Public-benefit foundations make a real difference to the public good across the European Union, but the full potential of their activities is being hampered by the burden of Value Added Tax (VAT). The current VAT system creates a series of problems for the foundation sector, so the European Foundation Centre (EFC) is reviewing how a fairer VAT treatment of public-benefit foundations could be reached, to allow them to maximise the public-benefit impact of their work.

What is the issue?

From December 2010 - May 2011, The European Commission held a public consultation on how to strengthen and improve the current VAT system. In May 2011, the EFC and the Donors and Foundations' Networks in Europe (DAFNE) submitted a joint response to the consultation:

 EFC and DAFNE response to the EC public consultation on VAT (May 2011)

In December 2011, the European Commission released a Communication outlining its proposals for the VAT system, following the review of repsonses to the abovementioned consultation. The information note below looks at the potential impact of the proposed measures for foundations:

 Information note - Foundations and VAT (December 2011)

The 2010 EFC position paper on  foundations and VAT outlines the issue and considers the possible solutions to the difficulties faced by foundations with regard to VAT:

Position Paper - Foundations and VAT (November 2010)

The EFC has also previously issued a joint information note with partners on the issues involved and what foundations can do regarding VAT:

Information note: How to improve the VAT system for public-benefit foundations (92kb)

What can I do?

The EFC has launched a VAT survey to improve its understanding of how much public-benefit foundations lose on VAT on annual basis

> Take the EFC VAT survey

The results of the survey so far indicate that €40 million is lost on VAT expenses by 33 EFC members alone. A smaller group of EFC members has agreed to share their experiences through case studies of their VAT losses.

Interim results of the EFC VAT survey (44kb)

EFC VAT case studies (28kb)

Learn more

If you would like to know more about the VAT treatment of public-benefit foundations or would like to tell your story to us, please contact the EFC Legal Department.