registeredassociations (see paragraph 21 above).But in addition: the administrativeauthority responsible can removemembers of the board who commit actswhich render them unworthy of theirposition, who do not fulfil the nationalityor residence requirements, who fail toact in conformity with the statutes, orwho are demonstrably incapable offulfilling their role; the administrativeauthority can also appoint members ofthe board (even in non-conformity withthe statutes);bankrupt members of the board mustresign;

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founders and their relatives cannot formthe majority on the board without thepermission of the administrativeauthority. Nor, in the case of afoundation created by a company, cananybody who owns more than half thevoting capital form, conjointly with thefounder and his or her relatives, themajority on the board without thepermission of the administrativeauthority;board members cannot receive largerfees for their services than areconsidered normal for the type of workinvolved.board members cannot take part indebates in which they have an interest;all foundations must basically have theirannual accounts audited, and if their owncapital in the preceding year was over 3million Dkr, the auditor must be achartered accountant. The auditor must

normally be resident in Denmark andmust be absolutely independent of thefoundation, its board members and ofany of its employees concerned withaccounting or the administration of itsassets. The audit must be detailed andcritical, and the auditor must abide byany requirements imposed by therelevant authority. He or she must begiven every facility by the foundation;members of the board are responsible forany damage to the foundation due totheir management, as if relevant are thefoundation's auditors and the companies,if any, to which they belong;foundations can set aside reasonablesums to their reserves, but aside fromthis their funds must be spent on theirobjects. The amounts allocated forreserves or spending can be varied by theauthority responsible.

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GERMANY

ASSOCIATIONS (VEREINE)

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes: Constitution, Article 9, paragraph1: German nationals have the generalright of association. The legal position ofthe association is governed by Article 21et seq. of the Civil Code (BGB) and bythe relevant provisions of the Law onAssociation (VereinsG).

2. Basic definitionNo legal definition. In legal practice andtheory an association is defined as apermanent and structured group ofpersons (natural or legal) who form anentity on a voluntary basis with a view toattaining a common object. The conceptof the communality of the members mustbe expressed at least by a commondenomination and in a body whichrepresents them.

3. Minimum number of founders.Two founder-members. However, theremust be at least seven when the statutesare registered with a view to obtaininglegal personality.

4. Types of associations.The Civil Code governs non-profitassociations (Idealvereine, Article 21BGB) and commercial associationswhich aim to make profits(wirtschaftliche Vereine, Article 22BGB). However, the latter are of onlymarginal importance, and requireauthorization by the public authorityconcerned. The result, de facto, is thatthe concept of an association is more orless restricted in Germany to non-profitorganizations, irrespective of whetherthey have legal status.

5. Membership nationality requirementsNo restrictions.

6. Legal personality and how acquired.By entry in the register of associations inthe court local to the head office (Article21 BGB).

7. Legal capacity.Unlimited

8. StatutesFor registered associations (BGB 57 and58).

9. Registration requirements.For associations wishing to acquire fulllegal personality.

10. Commercial activities.A non-profit association may engage incommercial activities if they are purelyancillary, do not constitute the mainobject of the association and play a verysecondary role in relation to its mainnon-profit activity. If these commercialactivities are not completely ancillary,they cannot constitute the association'smain or statutory activity. In principle,ancillary activities are allowed only iftheir purpose is to help in theperformance of activities to which taxconcessions are attached (not only fundraising) and if this purpose can beattained only through this activity(Articles 65 to 68 of the tax code). Theincome, profits and assets arising fromother commercial activities of anassociation which is recognized as apublic utility are liable to ordinary tax.

11. Disposal of assets on liquidation

Assets pass to the non-profit associationnamed in the statutes. The statutes maylay down that the Annual GeneralMeeting should nominate the non-profitassociation authorized to receive theassets, but in this case the authorizationof the tax authorities is required.

TAX POSITION

INDIRECT TAX12. Article 13 of the Sixth VAT Directive

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All the exemptions applicable toassociations under Article 13 apply.

13. Other specific exemptionsNone

14. Zero ratesNo

DIRECT TAX

15. General positionassociations are liable for corporationtax. If their income does not exceedDM 7 500 they are exempt fromcorporation tax (concession).

16. Associations which are recognized orwhich enjoy tax concessions.Tax concessions are granted toassociations whose statutes and effectivemanagement are inspired exclusively byaltruism and the general good and whichare directly engaged in a philanthropic orreligious activity (Articles 51 to 68 ofthe tax code). Tax concessions are notconfined to associations, but are grantedon the same conditions to any legalpersons within the meaning of Article 1of the law on corporation tax.

17. Criteria for recognitionIt must be clearly apparent from thestatutes and the association'sadministration that in its actions it ispursuing an objective for the publicgood. The statutes must state veryprecisely:- the object;- the way in which the object isattained;- the non-profit activity aimed solelyand directly at this object;- that if the association were to bewound up or deprived of its status as apublic utility, its assets would remain inthe public utility field;- that the effective management mustbe in accordance with the statutes.

18. Recognized bodies

Under Articles 52-54 of the Tax Code,any association whose statutes andactual management are exclusivelyinspired by altruism and the generalgood and which is directly engaged in aphilanthropic or religious activity isrecognized as being of public utility fortax purposes.In tax law, a distinction is made, withregard to the financial activities of anassociation of public utility, betweenactivities strictly connected with thedeclared object in order to enjoy taxconcessions and financial activitiesunconnected with this object andtherefore taxable.Activities strictly connected with thedeclared object are those for which thereceipts are wholly allocated to theobject which the association hasdeclared in order to enjoy taxconcessions. There are no limits on theseactivities, which are deemed to bewithout profit aim, and which enjoy taxconcessions.On the other hand, activities not directlyrelated to the declared object aretaxable. These are mainly commercialactivities engaged in by the associationthrough enterprises engaged to raisefunds to be used to attain the object forwhich the association has applied for taxconcessions. These activities are taxed inthe same way as any other commercialactivity, but do not entail the loss ofnon-profit status provided that they donot take over from the main activity ofthe association (first paragraph of Article55 of the Tax Code).

19. Gifts by individualsGifts made by a natural or legal personliable to tax in Germany with the aim ofpromoting charitable, ecclesiastical orreligious activities for activities whichare recognized as being for the generalgood to an association recognized by thetax authorities as being of public utilitycan be deducted from the donor's taxable

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income up to certain ceilings; theceilings vary, depending on the purposeof the gift, by between 5% and 10% ofthe donor's total taxable income.

20. Gifts by companiesCompanies may deduct gifts up to 0.2%of the sum of total turnover and salariesand wages paid.

20(a). Gifts to non-resident associationsSuch gifts are not deductible.

ACCOUNTS AND AUDITING

21. Accounts

The association must produce an annualprofit and loss account. Thisaccountancy obligation vis-à-vismembers is laid down in Articles 27 (3)and Article 666 of the Civil Code, andvis-à-vis the tax authorities (for thepurposes of establishing the non-profitnature of the social object), in Article 63(3) of the Tax Code.If the association is engaged in acommercial activity, it is required bycommercial law to keep accountingrecords in the same way as businesses.In all cases, two sets of accounts mustbe presented, one for taxable activitiesand the other for non-taxable activities.AuditingThe administrators are responsible to theAnnual General Mmeeting for keepingproper accounts. The statutes mayprovide for a supervisory body and alsofor its powers. If a supervisory body(Aufsichtsrat) is set up, the provisionsapplicable to GmbH and AG forms ofcompanies are not applicable. Theresponsibilities of such a body aredetermined by the statutes.The task of auditing associations haspassed to the tax inspectorate. Itcomprises the process of regularlyrecognizing and checking theirnon-profit status. As soon as a non-fiscalinfringement is detected, the file is

forwarded either to the Ministry ofInternal Affairs, which is empowered todissolve an association covering morethan one “Land”, or - if the associationdoes not cover more than one Land - tothe senior government authority in theLand concerned .

FOUNDATIONS (STIFTUNGEN)

22. ConstitutionBy a Memorandum of Associationsubscribed to by any person, physical orlegal, inter vivos (in which case it can berevoked up to the date of approval), orthrough a will. The memorandum muststate the object of the foundation, theresources available for pursuing thisobject and the governing body or bodies.The resources provided must beadequate for pursuing the object whichthe foundation has set itself. Anapplication for authorization must bemade to the Land in which thefoundation has its head office (under thelaw of the Länder). An appeal againstrefusal of authorization may be madeonly on the basis that the administrationhad not applied its own criteria.

23. DefinitionAssets to which a legal personalityattaches.

24. Nationality requirementsAny person may be a founder.

25. Acquisition of legal personalityThrough approval by the competentauthority.

26. Legal capacityThe maximum capacity required to attainthe object of the foundation. It may doall that is necessary, or even simplyuseful, in pursuing its objective.

27. Disposal of assets on liquidationIf it has become impossible for thefoundation to accomplish its object, or ifthe foundation is jeopardizing the publicgood, the administrative authority may

43

amend its object while complying withthe intentions of the founder as far aspossible. The executive committee mustbe heard. The authority may also abolishand dissolve the foundation (Article 87BGB). In this event, the assets go to thepersons designated in the statutes.Otherwise, they go to the state. Theliquidation procedure is as forassociations.

TAX POSITION

28. See associations

ACCOUNTS AND AUDITING

29. AccountsSee associations

30. AuditingThe managing body for the foundation issubject to the competent administrativeauthority, which is concerned only withconformity with the rules of publicorder. It operates in the exclusiveinterest of the foundation. Auditing ofthe accounts is governed by the statutes.

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GREECE

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes. Article 12 of the 1975 Constitutionprotects non-profit associations andunions provided that they conform to thelaws of the State, which cannot make theexercising of this right subject to priorauthorization.

2. Basic definitionArticle 61 of the Civil Code. A union ofpersons with legal personality, formedwith a view to pursuing a given object,as well as a collection of goods assignedto serving a given object.

3. Minimum number of foundersTwenty

4. Types of associationsCommon law associationsSpecial associationsUnions of persons (without legalpersonality and to which the provisionsrelating to companies apply if no otherprovision is made).

