CONSULTATION ON A POSSIBLE STATUTE FOR A EUROPEAN FOUNDATION. Contribution of the Fondazione Cassa di Risparmio di Orvieto

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1 CONSULTATION ON A POSSIBLE STATUTE FOR A EUROPEAN FOUNDATION Contribution of the Fondazione Cassa di Risparmio di Orvieto Introduction The Fondazione Cassa di Risparmio di Orvieto shares the initiative of the EU Commission to proceed with an in-depth examination of the issues connected with the identification, at the European level, of a common discipline in the matter of foundations, through the opening of a public consultation. The definition of an EC discipline of the foundations represents a stimulus to the development of the foundation sector, a phenomenon - as is highlighted in the Final Report on the feasibility study regarding a European foundation statute - experiencing steady growth in the Member States. An EC approach can also be instrumental in simplifying and cutting the costs of establishing foundations, in addition to increasing the transparency and accountability of the sector. The definition of a common model of European foundation will aid the activity of the same EC and international bodies, which thus will be able to interact with more homogeneous subjects insofar as the discipline of reference. It is further hoped that a common discipline at the European level will encourage the Member States to bring national civil law and tax law in line vis-à-vis the foundations, thus contributing to overcoming the barriers, especially of a fiscal nature, that today hinder a free circulation of capital in the single market without discrimination.

2 2. THE QUESTIONNAIRE, PART I Information about the respondent A. Name of the foundation/company/organisation/person and your function Fondazione Cassa di Risparmio di Orvieto B. Address and register ID number of registered organisations 1 Piazza Febei, Orvieto (TR) Number register 260/92 of persone giuridiche private (presso la prefettura): Terni C. The legal form, field of activity and country of origin of your organisation Private foundation of banking origin; the foundation operates in the main following fields: culture and heritage, education, local expansion, public health, preventive medicine and riabilitativa, support to volunteer organizations, assistance to the eldery ones. D. If you are answering for a foundation 1. Does your foundation conduct cross-border activities in the EU/EEA area? If yes, in which form does your foundation conduct these activities (e.g. foreign foundations, branches, subsidiaries, provision of services, export/direct sales of goods, fund raising, grant making)? No 2. Does your foundation plan to expand its activities to other Member State(s) in the foreseeable future? If yes, in which form (e.g. foreign foundations, branches, subsidiaries, provision of services, export/direct sales of goods, fund raising, grant making)? Please indicate to which Member State(s). No 3. Please indicate the approximate yearly expenditure of your foundation. Yearly grants amount to Euros. 1 The Commission asks organizations who wish to submit comments in the context of public consultations to provide the Commission and the public at large with information about whom and what they represent. If an organization decides not to provide this information, it is the Commission's stated policy to list the contribution as part of the individual contributions. (Consultation Standards, see COM (2002) 704, and Communication on ETI Follow-up, see COM (2007) 127 of 21/03/2007) 2

3 4. Please indicate whether the purpose of your foundation is (1) public benefit only, (2) mixed public benefit and private or (3) private only. Public benefit only. Question 1: Barriers to the cross-border activities/establishment of foundations Q 1.1 The study identifies four categories of civil law barriers/difficulties for the crossborder activities of foundations in Europe (pp ): 1) Recognition of foreign foundations (pp ), 2) Recognition of trusts (p. 107), 3) Cross-border transfer of the Real Seat (pp ), 4) Cross-border transfer of the Registered Seat (pp ). Do you agree with these findings? We agree with the above list, which indicates the most important barriers to the establishment and activities of foreign foundations in the ambit of the different countries of the Union. Q 1.2 Do you see any further civil law barriers/difficulties? Please specify. No other particular normative barriers are seen. Q 1.3 Please rank the civil law barriers in order, starting with the one you find the most important. Although the principal legal barriers relate to the possibility of transferring the Seat to another Member State and to the complexity of procedures for the recognition of legal status, not to be overlooked among the greatest barriers to the setting up of foundations in the Member States is the obstacle formed by tax regulations. The different systems existing in the various States condition the freedom of constitution and establishment of foundations abroad. Q 1.4 If you are answering for a foundation, please give concrete examples of the civil law barriers and/or difficulties you have encountered. How do you deal with these barriers/difficulties? Have they influenced your plans to conduct cross-border activities? Q 1.5 If you are answering for a foundation and have tried to transfer your real or registered seat cross-border, have you experienced any problems? Please specify your reasons for wanting to transfer the seat and the problems experienced, if any. Q 1.6 The study identifies eight categories of tax law barriers/difficulties for the crossborder activities of foundations in Europe (pp ): 1) Income taxation of foreign foundations (pp ), 2) Income taxation of domestic foundations operating abroad (pp ), 3) Income taxation of domestic donors of foreign foundations (p. 116), 3

