Public benefit law in the Netherlands Zagreb 6 december 2005 Dr. W.J.M. van Veen Vrije Universiteit Amsterdam/ Baker&McKenzie Amsterdam

Association and Foundation law and Public Benefit Public benefit status is not related to association and foundation law: –Not related to eligibility for establishment (Civil Code) –Related to tax provisions, which provide favorable treatment to associations and foundations engaged in public benefit activity (Tax Law)

Public Benefit Status Has Fiscal Implications: –Donor Incentives for companies and individuals –Donations by a public benefit organization in the pursuit of its purpose are exempt –Donations (liquidation distribution) to other public benefit organisations are exempt –0% gift and death duties (as of 1 January 2006) –For certain institutions; exemption energy consumption tax

Acquisition of Public Benefit Status Public benefit status follows from the law Listing or acknowlegdement by public authority is not required (except for foreign NGOs). However, listing may be applied for by the Inspector for Registration and Succession (tax authority for gift and death duties) –A refusal is subject to review by fiscal court

Acquisition of public benefit status (contd.) The relevant Inspector may challenge that a specific NGO meets the criteria for public benefit status. He can do so by refusing preferential tax treatment as claimed by the NGO NGO may challenge this position of the Inspector in court of law.

Acquisition of public benefit status (contd.) Application for registration by letter addressed to Inspector for Reg. & Succ. Confirmation or refusal may be issued within one week.

Requirements for Listing Purpose as well as de facto activities must be of public interest (religion, charity, culture, science, or public benefit interest) Established in the Netherlands No commercial purpose (income from commercial activities is allowed if applied to public benefit purpose) At least three directors (restrictions on close relations between directors) All directors have one vote

Requirements for listing (contd.) Directors may not be remunerated (in practice this is restriction is however, not applied) Liquidation proceeds applied for purpose or transferred to other PBO Amendment of articles and change of composition board of directors requires prior consultation with Inspector Annual account and report must be submitted to Inspector

Requirements for listing (contd.) Application must be done in writing accompanied with: –Copy of authentic deed containing articles of incorporation that are in force –List of names and addresses of directors –Last annual account

Supervision General supervision by Public prosecutor: applicable to all legal persons including companies on shares and non profit organisations. Not specific for Public benefit organisation.

Supervision By the Inspector: –For listed PBOs based on annual reports and/or at random –For non-listed PBOs based on tax declarations, press releases, complaints and/or at random (estimated number of PBOs )

Loss of Public Benefit Status Fiscal implications only: loss of preferential tax treatment of donations, etc. received by or done by the organisation. For the future only (unless fraud is involved)

Policy Proposals Listing required for public benefit status Requirements based on self-regulation; safeguards to be implemented in the articles of assocciation –composition board of directors –reporting requirements –decisionmaking process –conflict of interests provisions –Etc. (inspired on Central Bureau of Fundraising criteria for the Seal of Approval for fundraising organisations)