5. Membership nationality requirementsThe right of association is extended tonon-nationals under Article 11 of theEuropean Convention for the Protectionof Human Rights and FundamentalFreedom

6. Legal personality and how acquiredFollowing the application to the Court ofFirst Instance in the area of theadministration's office (theMemorandum of Association and thestatutes must be appended), the legalauthorities verify that the provisions ofthe law are complied with (check onlegality). The association acquires legalpersonality once the Court's decision is

final and the association is entered in theregister of that court.

7. Legal capacityFull legal capacity except for actsinherent to physical persons.

8. StatutesThey must be drawn up in writing andare subject to rules on publicity.

9. Registration requirementsRegistration constitutes acquiring legalpersonality.

10. Commercial activitiesMaking a profit occasionally in order toobtain resources for the association isauthorized.

11. Disposal of assets on liquidationArticle 77 of the Civil Code. The assetsof a legal person which has been woundup pass to the State, unless providedotherwise by law, the charter or thestatutes, or by the decision of thecompetent authority. The State is boundto pursue the object formerly pursued bythe legal person, using these assets. Theassets of the association wound up maynot under any circumstances be sharedamong the members.

TAXATION

INDIRECT TAXATION12. Article 13 of the Sixth VAT Directive

Application of the exemption laid downin Article 13.

13. Other exemptionsSpecific rate (4%) for associationspursuing an object for the public good.

14. Zero ratesNo

DIRECT TAXES

15. General position

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Income tax. The basis of taxation forlegal persons not pursuing aprofit-making object is constituted bythe net taxable income arising from theleasing of buildings or land andsecurities. The tax is not payable onother income or receipts necessary forpursuing the association's object, such asmembers' regular subscriptions. In thecase of foreign associations, onlyreceipts necessary for pursuing theassociation's object are not taxed.

16. Recognition of association for taxpurposesAssociations with an object which is forthe public good enjoy exemption fromtax on income arising from the leasing ofland and real estate and from securities.There is also exemption from payinginheritance tax and taxes on gifts madeto legal persons which do not have aprofit-making object, are legallyconstituted in Greece and pursue anobject of a national, religious,philanthropic, pedagogic or artisticnature or for the public good. Theexemption covers all non-national legalpersons with the same characteristicsregarding assets which they might inheritin Greece, subject to the principle ofreciprocity.

17. Criteria for recognitionA very broad concept of the publicgood. Covers any object which is not ofstrictly private interest and concerns theinterests of large groups of persons(philanthropic, religious, social, artistic,educational).

18. Qualifying objects for recognitionThe competent authority for grantingexemption is the tax inspectorate in theregion of the association's head office.

19. Gifts by individualsTax-deductible from taxable income, butthe donor must have Greek nationality.

If the amount exceeds DR 100 000 inone year, it must be deposited in a loanand deposit fund.

20. Gifts by companiesTax-deductible provided that they havebeen deposited in a loan and depositfund.

20(a). Gifts to non-resident associationsNot tax-deductible.

ACCOUNTS AND AUDITING

21. AccountsThe auditing authority is generally thelocal authority.

FOUNDATIONS

22. ConstitutionConcession system. Act of foundation (act

intra vivos before a notary or a swornstatement - unilateral act by the founder)and presidential decree which approvesthe will of the founder and is issued bythe competent Minister, depending onthe objects of the foundation.

23. DefinitionSet of goods intended to implement aproject for the public good (in principle)and with a non-profit object.

24. Nationality requirements25. Acquisition of legal personality

Concession system. Acquisition occurson the day of publication in the GreekOfficial Journal of the decree grantingauthorization.

26. Legal capacityFull. Acquiring legal personality doesnot automatically imply acquisition ofthe assets assigned.

27. Disposal of assets on liquidation

TAXATION

28. As for associations.

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ACCOUNTS AND AUDITING

29. AccountsAudit board.

30. AuditingThe operations of the foundation aremonitored by the State.

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SPAIN

ASSOCIATIONS

LEGAL FRAMEWORK1. Right of association guaranteed by law?

- Articles 22 (on associations) and 34(on foundations) of the Constitution.- Law 191/1964 of 24 December1964 governing associations andSupplementary Decree of 20 May 1965.- Law 30/1994 of 24 November 1994on foundations and tax advantages forprivate persons engaged in activities forthe public good.- Several laws of AutonomousCommunities.

2. Basic definitionGroup or union of several naturalpersons with legal capacity which carriesout the wish of this group to pursue on apermanent basis a given permissibleobject laid down by the statutes of theassociation (definition in the strictsense).

3. Minimum number of foundersThe law of 1964 specifies a meeting atwhich "several persons" agree, withoutanywhere stating the number of personsor founder members required.Nevertheless, the usual practice is torequire a minimum of three persons.

4. Types of association1 - Associations governed by the Lawof 24 December 1964 (which does notgovern public or private foundations,civil or commercial organizations orcorporate bodies).2 - Associations governed preferentiallyby special statutes (associations ofcannon law, associations established bythe state to attain specific objects, tradeunions and similar associations,associations of civil servants and militarypersonnel, administrative associations of

property owners, political parties, sportsassociations, students etc.).Associations with social, educational,cultural or sporting objects, or thoseseeking more generally to promote thepublic good, may be recognized as"public utilities" by the Spanish Councilof Ministers, on a proposal from theMinister for the Interior, which givesthem several advantages, including taxadvantages.

5. Membership nationality requirementsNon-nationals legally resident in Spainhave the right of association and mayexercise it in conformity with the lawsand regulations. (organic law 7/1985 onthe rights and liberties of non-nationalsin Spain)

6. Legal personalityArticle 25 of the Civil Code grants thestatus of legal person to corporatebodies, associations and foundations forthe public good recognized by the law,and to associations with specificinterests, whether civil, commercial orindustrial, to which the law grants theirown personality independent of that ofits members.In accordance with the legal practice ofthe supreme tribunal, legal personalityarises from a contract of association. InArticle 22 (3) the Constitution statesthat associations are entered on theappropriate register "for publicitypurposes only".

7. Legal capacityArticle 38 of the Civil Code grants legalcapacity to legal persons, which includesassociations which are recognized inlaw. They may therefore acquire andpossess goods, and contract debts orengage in civil or criminal proceedings.Nevertheless, associations which are notrecognized as public utilities may notacquire premises which are not strictlynecessary for achieving their object, and

48

they must obtain authorization forcertain private donations.

8. StatutesArticle 3.2 of the Law of 1964 lists theinformation which must be given in thestatutes.

9. Registration requirementsEntry in a register is obligatory. Theprocedures for such registration varydepending on the current provisions inthe autonomous region of the headoffice of the association. Forassociations subject to the Law of 1974,there is a register for each province anda national register.There are also special registers forcertain associations governed by specificsystems.

10. Commercial activitiesAuthorized

11. Disposal of assets on liquidationThe procedure for disposing of assets inthe event of the association beingdisbanded must be specified in thestatutes.

TAXATION

INDIRECT TAXATION

12. Article 13 of the Sixth VAT Directive:exemptions provided for in Article 13.Law 37/1992 of 28 December 1992 onVAT does not exempt associationsdirectly, in that the different rates do notdepend on the legal form of the entitybut on the nature of its activities.However, it provides for numerousoperations common to associationswhich are exempt or are eligible for adeduction.

13. Other specific exemptionsSee 12.

14. Zero ratesNo

DIRECT TAXES

15. General positionAssociations which have beenrecognized as public utilities and whichfulfil the conditions laid down in Article42 of the Law on Foundations and TaxConcessions for Private Participation inActivities for the Public Good haveseveral tax advantages.1 - They are exempt from corporationtax in respect of the activities whichconstitute their social or specific object,including additions to assets derivedfrom acquisitions or transfers of cashbonds. They are also exempt in respectof any profit from commercial activity,provided this corresponds to the entity'sobject or specific purpose.Income from commercial activities orfrom capital is not exempt, but is alsoeligible for certain concessions, inparticular the tax band, which is a fixedrate of 10%.2 - They are exempt from most localtaxes.

16. Associations which are recognized orwhich enjoy tax concessionsAssociations which have beenrecognized public utilities and whichfulfil the conditions laid down in Article42 of the Law on Foundations and TaxConcessions for Private Participation inActivities for the Public Good, and inparticular the following conditions:- they must pursue objects for thepublic good (social assistance, civicmatters, educational, cultural, sporting,health, development cooperation,environmental protection, promotion ofthe "économie sociale" , voluntary socialwork or research work etc.);- they must allocate at least 70% oftheir net income to these objects;- they must submit their accountsannually to the competent body in goodorder;

49

- in the event of liquidation, they mustassign their assets to achieving objectsfor the public good;- their statutory representatives mustbe honorary officials.

17. Criteria for recognition as a public utility.These are given in Article 4 of the Lawon Associations of 1964, as amended bythe Law on Foundations and TaxConcessions for Private Participation inActivities for the Public Good. The maincriteria are:- the statutory objects must be for thepublic good;- activities must be open to all and notrestricted to members;- the association must be non-profit,any profits must not be shared out, andno fees must be paid to the committeefor carrying out its duties;- it must possess the human andmaterial resources necessary forachieving its statutory objects.- it must have been in operationcontinuously for two years prior tosubmitting its application.

18. Types of associations recognizedcf. 16 and 17.

19. Gifts by individualsDonors who are natural persons maydeduct from their taxable incomedonations or gifts to bodies which enjoytax concessions, under certain conditionsand with certain limitations. Normally,this deduction will be 20% of the valueof the gift. However, total tax-deductibleexpenditure must not exceed 30% oftaxable income.

20. Gifts by companiesOrganizations with a legal personalitymay under certain circumstances deductgifts made to bodies which enjoy taxconcessions. This deduction may notexceed 10% of taxable income in mostcases.

In addition, participation by businessesin activities for the public good, and - inparticular - the acquisition of works ofart to be offered as a gift andexpenditure on promoting anddeveloping certain arts also attract taxconcessions.

20(a) Gifts to non-resident associationsThere is no legislation governingassociations on this point (forfoundations cf. 24).