4 4) Income taxation of foreign donors of domestic foundations (p. 117), 5) Income taxation of foreign donors of foreign foundations (pp ), 6) Income taxation of affiliated beneficiaries (p. 118), 7) Inheritance taxation (pp ), 8) Further taxes (pp ). Do you agree with these findings? If not, please explain why. All the above-mentioned barriers are particularly important; this is the reason why a European Foundation Statute with tax elements is of absolute importance for our sector. However, in our opinion the principal barrier is formed by discrimination in the income taxation of donors to foreign foundations. In effect, any foundation that develops activities for instance, in the research or health sector even if in the absence of activity abroad, would gain an advantage from the possibility to raise funds in a European rather than national sphere. Q 1.7 Do you see any further tax law barriers/difficulties? Please specify. The Report states that civil law barriers are greater than tax law differences. While the assertion can be shared in a general way, nonetheless it must be borne in mind that the level of national taxation also affects foundations cross-border activities and freedom of establishment. In States, such as Italy, where the tax system is penalising with respect to other States, the setting up and activity of foundations is not encouraged. We believe that the different tax system currently in force in each of the 27 Member States creates discrimination and constitutes an obstacle to the free circulation of capital and the carrying on of cross-border activity. Q 1.8 Please rank the tax law barriers in order, starting with the one you find the most important. The principal tax law barriers to the activities of foundations having purposes in the public interest are the following: high taxation of receipts; lack of incentives for donations. Q 1.9 If you are answering for a foundation, please give concrete examples of the tax law barriers and/or difficulties you have encountered. How do you deal with these barriers/difficulties? Have they influenced your plans to conduct cross-border activities? Q 1.10 Do you consider the civil law barriers or the tax law barriers more important? The civil law barriers are just as important as those relating to tax law; however, the development of foundations can be conditioned by the applicable tax system. Therefore, it is thought that the definition of a European discipline of foundations cannot leave out elements of a fiscal nature. Q 1.11 Why do foundations set up additional organisations/structures in other Member States in your view? 4

5 Foundations set up additional structures in other Member States not only to pursue their public benefit, but also for policy, managerial, legal and fiscal reasons Q 1.12 The study seems to identify tax barriers as the main reason for foundations setting up additional organisations/structures in other Member States (p. 122). Do you agree with this finding? If not, what do you think is the main reason for foundations setting up additional structures/organisations in other Member States? We agree. In effect, the discrimination of donors to foreign foundations, just as discrimination regarding income taxation of non-domestic foundations, imposes the establishment of branches in other countries, not only in the case of activities performed abroad, but also in the event that fundraising is not confined to the country where the foundation has its Seat. Question 2 What solutions would be most appropriate Q 2.1 The study assesses five different options to deal with the barriers/difficulties identified. The options assessed are (p ): 1) Status quo combined with soft law instruments 2) Harmonisation 3) Bilateral or multilateral treaties 4) A European Foundation Statute without tax elements, and 5) A European Foundation Statute with tax elements What other options for solving the problems do you see if any? No, we don t see other options to solve the problem. Q 2.2 The study suggests that of the above options, the European Foundation Statute seems to be the preferable policy option (p. 1). Do you agree? Why/why not? The adoption of an EC discipline of the European foundation, based on principles of a general nature and on a system of statutory self-determination, appears useful for bringing down the barriers to cross-border activities, since among the models proposed it is the one that makes it possible to deal realistically with the theme of overcoming the administrative and legal barriers between the States. Q 2.3 If you do not agree, what do you consider as the preferable policy option? Why? Q 2.4 Would you consider a European Foundation Statute which does not include tax elements (for instance a tax-exempt status in all EU Member States, p.191) as a useful/attractive instrument? Why/why not? For the reasons already expressed in the answer to question 1.10, we believe that the EC discipline ought to also contain norms of a fiscal nature in order to allow a real dismantling of the barriers between States, also making it possible for subjects operating in countries with a penalising system of taxation to not be discriminated against. 5

6 Q 2.5 Do you believe that an accreditation system (pp ) could be a proportionate solution to the problems for cross-border activities that foundations face today? Why/why not? The optimal solution for solving the problem of cross-border activities of foundations indeed, probably the only effective solution allowing substantial development of the sector in the Union is represented by the European foundation statute, especially if the hypothesis of a statute with tax elements gains ground. Nevertheless, should such solution prove to be politically unfeasible, we believe that even an accreditation system, based on principles of transparency, accountability and good governance, would be a first step toward the elaboration of a European statute. Q 2.6 What added value do you think a "European label" (obtained for instance through a European legal form like the European Foundation) would bring for the foundations? A European label resulting from a process of rating the degree of accountability, transparency and good governance, would constitute a sign of reliability of the foundation, as well as a further legitimisation of the same. Q 2.7 In your view, the benefits attached to a "European label" for foundations: can only be achieved through a specific European legal form (European Foundation Statute) can be achieved through an accreditation system can already be achieved through national foundations (e.g. through their names, statutes, marketing) can be achieved through other means, which ones? It is thought the advantages as per 2.6 would be effectively obtainable only if coupled with a discipline of the European foundation. In this hypothesis, in fact, a European label, while achievable through an accreditation system, would constitute a real index of trustworthiness and protection for third parties. Question 3: Content and form of a possible statute for a European Foundation Q 3.1 According to the study the European Foundation should have the following five main characteristics (p.194): 1) Legal personality 2) Promotion of a public benefit purpose 3) No membership 4) State supervision, and 5) Establishment by registration Do you agree that a European Foundation should have these five characteristics? If not, please explain why. It is thought that the European Foundation, in addition to the five above-mentioned characteristics, should also have that of a private, autonomous and independent selfgoverning body. 6

