What is a foundation?

A foundation is a legal entity that you can establish when you want to reach a societal, social or idealistic goal. With a foundation, you can request subsidies, invest capital, recruit donors or generate income in other ways. In short; you gather resources to realize your goals.

How do you establish a foundation?

The registration at the Chamber of Commerce for a foundation must go through a notary. You can draft a notarial act that states that the foundation is being established. The notary will help you correctly and completely record the articles and will generally bill you for a few hundred euros. The cost to register at the Chamber of Commerce is fifty euros.

What does the organization look like?

A foundation does not have any members, which makes it different from an association. The organisation is controlled by the board. The board usually consists of at least a chairman, secretary and a treasurer. Board members will need to be officially registered and deregistered. They can have their expenses reimbursed by the foundation. Unlike a partnership or private company, the board or founders are not liable for any debts that are incurred. The board members will need to be included in the UBO-registry (Ultimate Beneficial Owners) as ultimate stakeholders.

What are your duties?

In addition to registering and establishing articles and appointing a board, there are a few other requirements that a foundation will need to meet. For example, you are obligated to have a comprehensive administration. When you reach a certain revenue, you will also need to file an annual account. When employees are hired, taxes will need to be paid over the wages. As an entrepreneur, this means you will be subject to revenue taxes.

What are your rights?

As a foundation, your activities must be in service of a goal that contributes to society. You can request to be designated as an ANBI: a general benefit providing organisation. As an ANBI you are entitled to a number of appealing tax benefits. This way, the work of your foundation is made more appealing fiscally by the government. Therefore, it pays to find out if your foundation meets the requirements (in Dutch only).

What fiscal exemptions do you get as an ANBI?

The main tax advantages of an ANBI are that the organisation does not have to pay inheritance tax or donation tax and that the ANBI does not have to pay any taxes over the donations they make. In addition, those involved are often entitled to benefits. For example,  voluntary work can be seen as a gift by the Tax Authorities. This means that any compensation for voluntary work is not taxed and can be deducted as a gift. Check the requirements to determine if this applies to your volunteers. Additionally, those donating also benefit from donating to an ANBI. They can deduct their donations from their income- or partnership taxes.

Are you allowed to make a profit?

As a foundation, you can manage an enterprise: You can attempt to make a profit through labour and capital. You strive for social and ideological goals and commercial goals. Making a profit is allowed, on the condition that the revenue serves the goal of the foundation. Therefore, making a profit is a means instead of the goal (as would be the case for other company forms).

(How) are you obligated to pay taxes?

Corporate income tax
As a foundation, you are obligated to pay taxes to a certain extent: in some situations you will have to declare taxes for the corporate income and in other situations you do not. For example, if you do not attempt to make a profit, you can be exempt from corporate income taxes. When you run your foundation as a company and have structural commercial activities (and make more than €15.000 profit annually, or made more than €75.000 in profit over the past four years), you will need to pay corporate income tax over that profit. When your foundation has to declare for corporate income tax, you can be entitled to certain tax deductions. On the website of the Tax Authorities, you can read more about the conditions, the tax declaration and possible tax deductions of the corporate income tax.

VAT
When you register as a foundation at the Chamber of Commerce, they determine whether you are an entrepreneur, for turnover tax. Are you not seen as an entrepreneur? Then, you are always exempt from paying VAT. However, even if you are seen as an entrepreneur, there is a chance you are exempt from VAT. This depends on your activities and the sector of your organisation. Whether you charge or pay VAT is dependent on your specific situation. Read more about foundations and VAT and what activities are exempt here (in Dutch only).

Separate private capital and income-, gift-, and inheritance tax
Foundations sometimes receive income from separate private capital: a private individual brings in (family) capital for the benefit of the foundation. In some cases, taxes will need to be paid over this capital. When the donor is Dutch, you will need to pay gift tax over this donation. When a gift or an inheritance is donated that exceeds the tax-free base (in 2022, this is every amount above € 2.274) tax will need to be paid. You can read more about that here (in Dutch).

Further reading

Founding, managing and financial administration of a foundation can be complicated. The Dutch government provides information in English for those involved in the organization. When necessary, it can be desirable to get extra advice. Moneywood is happy to help you with that.