ACCOUNTS AND AUDITING

21. AccountsArticle 11 of the decree of 20 May 1965provides that associations must keepaccounts which show all receipts andexpenditure. These accounts must besent to all members of the association,and then submitted annually to theAnnual General Meeting, with a budgetfor the following year.Lastly, they must be sent to theprovincial authorities in the case ofassociations in an AutonomousCommunity which has no regulations onthis matter, or to the Ministry of Justicein the case of associations which havebeen recognized public utilities.AuditingThe law of 1964 provided for theauditing of associations by thegovernment authorities, but this wasimplicitly repealed by the 1978Constitution.Associations recognized as publicutilities must submit an annual report oftheir activities during the previousfinancial year to the Ministry of Justice.

FOUNDATIONS

22. ConstitutionA foundation may be constituted"inter vivos" or "mortis causa". In thefirst case, there must be a notarizedwritten act, and in the second case, its

50

constitution must be stipulated in thewill.Entry in a register of foundations, whichfalls within the competence of theMinistry of Justice, is compulsory andconstitutes official formation of thefoundation.

23. DefinitionArticle 1 of the Law on Foundations of1994 defines foundations asorganizations constituted on a non-profitbasis which, at the wish of theirfounders, have their assets assignedpermanently to an object for the publicgood.

24. Nationality requirementsNon-nationals may set up a foundationin Spain.In addition, like Spanish foundations,foreign foundations can also engage inactivities in Spain which relate to theirobject and can enjoy the concessionsgranted to Spanish foundations,provided they are represented onSpanish territory and are entered in theregister of foundations.Registration may be refused if theirobject is not for the public good or ifthey are not legally constituted inaccordance with their national legislation(Article 5 of the above law).

25. Acquisition of legal personalityFoundations assume a legal personalityonce they are entered in the register ofthe charter. Registration may be refusedif this act is not in conformity with theabove law.

26. Legal capacityThe assets of the foundation may consistof any kind of goods and assets whichcan be valued in financial terms. Thefoundation must be the owner of theseand an inventory of them must appear inthe register.The assets are managed and disposed ofby the body which manages the

foundation, in accordance with thestatutes. Notwithstanding, Article 19 ofthe above law sets limits to the disposalof the goods of the foundation andmakes several transactions subject to theprior authorization of governmentauthority.In addition, foundations may not haveshares in trading companies in whichthey are liable to be responsiblethemselves for the company's debts.They may, however, hold shares in jointstock companies.

27. Disposal of assets on liquidationGoods and assets resulting fromliquidation of the foundation must beassigned to private non-profit bodies andfoundations pursuing objects for thepublic good which are specified in thecharter or in the statutes of thefoundation. In the absence of suchstipulations, the governing body orgovernment authorities will decide whichof these organizations will assume theserights.Nevertheless, by derogation to theseprovisions, the act establishing thefoundation or its statutes may providethat these goods must be assigned toother public bodies pursuing objects forthe public good (Article 31 of the abovelaw).

TAXATION

28.Foundations legally entered in theregister which fulfil the conditions laiddown in Article 42 of the above lawenjoy the same tax concessions asassociations (cf. 15-20). To do so, theymust be accredited by the Ministry ofFinance and must expressly apply forthem.

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ACCOUNTS AND AUDITING

29. AccountsThe management of the foundation mustdraw up an inventory, a balance sheetand accounts, and a report on theactivities of the foundation and itsfinancial management every year. It mustalso obtain a discharge for the budget ofreceipts and expenditure for the previousyear. All these documents must be sentto the government authorities.In addition, under certain circumstances,an external audit is compulsory.Lastly, within the three monthspreceding the end of each financial yearthe management must also draw up andforward to the government authoritiesthe budget for the forthcoming year(Article 23 of the above law).

30. AuditingSupervision by a higher authority isintended to assist the foundation inexercising its right to exist and to ensurethat its constitution and operation arelegal. This supervision is carried out by agovernment body in the case offoundations which fall within thecompetence of the government.This government body is responsible forauditing the accounts. It can request thelegal authorities to intervene temporarilyin the foundation and can assume theresponsibilities of the governing bodyduring the period laid down by thejudge.

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FRANCE

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right to association guaranteed by law?Yes - (by the preamble to theConstitution of 1958 containing theprinciples laid down in the Declarationof the Rights of Man and of the Citizenof 1789) and by the ConstitutionalCouncil (Decision of 16 July 1971,French Journal Officiel, 18 July 1971).

2. DefinitionAn association is the conventionwhereby two or more persons have incommon, on a permanent basis, theirknowledge or activities for a purposeother than sharing profits (Article 1 ofthe law of 1901).

3. Minimum number of foundersTwo

4. Types of associationsNon-recognized or de facto associationsRecognized associationsAssociations recognized as a publicutility (no legal definition, thisrecognition is a discretionary act by theState).

5. Membership nationality requirementsNo particular conditions

6. Legal personality and how acquiredNon-recognized associations - notapplicableRecognized associations - by declarationto the local authorities of the name ofthe association, its objects, its premisesand the name, profession, domicile andnationality of each of the directors, withtwo copies of the statutes. Thisdeclaration must be published in theFrench Journal Officiel.

7. Legal capacityAn association declared in this way mayacquire, possess or administer “onlysuch premises as are intended formanagement of the association andmeetings of its members, and only suchbuildings as are strictly necessary for theaccompishment of its stated aim”(Article 4 of the law of 1901). It mayreceive gifts and legacies only if it has asits exclusive purpose the provision ofassistance and welfare services orscientific or medical research, or if it is acultural or family association or anassociation affiliated to a federationrecognised as a public utility.An association which is recognized as apublic utility has a somewhat widercapacity, since the term "strictly" is notapplied. It may also acquire woodlandsand land for forestry, and it can receivegifts and legacies. If it receives as a giftor legacy from a will a building which isnot necessary for its operation, it mustsell it and keep the proceeds. Thecharitable works proposed must beauthorized by the authorities in eachcase and in advance.

8. StatutesNo prescribed form for the statutes,which constitute the law of the parties.

9. Registration requirementsNone, see point 6 of declarationprocedure.

10. Commercial activitiesNot prohibited, either in the law of 1901or in legislation. Profits can be made.

11. Disposal of assets on liquidationThe balance of the assets must not beassigned to the members; in accordancewith the statutes and/or the AnnualGeneral Meeting, it is generally madeover to a non-profit organization whichpursues a similar purpose.

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TAX POSITION

INDIRECT TAX12. Article 13 of the Sixth VAT Directive.

All the exemptions applicable underArticle 13 seem to be included in theGeneral Tax Code.

13. Other specific exemptionsCertain exemptions from the registrationtaxes.

14. Zero ratesNone

DIRECT TAXES

15. General positionWhen they are exempt from VAT andare non-profit, associations are not liableto corporate taxes, such as corporationtax, apprenticeship tax and trading tax.When they are not liable to the taxeslevied on businesses at the ordinary rate,they are liable to tax on their assets.All associations are liable to local taxes,i.e. accommodation tax (except forunfurnished premises and those open tothe public) and property tax payable byall owners of premises (except low-costaccommodation).When they are exempt from VAT theyare liable to a payroll tax. If they havemore than 10 employees, they are liableto the contribution paid by employers forongoing vocational training and theemployers' contribution to the buildingeffortThey are liable to tax on income fromtheir assets.

16. Recognition of associationsIf an association wishes to engage incertain specific activities, it must obtainofficial approval, e.g for tourism andleisure activities, certain "authorized"activities in the field of health, socialwork or medical/social work, activitiesrecognized as being of the nature of

public services, i.e. engaging in huntingor fishing, organizing official sportingcompetitions etc.Associations recognized as publicutilitiesApplication for recognition is made tothe Ministry for the Interior and granted,under certain circumstances, by decreeby the Conseil d'État. This recognitionimposes certain obligations but givesbroader entitlement to receive gifts andacquire and possess premises.

17. Criteria for recognition as a public utilityMust be a recognized association, andhave operated regularly as such for threeyears, must pursue an object for thepublic good, cover more than the localarea, have at least 200 members, andmust adopt model statutes drawn up bythe Conseil d'État.

18. Criteria for recognitionRecognition is conferred by the state,which assigns tasks concerned withpublic services to associations. Theseassociations receive various types of aid,which are subject to administrativeconstraints and rigorous monitoring. Forinstance, the "ordonnance" of 8 August1985 gives sporting federations themonopoly for organizing competitions.

19. Gifts by individualsPrivate gifts are tax-deductible at therate of 1.25% of taxable income forrecognized associations, and 5% forfoundations and associations recognizedas public utilities. These gifts giveeligibility to a reduction in tax equal to40% of the value of the gift (50% whenthey are for free meals oraccommodation for people in difficultcircumstances). Only gifts which aremade to a French association or aforeign association operating in Franceare tax-deductible.

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20. Gifts by companiesGifts from companies are tax-deductibleat the rate of 37% or 42% of the taxableprofit up to 2‰ of turnover for gifts torecognized associations, and 3‰ forgifts to recognized public utilityassociations and to foundations.Only gifts which are made to a Frenchassociation or a foreign associationoperating in France are tax-deductible.

ACCOUNTS AND AUDITING

21. AccountsOnly associations recognized as publicutilities, associations subsidized by localauthorities and associations engaged incommercial activities above certainthresholds (concerning their budget,balance or number of employees) have alegal obligation to provide accounts in astandardized form.

FOUNDATIONS

LEGAL FRAMEWORK22. Constitution

Public utility foundation. The draft mustbe submitted to the Minister for theInterior and then to the Conseil d'État,which in granting recognition as a publicutility authorizes the foundation toreceive its working capital. The statutesmust be drawn up in accordance with themodel statutes issued by the Conseild'État, which lay down the compositionof the administrative committee. Thisusually follows the principle of thirds,one third of its members beingnominated by the founders, one thirdbeing members ex officio representingthe public authorities, and one thirdbeing nominated by the "conseild'administration" - managementcommittee.Sheltered foundation: set up within apublic utility foundation without creatinga new legal entity (rare).

Business foundation (Law of 4 July1990). There is no need for these to berecognized as public utilities. They areestablished for a given period - generally5 years renewable - and their actionprogramme is approved by theadministrative authorities.

23. Basic definitionIrrevocable assignation of goods, rightsand resources to work for an object forthe public good which is non-profit.

24. Nationality requirementsBy definition, one-third of theadministrative committee is composed ofeligible persons representing thegovernment authorities and designatedpersons. To engage in activitiespermanently in France or to have thesame capacities as a French foundation,a foreign foundation must be recognizedas a public utility.