7 As regards the five main characteristics, we think that the third characteristic of no membership ought to be supplemented by adding with entitlement to economic rights over the endowment or income. This is for the purpose of also including foundations whose organisation includes subjects and/or representatives of civil society that, even though entitled to statutory powers, are not entitled to any right over the endowment or income deriving from the investment of the same or from other sources of income. Furthermore, while we agree with the fifth characteristic concerning registration, the need is pointed out to ensure that the same does not lead to excluding foundations recognised by an administrative act in the ambit of privatisation processes. Q 3.2 How detailed should the European Foundation Statute be? Should it be as comprehensive as possible (as is the case for the Commission proposal for a European Private Company Statute) or should it only contain basic rules and refer to national laws on other issues (as is the case for the European Company Statute) (pp )? The European Foundation Statute should contain general principles in the matter of governance, transparency and accountability, leaving to statutory autonomy the detailing of the principles and discipline of the activities. The normative model would thus be flexible, easy to update, meeting the changeable needs of philanthropy; at the same time it would not alter the operational characteristics of any foundation, including in relation to the territory of intervention. Q 3.3 Should an initial endowment be required (p. 199)? If yes, how large an endowment should be required? The European Foundation should have an endowment or a comparable steady source of income adequate for accomplishing its institutional purposes and, in any case, amounting to no less than 100, (one hundred thousand euros) so as to ensure that the foundation has, already in its starting phase, an acceptable operational level. Q 3.4 What should be the rule on economic activities by the European Foundation itself (p. 204)? The carrying on of economic activities by the European Foundation should be directly or indirectly instrumental to the pursuit of the institutional purposes. Q 3.5 How should the supervision of a European Foundation be arranged (pp )? The supervision of a European Foundation should be assigned to an institution or special body at the EC level that is superordinate and takes the place of the national one, with the task of reviewing the legitimacy of acts engaged in by the foundation. Q 3.6 On what conditions should an existing foundation be able to transform itself into a European Foundation (p. 184)? A national foundation should be able to transform itself into a European Foundation on condition that: 7

8 - the decision is the expression of the autonomous free will of the of the foundation s governing bodies; - the foundation observes the principles established in the European Statute. In the event that any involvement of the national authority is deemed necessary for purposes of the adoption of the European Statute, the activity of the same should be limited to a review of the conformity of the foundation s statute to EC standards. Q 3.7 If you think that the European Foundation should have other characteristics, please specify which ones. As already anticipated as per 3.1, the European Foundation must be a subject: - that is private and provided with full statutory and operational autonomy; - with its own organisational independence, within the framework of the principles of governance laid down by EC regulations. Question 4: Potential transformation of existing foundations into a European Foundation If a European Foundation Statute were introduced, the possibility of transforming existing foundations into a European Foundation would seem to depend on several factors e.g. the statutes of the foundation ("will of the founder"), the agreement of the board of the foundation, the approval of the supervisory authority, the scope of crossborder activities and existing barriers, as well as on the content of a possible European Foundation Statute (p.184). The transformation of a national foundation into a European Foundation should be left up to the exclusive will of the concerned foundation without the consent of the national supervisory authority, being a decision deriving from the different operational dimension pursued by the same foundation. The foundation s decision will have to be made in accordance with its own statutory provisions by the organ delegated to make the strategic decisions of the body. Any involvement by the national supervisory authority will have to be limited to a review of the conformity of the decision with the European foundation statute. Q 4.1 If you are answering for a foundation, would you consider transforming your foundation into a European Foundation if possible? Yes. Q 4.2 On what criteria would the decision of the board depend? The resolution would have to be freely approved by the foundation s decision-making organ and not be subject to approval by the national authority except for review of legitimacy in relation to the discipline contained in the statute of the European foundation. Q 4.3 What do you think the benefits and drawbacks of a transformation in the case of your foundation would be? 8

9 Transformation into a European foundation will allow the foundation to overcome the normative and tax law barriers that hinder the accomplishment of cross-border activities regarding both fundraising and the disbursement of resources, above all in the scientific research sector. Q 4.4 Would the possibility to transform itself into a European Foundation be decisive in order for your foundation to expand its activities to other Member States? Why/why not? Yes, because it would make such an expansion much easier. Q 4.5 In case your foundation already operates cross-border, would this possibility lead to a substantial increase of cross-border activities? Question 5: Any other comments A significant portion of the activity of the foundations consists of the elaboration and search for new and better models of intervention, including on the basis of a fruitful comparison with the past experience of other foundations within the single Member States. We are dealing with activities not detectable from the analysis of international economic flows, by means of which the foundations aim at increasing the effectiveness and efficiency of the resources that they allocate to the pursuit of purposes of social interest. Such activities of study, research and comparison would be remarkably facilitated by a greater uniformity of the legal and statutory profiles of the foundations in the different Member Countries, such as that which could result from the introduction of a European Foundation Statute. 9