The EFC has been following the issue of foreign withholding tax for several years now. The current situation is such that non-resident public benefit foundations are typically subject to withholding tax, whereas resident public benefit foundations are either exempt from or entitled to a full refund of domestic withholding tax. It is thought that where this is the case, national tax laws are in conflict with the EC Treaty.

The following actions have been suggested as possible approaches for improving the situation:

• Foundations to launch individual claims in various Member States where they are taxed - obtaining a refund is possible.
• Suggest amendment to OECD model tax treaty - EFC Legal Committee is looking into this as an option for the long term.
• Launch infringement procedures at EU level - so far no procedure has started. This action would not lead to refunds, but would declare national tax laws officially in conflict with the EC Treaty.

The EFC has decided to compile an overview of withholding tax refund claims pursued by EFC members and accounts of their experiences of pursuing these claims. This would enable members to learn from each other’s experiences and it is hoped that by providing foundations with information on where, when, and on what basis successful or unsuccessful claims have been made, more organisations will be encouraged to ask for a refund.

We currently have information from nine members, covering claims across 14 countries. This information can be found here.

If you have any data to share, please contact the EFC secretariat: legal@efc.be

In addition, a recent article by Göran Blomqvist, Managing Director at Stiftelsen Riksbankens Jubileumsfond addresses the topic of foundations and foreign withholding tax. The article can be found here and featured in the Spring 2010 edition of the EFC’s EFFECT magazine.