25. Acquisition of legal personalityThis is acquired once the decree ofrecognition as a public utility has beenapproved by the Conseil d'État andpublished in the French Official Journal.

26. Legal capacitySame conditions for accepting gifts asfor an association recognized as a publicutility, but a wider entitlement to possessassets including premises.

27. Disposal of assets on liquidationAs for associations recognized as publicutilities (cf. 11), but the administrativeauthority's agreement must be obtained.

TAXATION

28. As for associations

ACCOUNTS AND AUDITING

Auditing and the obligation to produceaccounts are the same as for associationsrecognized as public utilities.

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IRELAND

ASSOCIATIONS

LEGAL POSITION

1. Right of association guaranteed by law?The general right to form associations isguaranteed by Article 40.6 of the IrishConstitution. The more specific right toform associations for non-governmentalorganisations is set out in the CompaniesActs and in the Industrial and ProvidentSocieties legislation.

2. Basic definitionThere is no specific definition of"associations" or similar term in Irishlaw. The specific form which anassociation takes on is determined by thetype of legal structure which it opts for.This is discussed further below.

3. Types of associationThere are three main types of structurerelevant to non-governmentalorganisations:(a) Unincorporated bodies. Such bodiesmay have a written Constitution. Thiswould set out the aims and objectives ofthe organisation and possibly details ofthe membership and ManagementCommittee. In legal terms, theConstitution is a contract or bindingagreement between the members of thegroup to abide by the terms of theagreement, i.e. to try to achieve the aimset out in the Constitution to carry outtheir activities in accordance with theConstitution, etc.. However, while theConstitution is legally binding asbetween the members of the group, ithas no effect in relation to non members.Thus the group does not have a legalpersonality of its own.(b) A company limited by guarantee.This is a variation on the standard formof legal personality for business firms inIreland. In this type of company there

are no shares in the company and themembers simply guarantee to pay acertain (usually nominal) amounttowards the debts of the company if it iswound up.(c) Industrial and provident society. Thistype of structure is frequently used byco-operatives. In practice, many of therules in relation to the industrial andprovident society are quite similar to thecompany limited by guarantee.However, there is one importantdifference in that whereas a group canbecome a limited company for any legalpurpose, in order to be registered as anIPS, a society must be formed "forcarrying on any industries, businesses ortrades".There are also various other types ofstructure which may be of relevance tonon-governmental associations includingTrusts, Friendly Societies, etc..However, the above three are the maintypes of structure which would be usedin Ireland.

4. Minimum number of foundersBoth the company limited by guaranteeand the industrial and provident societymust have at least seven members. Thereis no legal minimum to formunincorporated bodies.

5. Membership nationality requirementsThere are no specific nationalityrequirements in relation to any of themain three types of legal structure.

6. Legal personality and how acquiredThe unincorporated body has noseparate legal personality. Both thecompany limited by guarantee and theindustrial provident society do haveseparate legal personalities. This isacquired by submitting the Constitutionof the body in the required form to therelevant government organisation whichis authorised to certify the particularbody. The Constitution can then be

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inspected by members of the generalpublic.

7. Legal capacityThe legal capacity of the body is set outin its Constitution. In the case of thecompany limited by guarantee, this isknown as the Memorandum andArticles. In the case of the industrial andprovident society. this is known as theRules. There are no specific limitationson legal capacity in relation to non-governmental associations other thanthose generally laid down by law inrelation to legal structures generally.

8. Statutes in proscribed form?In the case of the company limited byguarantee, the statutes must be drawn upin a form acceptable to the CompaniesOffice which is the relevant registrationbody. Sample memorandum and Articlesare published in the Companies Acts,and these or some variation on thesewould generally be utilised by suchcompanies. In the case of the industrialand provident society, again the Rulesmust be acceptable by the Registrar ofFriendly Societies, who is the relevantregistration body. There is no officialform of prescribed rules but theRegistrar has approved rules drawn upby various non-governmentalorganisations, and these or somevariation on them are generally utilised.

9. Registration requirementsAs set out above, both bodies must beregistered with the relevant registrationauthority. Other than this, there is nospecific registration requirement.

10. Commercial activityThere is no specific limitation on theability of these types of body to carry oncommercial activity. However, where abody wishes to obtain exemption fromcertain taxes from the RevenueCommissioners on the basis of itscharitable activities, it must be "thesubject of a binding trust for charitable

purposes only", i.e. the Constitution orRules of the group must contain abinding clause which guarantees that anymoney received by the group will beused only for charitable purposes. Inaddition, it is unlikely that a Constitutionwhich contained elements of acommercial nature would be consideredto be charitable by the RevenueCommissioners.

11. Disposal of assets on liquidationThe Companies Acts and the Industrialand Provident Societies legislation donot contain any general restrictions inrelation to disposal of assets onliquidation. Again, where a companywishes to be recognised as charitable bythe revenue Commissioners, theCommissioners will normally insist thaton being wound up, any assets will betransferred to another body of acharitable nature.

TAX POSITION

INDIRECT TAX12. Article 13 of the 6th VAT Directive

Article 13 has been implemented inIreland.

13. Specific exemptionsSpecific exemptions of relevance toNGOs (including those required by the6th VAT Directive) include:(a) school or university education andvocational training or re-training;(b) hospital and medical care ortreatment provided by a hospital, nursinghome, clinic or similar establishment;(c) services for the protection or care ofchildren and young persons;(d) supply of goods and services closelyrelated to welfare and social security bynon-profit organisations;(e) supply of services and goods for thebenefit of their members by non profitmaking organisations whose aims areprimarily of a political, trade union,

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religious, patriotic, philosophical,philanthropic or civic nature.

14. Zero ratesItems which are zero-rated includemedical equipment and appliances, i.e.invalid carriages and other vehicles,orthopaedic appliances, etc., walkingframes and crutches and similar items.

DIRECT TAX

15. General positionThe Companies Acts and the Industrialprovident Societies legislation do notcontain any general exemption fromtaxation in relation to non-governmentalorganisations.

16. Recognised associationsIt is possible for either a companylimited by guarantee or, moreexceptionally, an industrial andprovident society, to seek exemptionfrom various taxes from the revenueCommissioners on the basis of itscharitable status. In order to qualify ascharitable, the objects and powers of thecompany or society must be so framedthat every object to which its income orproperty can be applied is charitable and,as set out above, its main objects and theapplication of its income or propertymust be bound by a binding trust. Thismeans that it must be obliged by law toadvance only its stated main objects andto apply its income and property to theseobjects exclusively.

17. Qualifying criteria for recognitionIn order to qualify as a charity, theobject of the company must fall underone of the following headings:(a) advancement of education;(b) advancement of religion;(c) relief of poverty, or(d) other works of a charitable naturebeneficial to the community.

In addition to satisfying the above, thecompany must keep annual auditedaccounts and make these available to theRevenue Commissioners on request; itmust prohibit the payment of fees and/orsalaries (other than out-of-pocketexpenses) to officers and directors forservices rendered; it must also satisfy theother criteria discussed, including thosein relation to the winding up of theorganisation.The taxes from which an organisationmay be exempt include income tax,corporation tax (in the case ofcompanies), capital gains tax, depositinterest retention tax, capital acquisitiontax and stamp duty on a transfer or leaseof land.There is no exemption in relation tovalue added tax, and employees of acharity are liable to income tax under thePAYE system and Pay Related SocialInsurance.

18. Gifts by individuals and companiesIn some circumstances, gifts byindividuals and companies may besubject to tax relief. One of the mainreliefs of relevance to the non-commercial sector is that gifts ofbetween £100 and £10,000 to certaineducational establishments may beentitled to relief.

ACCOUNTABILITYAND SUPERVISION

19.There is no specific supervision ofunincorporated bodies. Companies aresubject to reporting and accountingrequirements to the Companies office.Annual returns and accounts must besubmitted and records must be keptconcerning changes in members,management, etc.. Broadly similarreporting requirements are imposed onindustrial and provident societies(reporting to the Registrar of FriendlySocieties). In extreme cases,

58

investigators can be appointed toinvestigate the operation of these bodies.Bodies which regularly fail to makereturns will be struck off. Generally,however, the accountability andsupervision requirements are not verystringent. In the case of charities, therevenue Commissioners have asupervisory function but again, inpractice, this is not very onerous.

FOUNDATIONS

There is no specific legislation on"foundations" in Ireland. A body whichis recognised by the RevenueCommissioners as having charitablestatus may apply to the Commissionersof Charitable Donations and Bequests tobe incorporated under the CharitiesActs, 1973. However, there are onlyabout 25 such bodies in Ireland.

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ITALY

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Articles 2 and 18 of the Constitution.Articles 14 to 22 of the Civil Code. Lawof 27 February 1985, Law No 266 of 11August 1991 on voluntary organizations.

2. DefinitionThe law does not give a definition. Incommon practice it is any stableorganization of a number of personspursuing a common interest, other thanprofit.

3. Minimum number of foundersNo

4. Types of associationRecognized associationsNon-recognized associationsCommittees

5. Membership nationality requirementsNo restrictions

6. Legal personalityOnly for recognized associations,following the decree of recognition bythe government authorities. A conditionfor such recognition is to have sufficientassets to pursue the statutory objects.The faculty of recognizing legal personsmay be assigned to the President of theItalian Council of Ministers, the Regionor the Prefects, depending on theterritorial coverage of their activities.There are certain constraints onnon-recognized associations (cf. 7).

7. Legal capacityPrivate legal persons may not acquirefixed assets or accept gifts orinheritances, or even legacies withoutgovernment authorization. Authorization

is considered to be the condition for theacquisition to produce its effects. Theconstraints on non-recognizedassociations consist of restrictedautonomy on assets, in that persons whohave acted in the name and on behalf ofthe association are also responsible forthe debts of the association Law No 52of 27 February 1985 now allowsnon-recognized associations to acquirefixed assets. Non-recognized associationand committees may take legal action.Voluntary organizations which areentered in the register, even if they havethe form of non-recognized associations,may acquire the goods necessary fortheir activities and receive gifts andlegacies.

8. StatutesThe Memorandum of Association mustbe in the form of a public act forrecognition to be granted. There arecertain minimum requirements.

