On 6 December 2011 the European Commission published the long awaited Communication on the future of VAT (COM 2011 851/3). While the Communication clearly recognises that non-profit organisations face a significant VAT burden, it does not propose any (new) solution to remedy this, other than calling on Member States to make use of existing options to alleviate the VAT burden on non-profit making organisations and to consider VAT refund schemes at the national level.

More worrying in the Communication is the suggestion that Member States could generate more income by limiting the use of VAT reduced rates, which would imply that public-benefit foundations may have to provide services at a higher price. The Communication suggests that existing exemptions would /should be examined with the aim of broadening the tax base.

Current proposals do not worsen the situation of foundations, but the EFC and its members must remain vigilant in the coming months about the possible review of current reduced rates and exemptions granted to non-profit organsiations and public bodies.

For more information on the Communication and the impact of the proposals for foundations, please see the EFC information note on this matter.