Public benefit law in the Netherlands

1. Public benefit law in the Netherlands Zagreb 6 december 2005 Dr. W.J.M. van Veen Vrije Universiteit Amsterdam/ Baker&McKenzie Amsterdam

2. Association and Foundation law and Public Benefit • Public benefit status is not related to association and foundation law: • Not related to eligibility for establishment (Civil Code) • Related to tax provisions, which provide favorable treatment to associations and foundations engaged in public benefit activity (Tax Law)

3. Public Benefit Status • Has Fiscal Implications: • Donor Incentives for companies and individuals • Donations by a public benefit organization in the pursuit of its purpose are exempt • Donations (liquidation distribution) to other public benefit organisations are exempt • 0% gift and death duties (as of 1 January 2006) • For certain institutions; exemption energy consumption tax

4. Acquisition of Public Benefit Status • Public benefit status follows from the law • Listing or acknowlegdement by public authority is not required (except for foreign NGOs). • However, listing may be applied for by the Inspector for Registration and Succession (tax authority for gift and death duties) • A refusal is subject to review by fiscal court

5. Acquisition of public benefit status (contd.) • The relevant Inspector may challenge that a specific NGO meets the criteria for public benefit status. • He can do so by refusing preferential tax treatment as claimed by the NGO • NGO may challenge this position of the Inspector in court of law.

6. Acquisition of public benefit status (contd.) • Application for registration by letter addressed to Inspector for Reg. & Succ. • Confirmation or refusal may be issued within one week.

7. Requirements for Listing • Purpose as well as de facto activities must be of public interest (religion, charity, culture, science, or public benefit interest) • Established in the Netherlands • No commercial purpose (income from commercial activities is allowed if applied to public benefit purpose) • At least three directors (restrictions on close relations between directors) • All directors have one vote

8. Requirements for listing (contd.) • Directors may not be remunerated (in practice this is restriction is however, not applied) • Liquidation proceeds applied for purpose or transferred to other PBO • Amendment of articles and change of composition board of directors requires prior consultation with Inspector • Annual account and report must be submitted to Inspector

9. Requirements for listing (contd.) • Application must be done in writing accompanied with: • Copy of authentic deed containing articles of incorporation that are in force • List of names and addresses of directors • Last annual account

10. Supervision • General supervision by Public prosecutor: applicable to all legal persons including companies on shares and non profit organisations. Not specific for Public benefit organisation.

11. Supervision • By the Inspector: • For listed PBOs based on annual reports and/or at random • For non-listed PBOs based on tax declarations, press releases, complaints and/or at random (estimated number of PBOs 20.000-30.000)

12. Loss of Public Benefit Status • Fiscal implications only: loss of preferential tax treatment of donations, etc. received by or done by the organisation. • For the future only (unless fraud is involved)

13. Policy Proposals • Listing required for public benefit status • Requirements based on self-regulation; safeguards to be implemented in the articles of assocciation • composition board of directors • reporting requirements • decisionmaking process • conflict of interests provisions • Etc. (inspired on Central Bureau of Fundraising criteria for the Seal of Approval for fundraising organisations)