9. Registration requirementsNo obligation, but if the association isnot registered, the administrators arejointly and severally responsible, withthe legal person, for its debts (Article 33of the Civil Code).

10. Commercial activities.Associations may engage in commercialactivities. Such activity should not beaimed at making a monetary profit, butexclusively at obtaining their purposes.If, on the other hand, the commercialactivities are autonomous in relation tothe purpose of the association, theassociation may be considered as a defacto company, with important taxationand social consequences. Article 24 ofthe Civil Code provides that membershave no right to profit-sharing.

11. Disposal of assets on liquidationThe remaining assets are disposed of inaccordance with the provisions of the

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Memorandum of Association or thestatutes. In the absence of specificprovisions, the decisions of the AnnualGeneral Meeting which has decided onthe winding up are implemented. In theabsence of such decisions, thegovernment authorities decide.

TAXATION

INDIRECT TAXATION12. Article 13 of the Sixth VAT Directive

Yes.13. Other specific exemptions

Goods and services provided byvoluntary organizations are exempt fromVAT. Exemption from registration taxand taxes relating to the Memorandumof Association and all acts relating to theactivities of voluntary organisations.Exemption from the taxes on gifts,transfers, land registry and INVIM (taxon the increased value of fixed assets)for the associations which receive thegifts. This also applies to legacies andinheritances.

14. Zero ratesNo

DIRECT TAXES

15. General positionRecognized and non-recognizedassociations are liable to tax on theincome of legal persons (IRPEG), whichis proportional to the sum of the incomereceived as land revenue, revenue of aland-income nature, income from capitalor income arising from engaging in acommercial activity, whether occasionalor not. Amounts paid by members ascontributions or associations’subscriptions are not included in thetaxable amount.

16. Recognition of associations for taxpurposes

The IRPEG is reduced by 50% forhistorical, literary, scientific,experimental and research societiespursuing essentially cultural objects.Profits from marginal trading andproduction activities earned by voluntaryorganizations are not taxable, providedthey are used for the institutionalpurposes of the organization.

17. Criteria for recognitionMust have legal personality in the firstcase and be a voluntary organizationwithin the meaning of Law No 266/91.

18. Criteria for obtaining tax concessionsFor voluntary organizations, exemptionmust be laid down by the criteriaestablished by an inter-ministerial decree(involving the Ministry of Social Affairsand the Ministry of Finance), which isbeing drafted.

19. Gifts by individualsGifts for the public good, humanitarian,religious or political objects may bededucted up to a limit of 2%.This limit may be exceeded when the giftis going to organizations for promotingstudy, research, dissemination ofinformation, the acquisition,maintenance or restoration of part of thecultural heritage or to institutions whichorganize fairs and exhibitions with aparticular cultural or scientific interestwith the authorization of the Ministry ofCulture.Gifts for the central institute for thesupport of the clergy of the ItalianCatholic Church, and those for helpingpeople in developing countries, may bededucted up to a ceiling ofLIT 2 million.Gifts to voluntary organizations whichare entered in the register are no longertax-deductible. The only deductionpossible at present is that concerning, onthe one hand, an organization subject tocorporation tax or, on the other hand, a

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voluntary organisation with legalpersonality. Entry in the regional registerof voluntary organizations is thereforeno longer sufficient.

20. Gifts by companiesAs in the case of private persons, giftsfor purposes concerning the public good,or humanitarian, religious, or politicalpurposes, can be deducted up to aceiling of 2%.

20(a). Gifts to non-resident associationsFor associations with their head office inItaly, the system is the same, providedthat they are entered in a regionalregister on Italian territory.

ACCOUNTS AND AUDITING

21. The administrative authority has the power to audit and monitor.

FOUNDATIONS

22. ConstitutionAct of foundation (unilateral actinter-vivos in the form of a public act orwill).

23. DefinitionPrivate legal person with assets assignedto an object.

24. Nationality requirementsNo.

25. Acquisition of legal personalityBy government authorization in the formof a decree of the President of the ItalianCouncil of Ministers

26. Legal capacityAs for recognized associations

27. Disposal of assets on liquidationIf nothing is laid down in the statutes,the government authorities assign theassets to other bodies with similarobjects.

TAXATION

Historical, literary, scientific,experimental and research foundationswith exclusively cultural objects withinthe meaning of Article 6 of PresidentialDecree No 601/73 enjoy a reduction of50% on taxable income on legal persons.Imports of goods for foundations withthe object of giving assistance orcarrying out charitable works, education,training, study and research are exemptfrom VAT.In addition, as a general principle,foundations which are not engaged incommercial agricultural activities ortrade activities are not liable to VATwithin the meaning of Article 4 ofPresidential Decree No 633/72.

ACCOUNTS ANDMONITORING

29. AccountsNo

30. MonitoringThe government authorities have powersto monitor foundations, which consistessentially of the power to amend theobjects of the foundation when thesehave been attained, or have becomeimpossible or meaningless. They havethe power to coordinate the foundationsand may group foundations togetherwhen their assets have becomeinsufficient.

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LUXEMBOURG

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes, under Article 26 of the Constitutionof 17 October 1868 as amended, theLaw of 21 April 1928 on non-profitassociations and foundations, and theLaw of 11 May 1936 guaranteeingfreedom of association.

2. Basic definitionArticle 1 of the Law of 21 April 1928defines a non-profit association as onewhich does not engage in industrial ortrading activities, and which does notseek to obtain material gain for itsmembers.

3. Minimum number of founders.Three

4. Types of associationNon-profit associations (ASBL)De facto associations

5. Membership nationality requirementsNo restrictions.

6. Legal personality and how acquiredAcquired on the date when the statutesare published.

7. Legal capacityAn ASBL may possess, as its ownproperty or otherwise, only the premisesnecessary for attaining its statutorypurposes. There is no limitation onfurniture.Gifts exceeding LUF 500 000 mustalways be authorized by Grand-DucalDecree.

8. StatutesWritten act duly authenticated or underprivate seal.

9. Registration requirements

The Memorandum of Association mustbe registered. The statutes and the fullnames, trades/professions and addressesof the administrators and the head officemust be deposited with the register oftrade and businesses. Any amendmentsmust also so be lodged. An alphabeticallist of members must be deposited withthe chancellery of the court for the placein which the association has its offices inthe month when the statutes arepublished. They must be updatedannually.

10. Commercial activitiesProfit-making activities are notprohibited but they must nevertheless beoccasional and ancillary to the mainactivity.

11. Disposal of assets on liquidationIf the statutes contain no provisions, thedecision is taken by the Annual GeneralMeeting. If the meeting cannot make adecision, the receivers decide on amethod of disposal which is as close aspossible to the social purpose.

TAXATION

INDIRECT TAXATION12. Article 13 of Sixth VAT Directive

Yes13. Other specific exemptions

Operations with an educational purposeorganized by public or privateestablishments, operations carried out byyouth hostels, the organizers of sportingor scientific, cultural, educational,economic or professional events whenthe income is intended mainly to coverorganizational costs, theatricalrepresentations, conferences, medicaland paramedical services, provided thatthese exemptions do not distortcompetition.

14. Zero ratesNo

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DIRECT TAXES

15. General positionIn accordance with Article 159 of theLuxembourg Fiscal Code, ASBLs areliable to tax on corporate bodies (IRC).Any person liable to the IRC tax is alsoliable to a wealth tax. Article 25 of thelaw of 29 December 1971 lays down therights of registration and the rights ofsuccession and transfer on death. Forgifts inter vivos and legacies, the rate is6%.

16. Recognition of associations for taxpurposes

Article 161 of the Fiscal Code providesfor an exemption from IRC fororganizations pursuing directly andsolely charitable or cultural purposes orpurposes for the public good. However,they are still liable to tax if they engagein industrial or commercial activities.Only disinterested activities of ASBLsare exempt from tax and not anyancillary or occasional profit-makingactivities.

17. Criteria for recognitionNon-profit associations pursuingcharitable or religious purposes, orpurposes for the public good (publichealth, youth and sport, sciences, arts,culture) may be recognized as being forthe public good.

18. Qualifying purposes for recognitionApplication must be made to theMinistry of Justice. Purposes must benon-profit, and recognized as being forthe public good in conformity with thestatutes. A Grand-Ducal "Arrêté",adopted with the assent of the Conseild'Etat, confers the status. Taxconcessions are then awarded on thebasis of tax law.

19. Gifts by individualsGifts totalling over Flux 5 000 perannum are tax-deductible up to a ceiling

of 10% of total income orFlux 10 000 000. Any gifts must be torecognized organizations for the publicgood and other bodies recognized assuch in law.

20. Gifts by companiesThe same rules apply to companies inLuxembourg

20(a). Gifts to non-resident associationsThese are not tax-deductible

ACCOUNTS AND AUDITING

21. AccountsThe annual accounts must be lodgedwith the registry of the civil court on theestablishment of the association, or atleast the accounts for the past tenfinancial years, to obtain authorization toaccept gifts.

FOUNDATIONS

22. ConstitutionAssignment of assets by authenticateddocument or by will, with approval byGrand Ducal "Arrêté".

23. DefinitionFoundations are circumscribed by law,since the only establishments recognizedas foundations are those which areengaged in philanthropic, religious,scientific, artistic, educational, social,tourism or sporting activities, usingrevenue arising mainly from capitalacquired either at the time when theywere founded or subsequently, to theexclusion of the pursuit of material gain.

24. Nationality requirementsNone

25. Acquisition of legal personalitySimultaneously with approval of thestatutes by the Grand Ducal arrêté.

26. Legal capacityAs for associations

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27. Disposal of assets on liquidationAs provided for in the statutes, failingwhich the Ministry of Justice assignsthem to a purpose as close as possible tothat for which the institution wasestablished.

TAXATION

28. As for associations

ACCOUNTS ANDMONITORING

29. AccountsEvery year, within two months of theend of the financial year, the accountsand budget must be forwarded to theMinistry of Justice. These documents arepublished in the “Mémorial”.

30. MonitoringArticle 40 of the law of 1928 providesthat the Minister for Justice shall ensurethat the assets of a foundation areallocated to the purpose for which theinstitution was established.

