The foundation: founding and (fiscal) organization in The Netherlands
Maintaining cultural heritage, collecting funds for medical research or organizing a charity run. There are numerous ways in which people can give shape to idealistic goals. Are you one of those people and looking for an organizational form to realize ideals? Then, the foundation is the solution for you.
But what is a foundation exactly? How do you establish a foundation in The Netherlands? What rights and duties do you have? What fiscal advantages and disadvantages does the Dutch legislation entail? This article will answer the most important questions.
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 the foundation, you can request subsidy, invest capital, recruit donors or generate income in some other way. 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 expenses to register at the Chamber of Commerce are fifty euro.
What does the organization look like?
A foundation does not have any members, which makes it different from an association. The organization is controlled by the board. The board usually consists of at least a chairman, secretary anda treasurer. Board members will need to be officially registered and deregistered. They can get their expenses reimbursed by the foundation. Unlike a partnership or private company, the board or founders are not liable for any debts that may occur. 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 have to deal with 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 organization. As an ANBI you are entitled to a number of appealing tax benefits. This way, the work of the foundations 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 organization 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 sometimes also entitled to benefits. For example, the 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. In conclusion, those donating also benefit from donating to an ANBI. They can deduct their donations from the income- or partnership taxes.
Are you allowed to make a profit?
As a foundation, you can manage an enterprise: You attempt to make a profit through labour and capital. You strive for social and ideological goals and commercial goals. Making a profit is allowed, however the condition is 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 the 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 the 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.
When you register as a foundation at the Chamber of Commerce, they determine whether you are an entrepreneur for the 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 organization. Whether to 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 private interest. 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 an inheritance is donated from someone who has or had a share in the foundation, then inheritance tax will need to be paid. Whether the separate private capital is exempt from the income tax is dependent on various factors. You can read more about that here (in Dutch).
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.