Possible tax relief on cross-border giving

Possible tax relief on cross-border giving


It may soon be possible for UK donors to benefit from tax relief on donations to charities in other European countries, after an opinion published by the Advocate General of the European Court of Justice (ECJ).

If the ECJ follows the Advocate General's opinion, UK donors would be able to give to a charity in another member state within the European Community (EC) and, provided they can prove the organisation would qualify as charitable in the UK, claim tax relief as they would if giving to a charity within the UK.

Jacob Rigg, head of Policy at the Society of Trust and Estate Practitioners (STEP), said, “If the ECJ follows the Advocate General’s opinion this would be good news for donors in the UK, as they will be able to give tax-efficiently to any charity in the EC that they can prove satisfies the UK meaning of charitable.”

The ECJ can rule on matters that concern the principle of the free movement of capital between EC member states.

The Advocate General’s opinion – on a German tax case, Hein Persche v Finanzamt Lüdenscheid (C318/07) – says that donations (of moveable or immoveable goods) constitute movements of capital provided that the elements making up those donations are not restricted to within the borders of a single member state. The form of the donation only relates to the method of making the donation.

Although the ECJ ruling does not have to follow the Advocate General’s opinion, it did in the last case concerning charity income from other EC member states. The Centre di Musicologia Walter Stauffer v Finanzamt Münchenen für Körpershcaften (C386/04) case related to a charity’s own income, when it was derived from investments in another member states.

Simon Weil, a partner at law firm Bircham Dyson Bell, told Third Sector magazine (23/10/2008), “It’s now incumbent on the UK and other governments that are under notice from the commission that they must comply with the law to respond. Previously, the UK government had been challenged and just hadn’t responded”.

More information is available on the ECJ website.