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NETHERLANDS

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes - the right of association isrecognized for any person residentwithin the territory of the Netherlands(Articles 1 and 8 of the Constitution).

2. Basic definitionIn accordance with Article 2.26 of theBW (Burgerlijk Wetboek - Civil Code),an association is a legal personcomposed of members and constitutedfor a precise purpose other than that laiddown for cooperatives and mutualsocieties13. It is constituted by amultilateral legal act. It cannot shareprofits among its members.

3. Minimum number of founders.Two

4. Types of associationAssociations under private sealAssociations by notarized actStateless associations (internationalassociations not under any specific legaljurisdiction, not provided for in law butrecognized by the law)

5. Membership nationality requirementsNo conditions

6. Legal personality and how acquiredFull: associations whose statutes appearin a notarized act (incorporation of thestatutes in a notarized act can also bedone during the life of the association).Such an association must be entered inthe register of associations;

13 These are types of associations in Dutch law.

Limited: associations whose statutes arenot incorporated in a notarized act.Entry of such an association in theregister of associations has the effect oflimiting the responsibility of thedirectors, which will be invoked only ifthe other party claims that theassociation has not met its obligations.Foreign associations: the Netherlandsfollows the principle of incorporation.This means that an associationconstituted abroad is recognized withinthe Netherlands, and that the foreign lawapplicable (which determines whetherlegal personality can be granted) governsthe association under Netherlands law.

7. Legal capacityAssociations whose statutes areincorporated in a notarized act have fulllegal capacity, they may contract debts,receive legacies and acquire fixed assetswithout restrictions. Associations whosestatutes are not incorporated in anotarized act (with limited personality)cannot acquire registered goods orreceive legacies.

8. StatutesNo obligatory form, except for statutesincorporated in a notarized act, forwhich the content is laid down.

9. Registration requirementsNone, except for associationsconstituted by notarized act orrecognized in a notarized act. The actmust be entered in the register held forthis purpose by the Chamber ofCommerce and Industry in the area ofthe head office.

10. Commercial activitiesAn association may engage incommercial activities, but the profitsmust not be distributed to the members.The purpose of an association cannot beto make profits and distribute them tothe members.

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11. Disposal of assets on liquidationThe statutes of an associationconstituted by notarized act must specifyhow the assets are to be disposed of onliquidation or the procedure fordetermining such disposal (BW - CivilCode - and Article 2: 27 (f). Oncecreditors have been paid, the balance ofthe assets is assigned to all parties whoare entitled to them under the statutes,pro-rata to their rights, otherwise to themembers. If no-one has a claim to theremaining assets they pass to the state,which will assign them in accordancewith the object of the legal person as faras possible BW, Article 23b (1).

TAXATION

INDIRECT TAXATION12. Article 13 of Sixth VAT Directive

All exemptions concerning associationsapply.

13. Other specific exemptionsThere are several exemptions for goodsand services supplied by associations,and special exemptions for the provisionof services and related goods byassociations to their members, providedthat the exemptions do not producerestrictions on competition and that theorganization does not attempt todistribute the profits to the members.

14. Zero ratesNo.

DIRECT TAXES

15. General positionIncome tax. In general, associations aresubject to the common law regardingtaxes. There is no special tax forassociations (legal persons). Anassociation may be subject tocorporation tax (Vpb) if it is carrying ona business which brings it intocompetition with businesses liable to

corporation tax, in respect of the profitwhich it obtains from this activity.Tax on fixed assets: Associations with areal title to fixed assets or the users ofsuch assets must pay a local tax.

16. Recognition of associations for taxpurposes

No exact definition. Article 24(4) of thelaw on estate duty provides for taxexemptions for recognized organizationswhich exist for the public good.An association for the public good iscompletely exempt from corporation taxif the profits in any one year are less thanHFl 13 000 or if the profit for the pastfour years is less than HFl 65 000,provided that there is no profit motive,or that the profit motive is secondaryand the profits are used solely for thepublic good (Article 5 of the law oncorporation tax and "arrêté" of 20August 1971). Charitable institutions,libraries, retirement funds, institutionsfor the preservation and management ofland for nature preservation purposesand certain other institutions on specificland.Tax on income from fixed assets:Associations not liable to corporationtax may apply for reimbursement of thefixed assets deduction, which isdeducted at source on dividends orinterest.There are provisions for exemptions(inter alia on buildings used for religiouspurposes) from property taxes.

17. Criteria for recognitionThe relevant legislation does not give adefinition of the public good. The law onestate duty specifies that a precise orderin respect of a legacy or a gift precludestheir being for the public good.According to the law, the public good isthe opposite of the good of an individualor of a restricted group.

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18. Criteria for obtaining approval orempowerment

Recognition by the registration andestate duty inspectorate.

19. Gifts by individualsGifts made to approved Dutchassociations are tax-deductible at a rateof between 1% and 10% of taxableincome on sums exceeding HFL 120 perannum and per donor. Gifts made undercontracts in authenticated form for atleast five years are tax-deductible in fullin all cases where they are for the benefitof a Dutch association composed of atleast 25 members (in which case publicgood is not a criterion), provided thatsuch gifts are in the form of an annuity,that the association has full legalcapacity and that it is not liable forcorporation tax.

20. Gifts by companiesGifts made to associations orfoundations registered in theNetherlands which have an academic,religious, charitable, cultural object orone for the public good (includingpolitical parties) are tax-deductible whenthey exceed a total of HFL 500 up to amaximum of 6% of taxable income.

20(a). Gifts to non-resident associationsThe same regulations apply toassociations registered abroad, which arespecifically mentioned by the Ministerfor Finance.

ACCOUNTS AND AUDITING

21. AccountsWithin six months of the end of thefinancial year, the administrative councilforwards to the Annual General Meetingan annual report on the situation andmanagement of the association. Itsubmits the balance and the profit-and-loss account, together with comments,to the meeting for approval. These

documents are signed by the directorsand other officials.AuditingInternal: The statutes may provide thatthe association will have a college ofcommissaires. In the absence of such acollege, and of an accountant within themeaning of Article 2.393 (1) attestingthe veracity of the documents, everyyear the Annual General Meeting shallappoint a commission of at least twomembers who cannot be members of theadministrative council.External: by declaration of a qualifiedaccountant attesting the reliability of thedocuments. There is no obligation topublish accounts.

FOUNDATIONS (STICHTING)

22. ConstitutionBy authenticated act containing thestatutes. These statutes must be enteredin the special foundations register of theChamber of Trade and Industry in thearea of the head office.

23. DefinitionA legal person created by a legal actwhich has no members and which hasthe aim of pursuing the object laid downin the statutes using the goods assignedto this object.

24. Nationality requirementsThe head office must be in theNetherlands, although foundations mayhave offices abroad.

25. Acquisition of legal personalityBy notarized act.

26. Legal capacityFoundations have full legal capacity

27. Disposal of assets on liquidationAccording to the procedures laid downin the statutes. If there are no claimantsto the remaining assets, they revert tothe state, which will allocate them in

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accordance with the object of the legalperson as far as possible.

28. TaxationAs for associations

ACCOUNTS AND AUDITING

29. AccountsIn accordance with BW 2 10 (2), thedirectors of the foundation are obligedto draw up a balance sheet and a profit-and-loss account for the legal personwithin the six months following the endof the financial year, and to keep themfor ten years.

30. MonitoringInternal: In accordance with the statutes.External: The government authoritiesmay ask the directors for information. Ifcooperation is not forthcoming, thePresident of the Court can order thedocuments to be shown to thegovernment authorities. At the requestof the government authorities, or anyother person concerned, the Court canorder the directors to be suspended ordismissed and can appoint alternatedirectors.

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AUSTRIA

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of Asociation guaranteed by law?Yes, under Article 12 of the basicnational law (Staatsgrundgesetz -StGG): Austrian citizens have the rightto form associations. “Legal”associations are more specificallygoverned by the 1951 Law onAssociations.

2. Basic definitionNo legal definition. The followingdefinition is based on legal practice andcase law. An association is (1)voluntary, (2) intended to be permanent(3) a structured association of severalpersons (4) intended for attaining agiven permissible purpose for the publicgood (5) through continuous communalactivity.

3. Minimum number of foundersOne founder (a person who declareshimself willing to form an association) issufficient. Subsequently, the associationmust have at least three members (cf.also 6).

4. Types of associationAustrian legislation distinguishesbetween “ideelle Vereine” (non-profitassociations), which are governed by the1951 Law on Associations, andassociations set up with profit in mind(Associations Charter of 1852).

5. Membership nationality requirementsNon-nationals, even when not resident inAustria, are entitled to become membersof an association in Austria.

6. Legal personality and how acquiredEvery association founded in accordancewith the 1951 Law on Associations has a

legal personality. The notice of intentionto create an association must besubmitted to the competent authoritiesand be accompanied by a draft of thestatutes. If no prohibition againstforming an association is issued withinsix weeks, or if the authorities declarethat they do not prohibit its formation,the association may begin to function. Atleast three members must decide at aninitial general meeting to form anassociation on the basis of statutes whichhave not been rejected by the authorities.The association acquires its legalpersonality by virtue of this decision. Itacquires its legal capacity by electingrepresentatives as laid down in thestatutes.

7. Legal capacityFull legal personality after it has beenconstituted. L.

8. StatutesThe statutes, as provided for under thelaw of 1951, must state that theassociation is registered in accordancewith Article 12 of the law of 1951.

TAX POSITION

INDIRECT TAX12. Article 13 of 6th VAT Directive

Vereine enjoy the same exemptions inAustria as listed in Article 13 of the 6thVAT directive.

13. Other specific exemptionsThere are no specific exemptionscovering a wider scope than defined inArticle 13.

14. Zero RatesZero rates do not exist in Austria.

DIRECT TAX

15. General positionAlso subject to Corporation Tax(Körperschaftssteuer) are "nichtrechts-

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fähige Personenvereinigungen, Anstalten,Stiftungen" and ändereZweckvermögen".

16. Exempted from taxationNon-profit organizations for the generalpublic, for the public welfare, churches(§§ 34 - 47 Bundesabgabenordnung),small insurance associations (60.000ATS), associations in the field ofagricultural activities for the purpose ofusing common equipment (Weidw undMaschinengenossenschaften), etc.,private foundations, unions which arelegal professional representatives,financing associations for small andmedium-sized enterprises.

17. Qualifying criteriaThe most important criterion forrecognition is the object defined in thestatutes of the association, such ascharity, non-profit, public welfare, otherspecific purposes.

18. Qualifying objectsReligious communities recognized bypublic law, "pensions - undUnterstützungskassen"under specificconditions (§ 6 KSTG).The exemptions do not apply to limitedtaxable persons.

19. Gifts by IndividualsGifts by individuals to religiousinstitutions (up to 1.000 - ATS p.a.),high schools, associations in the field ofresearch and development can bededucted from income tax. The amountof deductable gifts is limited to 10% ofthe total incomes the year before.

FOUNDATIONS

LEGAL POSITION

22. ConstitutionFree to create

23. Basic definition

There are two different forms offoundation. 1) Foundation in accordancewith the Bundes-Stiftungs-und-FondsGesetz (law on foundations) or generalnational legislation: with permanentassets for pursuing objects for charitablepurposes or the public good. 2) Privatefoundation, with legal personality, whichhas been provided with funds by thefounder to be used, managed and appliedto pursue a permissible objectdetermined by the founder.

24. Nationality requirementsNone

25. Acquisition of legal personalityType 1 foundations (cf. 23 above): thesehave legal personality, which is acquiredwhen the appropriate authorities decidethat the foundation can be authorized.Type 2 foundations: these have legalpersonality, acquired on entry in the"Firmenbuch" (register of companies).

26. Legal capacityBoth forms of foundation have legalpersonality, i.e. they can complete legalformalities and be a party to legalproceedings.

27. Disposal of assets on liquidationType 1: to be stated in the winding-upnotice of the authorities concerned withfoundations.Type 2: assets pass to the ultimatebeneficiaries named in the"Stiftungserklärung" (declaration). If thisis revoked, they pass to the founder orto the Republic of Austria.

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PORTUGAL

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Article 46 of the 1976 Constitution,Civil Code, Articles 158 to 166 and 167to 184, and Decree-Law 594/74 of 7November 1974.

2. Basic definitionThe law does not give a definition. Inaccordance with general practice, agroup of individuals who pool certaingoods or services for an object whichexcludes making a personal profit.

3. Minimum number of foundersNo minimum.

4. Types of associationPrivate associations under the generalschemePrivate associations under a specialscheme (e.g. cooperatives and socialsolidarity organizations)Associations without legal personality(non-recognized associations and specialcommittees)

5. Membership nationality requirementsUnless the statutes provide otherwise,non-nationals can be members of anassociation

6. Legal personality and how acquiredStandard recognition, granted oncondition that the act of establishing thefoundation is authenticated by a notaryand that its content is in conformity withArticle 167-1 of the Civil Code.Publication of extracts of the act ofestablishing the foundation and thestatutes in the Portuguese OfficialJournal makes the associationrecognizable in law by a third party.

7. Legal capacityAssociations have legal capacity subjectto the ultra vires rule. In accordancewith this rule, associations arerecognized as having not only the rightsand obligations which are necessary butalso those which are appropriate forattaining their object. Only rights andobligations inherent to a human personare excluded.

8. StatutesYes. As for the Memorandum ofAssociation, i.e. the notarized act. Thereis an obligatory basic minimum.

9. Registration requirementsFor associations under the generalscheme, registration has the solefunction of publicity, and has noconstitutive function.

10. Commercial activitiesAssociations may have a financial object,not excluding financial advantages forthe associates, provided that these arenot in the form of a profit as such.

11. Disposal of assets on liquidationIn the case of goods bequeathed ordonated with instructions or intended fora certain purpose, they must be assignedto another legal person, with the sameinstructions or object. In the case ofother goods, Article 162-2 of the CivilCode authorizes members in accordancewith the statutes or by decision of thegeneral meeting to decide on theirassignment.

TAXATION

INDIRECT TAXATION12. Article 13 of Sixth VAT Directive

Yes.13. Other specific exemptions

Medical or paramedical care, educationalestablishments, artistic activities,insurance and social assistance services

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14. Zero ratesFoodstuffs, newspapers, reviews andcultural books, pharmaceutical productsand the like, passenger transport,medical services, entertainments.

DIRECT TAXES

15. General positionIncome tax for legal persons - IRC -(20% of taxable income) which ispayable on total income less certainexpenses. Subscriptions paid bymembers and subsidies to finance theattainment of the association's objectsare not considered as income.Tax on assets.

16. Recognition of associations for taxpurposes

Legal persons of an administrative publicutility (religious communities, voluntaryfiremen's associations etc.) are exemptfrom IRC, as well as ordinary publicutilities pursuing exclusively scientific orcultural objects, or performing charitableor social work; specific institutions forsocial solidarity (IPSS) and personslegally similar to these.

17. Criteria for recognitionIn the first two cases, the organizationsmust cooperate with the governmentauthorities, at national, regional or locallevel. IPSSs and similar bodies must beregistered with the regional socialsecurity department. Nevertheless, thedecision is at the discretion of theauthorities. The extent of the exemptionmay vary depending on the objects.

18. Qualifying objects for recognitionExemptions are granted by the Ministryof Finance at the request of applicants bymeans of a decision (despacho)published in the "Diáro da República

19. Gifts from individualsNatural persons may deduct gifts to theorganization specified in Article 56 ofthe law on the IRS up to a value equal to

15% of their net taxable income. Thisalso applies to legal persons withnon-profit objects belonging to, orestablished by, religious denominations,teaching or educational associations,scientific research or culture, literary,artistic etc.

20. Gifts by companiesLegal persons may deduct gifts given ascultural sponsoring or to organizationssuch as teaching or educational,scientific research or cultural, literary orartistic associations from their taxableprofits up to a total value equal to 0.2%of turnover, and 50% of any sum inexcess of that.

20(a). Gifts to non-resident associations

ACCOUNTS AND AUDITING

21. AccountsThe conseil de surveillance - supervisorycouncil - is the body responsible formonitoring the activities of theadministrative body. It ensures that theaccounts of the association are properlykept.The accounts of associations whichenjoy tax concessions must always beavailable to the tax authorities.

FOUNDATIONS

22. ConstitutionBy an act inter vivos or a will. Thenotarized form of the act is required,except in the case of a non-public will.The charter establishing the foundationmust state the object of the foundationand specify the goods allocated to it.The statutes must always be inauthenticated form.

23. DefinitionThere is no legal definition. Inaccordance with general practice, thefoundation is an organization pursuing a

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permanent object to which assets havebeen assigned.

24. Nationality requirementsNo, but the head office must be inPortugal.

25. Acquisition of legal personalityFoundations acquire legal personality byindividual recognition, which is theresponsibility of the administrativeauthority.

26. Legal capacityAs for associations

27. Disposal of assets in the event of windingup

The assets of wound-up foundations aredisposed of according to the commonsystem for associations and foundations

TAXATION

28. As for associations

ACCOUNTS AND AUDITING

29. Accounts30. Auditing

Foundations remain under the permanentsupervision of the competent authorityfor recognition. Foundations must havea tax council. They may be wound up bythe authority which recognized themonce their object has been attained orhas become impossible to attain, in theevent of illicit use of resources, if publicorder is endangered or if the objectbeing pursued no longer corresponds tothat laid down in the statutes.

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FINLAND

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes. Article 10a of the Constitution Actas amended in 1995 and Article 1 of theAssociations Act of 1989.

2. Basic definitionA contract by which several people acttogether for the common realisation of anon-profit purpose. (The association is apermanent body in the sense that it is notmomentary

3. Minimum number of foundersThree

4. Types of associationA. Registered associations:- non profit associations- economic associations (for example co-operative societies established before theentry into force of the Act on co-operative societies of 1954)- associations subject to permission(provided by the Associations Act)- associations organised by a legalact/statute (for example the FinnishAdvocates Associations)B. Non-registered associations which donot have legal capacity

5. Membership nationality requirementsAssociations Act: noneExceptions: if the primary purpose of theassociation is to exercise influence overState affairs, it may have as membersonly Finnish citizens, foreigners residingin Finland and associations whosemembers are Finnish citizens orforeigners residing in Finland orassociations who have member

associations made up of Finnish citizensor foreigners residing in Finland.Members of the Board: The chairmanand at least half of the members of theboard must be resident in Finland if theMinistry of Trade and Industry has notgranted an exception.

6. Legal personality and how acquiredYes. According to the Associations Act,legal personality is acquired byregistration. Only registered associationscan have legal personality. The membersof a registered association shall not bepersonally liable for the commitments ofthe association.

7. Legal capacityA registered association has full legalcapacity as a legal person. A registeredassociation may obtain rights, makecommitments and appear before a courtor another authority as a party. Non-registered associations do not have legalcapacity

8. StatutesYes.

9. Registration requirementsRegistration is not compulsory as such.If registration is wanted, requirements ofregistration are provided in theAssociations Act.A notification of formation shall berecorded in a Memorandum ofAssociation which shall include the rulesof the association and the name anddomicile of the chairman of the boardand the persons who have the right tosign for the association. The notificationof formation shall be signed by thechairman of the board

10. Commercial activitiesA non-profit association may onlypractise a trade or other economicactivity that has been provided in theassociation's rules or that otherwiserelates to the realisation of its purpose or

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that is to be deemed economicallyinsignificant.For economic associations there are nogeneral statutes (see types of associationn. 4)

11. Disposal of assets on liquidationAfter liquidation, the remaining assetsshould be used as required in the rules ofthe association. In the absence of such arule the liquidators must put theremaining assets at the State's disposalto be used to promote the same orsimilar objects as the liquidatedassociation

TAX POSITION

INDIRECT TAX

12. Article 13 of Sixth VAT DirectiveCorporations for the public good(charitable organisations, sportassociations etc.) are liable to tax it theirincome is deemed to be income frombusiness activities according to theIncome Tax Act. This means that inpractice all exemptions of relevance toassociations coming under Article 13have been implemented

13. Other specific exemptionsNone

14. Zero ratesPrinting services for membershippublications of associations for thepublic good are subject to zero rate

DIRECT TAX

15. General positionGenerally subject to company tax (28%of taxable income) on all their income;liable to real estate tax on taxable valueof land and buildings

16. Recognition of associations for taxpurposes

According to the Income Tax Act, non-profit associations (associations for the

public good) are liable to company taxonly on their income for businessactivities, and communal tax (12,04% oftaxable income) on their income fromreal property used for other than non-profit purposes.The National Board of Taxation maygrant exemption from tax on incomefrom business or real property if theoperation of associations is sociallysignificant

17. Criteria for recognitionAssociations operate exclusively anddirectly for the public good in a material,spiritual or social sense; their activitiesdo not concern only a limited group ofpersons; members must not geteconomic benefits (shares of profit etc.)from the operation

18. Qualifying objects for recognitionDividends, interests and capital gains arenot subject to income tax unless theproperty belongs to a business activity.Business income does not contain, interalia:- sales proceeds and other proceeds fromoccasions arranged for financing theoperation of associations; proceeds frommembership bulletins and otherpublications directly serving theoperation of associations

19. Gifts by individualsGifts given to non-profit associations arenot taxable income. Gifts are notdeductible in income taxation ofindividuals

20. .Gifts by companiesGifts given to non-profit associations arenot taxable income. In companytaxation, gifts are, within certain limits(FIM 5000-150.000), deductible if givenfor scientific or artistic purposes toassociations nominated by The NationalBoard of Taxation

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20(a). Gifts to non-resident associations

ACCOUNTS AND AUDITING

21. Accounts

FOUNDATIONS

22. ConstitutionAccording to the Act on Foundations, asamended in 1995, the establishment of afoundation is subject to a permissiongranted by the National Board of Patentsand Registration.

23. Basic definitionA foundation is established with a deedof foundation which must include thepurpose of the foundation and itsproperty.A foundation is governed by anindependent administration, the board ofwhich shall be set out in the by-laws ofthe foundation

24. Nationality requirementsThe members of the board of trusteesand the persons authorised to sign thename of the foundation must be residentin a member state of the EEAAgreement. However, at least one ofthose persons must be resident inFinland, if the Ministry of Trade andIndustry has not granted an exception tothis requirement.

25. Acquisition of legal personalityLegal personality is acquired byregistration. Registration of a foundationis compulsory.

26. Legal capacityFull legal capacity as a legal person;after a foundation has been registered, itcan acquire rights and undertakeobligations as well as sue and be sued inits own name

27. Disposal of assets on liquidationIf the foundation, after its debts havebeen paid, has assets and if the by-laws

do not provide for their use, they shallpass to the State, which shall withoutdelay transfer the assets to be used tofurther a purpose related to that of thefoundation

TAX POSITION

28.See references above to the tax positionfor associations

ACCOUNTS AND AUDITING

29. AccountsFoundation must have a minimum oftwo auditors and two deputy auditors toaudit their accounts and administration

30. AuditingThe Ministry of justice ensures that theadministration of the foundationcomplies with the law and the by-laws ofthe foundation.

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SWEDEN

ASSOCIATIONS

LEGAL FRAMEWORK

1. Right of association guaranteed by law?Yes. Chapter 2, Articles 2 and 20 in theConstitution of 1974

2. Basic definitionAn association (ïdeell förening") is alegal person in which several persons acttogether for a certain purpose. Theassociation may not have any economicaims or at least no commerciallyorganised activity

3. Minimum number of foundersNot regulated

4. Types of associationIdeell förening which is not regulated bystatutory law

5. Membership nationality requirementsNo special requirements

6. Legal personality and how acquiredThe association is considered to have alegal personality if there are statutes anda board

7. Legal capacityThe association is able to acquire rightsand obligations, to sue etc., without anyspecial restrictions

8. StatutesNo, but the statutes have to be ascomplete as necessary for the aim of theassociation

9. Registration requirementsThere are no general requirements. Anassociation with an economic activitysometimes has to be registered in theTrade Register

10. Commercial activitiesIn principle not allowed. The associationmay, however, carry on some businessactivity as long as it is not commerciallyorganised

11. Disposal of assets on liquidationThe assets are divided in accordancewith the statutes. If the statutes do notregulate this matter, the assets may bedivided among the members

TAX POSITION

INDIRECT TAX

12 - 14. General positionAssociations with charitable purposesare generally not subject to indirect tax.Other associations are subject to indirecttax on the same conditions as other legalpersons.

DIRECT TAX

15. General positionNormally not subject to income tax or tothe net wealth tax. Non-profitassociations pay no income tax forbusiness with a natural connection to thenon-profit activity. Income from otherbusiness activities are taxable.

19. Gifts by individualsGifts over 10 000 SEK are normallysubject to gift tax. With the exception ofreligious communities and associationsserving educational, medical, nationaldefence, research, social work orcharitable purposes, the gift is notdeductible for the donor.

20. Gifts by companiesThe same as 19.

ACCOUNTS AND AUDITING

21. AccountsNo special supervision for associations.

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FOUNDATIONS

22. ConstitutionAll physical and legal persons can createa foundation.

23. Basic definitionA property which according to thedispositions of the founder (gift or will),is singled out to be permanentlymanaged for a certain purpose.

24. Nationality requirementsNone.

25. Acquisition of legal personalityA foundation has legal personality assoon as it has been created, i.e. when theproperty has been transferred to theseparate management.

26. Legal capacity27. Disposal of assets on liquidation

In principle, a foundation cannot beliquidated as long as it has assets.However, in special cases the assets maybe used for a purpose which is veryclose to the original purpose. A specialpermit of a governmental authority isrequired for such a procedure.

TAX POSITION

28.Foundations serving national defence,educational, medical, social work,research or charitable purposes are onlytaxable for business income.Foundations with a non-profit purposeare not subject to gift tax. Gifts are notdeductible for the giver.Foundations are subject to indirect taxon the same conditions as other legalpersons.

ACCOUNTS AND AUDITING

29. Accounts30. Auditing

Foundations are generally supervised bya local government authority.

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UNITED KINGDOM

ASSOCIATIONS(Voluntary Organisations)

LEGAL FRAMEWORK1. Right of association guaranteed by law?

There is no written right to associationsalthough there exists freedom ofassociation. There is a freedom to createtrusts although in some cases trusts withnon-charitable objects may be void.

2. Basic definitionThere is no single generally acceptedlegal definition of an association. In itswidest sense, an association is oneformed by two or more people who oftheir own volition join together in acommon purpose which is not in pursuitof financial gain.

3. Minimum number of foundersIn practice two.

4. Types of associationUnincorporated associationsTrustCompany limited by guaranteeIndustrial and Provident societyIncorporated by Royal CharterIncorporated by Act of Parliament.

5. Membership nationality requirementsNo requirements for associations assuch. In the case of a charity in Englandand Wales, the Charity commission willonly register if within jurisdiction. This isnormally construed to mean that in thecase of an unincorporated charity amajority of the trustees should beresident in England and Wales, in thecase of a company registration within thejurisdiction is sufficient.

6. Legal personality and how acquiredCompany limited by guarantee-obtainedby registration with register ofCompanies.Industrial & provident Society-obtainedby registration with Registrar of FriendlySocieties.Incorporated by Royal Charter-obtainedthrough Royal Charter.Incorporated by Act ofParliament-obtained through Act ofParliament.Unincorporated associations-No.Trust no; however, the body of trusteescan obtain legal personality throughCertificate of incorporation issued byCharity Commission.

7. Legal capacityThere are no restrictions in statute;however, in some areas capacity will bederived from the objects and powersincluded in the governing document.

8. StatutesNo.

9. Registration requirementsRegistration with the CharityCommission for charities in England andWales. For other associations,registration will depend on the legalstructure. Registration with the Registrarof Friendly Societies for Industrial andProvident Societies, registration with theRegistrar of Companies for companieslimited by guarantee.

10. Commercial activitiesThere is a restriction on the commercialactivities of charities. They can engagein primary-purpose trading but not inpermanent trading as a means of fund-raising. Charities that wish to trade toany substantial degree must set up aseparate trading subsidiary which canthen covenant its profits back to the

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parent charity and the tax can berecovered.

11. Disposal of assets on liquidationIn associations, this will be inaccordance with the governingdocument.In the case of charities, to other charitieswith similar purposes. If the governingdocument does not include provisionsdealing with this, the CharityCommission may give directions byOrder or Scheme.

TAX POSITION

INDIRECT TAX12. Article 13 of Sixth VAT Directive

Not all exemptions of relevance tocharities have been implemented.

13. Other specific exemptions(a) The supply of education orvocational training otherwise than forprofit.(b) The provision of nursing andmedical care in an approved institution.(c) The provision of welfare servicesotherwise than for profit.(d) Fund-raising events.

14. Zero ratesThese include sales of donated goods,supply of advertising for fund-raising oreducational purposes, certain aids fordisabled people, vehicles and ambulancesfor disabled people, certain medicinesand medical equipment supplied tocharities. Construction of new residentialproperty and buildings used for a certaincharitable purposes are zero rated.

DIRECT TAX

15. General positionNo specific exemptions for associationsas such.

16. Recognition of associations for taxpurposes

Charities are exempt from most forms ofdirect taxation including income tax,corporation tax, capital gains tax,inheritance tax.

17. Criteria for recognitionTo qualify for the exemption, the incomeor gains must be applied to charitablepurposes only and trading income otherthan primary-purpose trading will oftenbe subject to corporation tax.

18. Qualifying objects for recognition19. Gifts by individuals

When an individual or corporationexecutes a deed of covenant promisingto pay a particular sum to a charity for aperiod to exceed three years, a sumrepresenting tax at the basic rate must bededucted and the Inland revenue refundsto the charity the basic rate of income orcorporation tax on that sum.Additionally, if the individual is a higher-rate tax payer, he can receive further taxrelief trough the adjustment of his taxcode. A company can claim a deductionfrom its profit for the gross amount, andobtains tax relief at its marginal rate.Similarly, since 1990 individuals havebeen able to make one-off paymentsunder Gift Aid. Currently the minimumdonation is £250 in monetary form

20. Gifts by companies20(a). Gifts to non-resident associations

ACCOUNTS AND AUDITING

21. Accounts

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

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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 forVoluntary Organisations and Foundations 26

Annex III. Legal and Fiscal Framework for Voluntary Organisations and Foundations 31