The International Journal of Not-for-Profit
Law - Volume 2, Issue 1
A quarterly publication from The
International Center for Not-for-Profit Law
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Public
Benefit Status in the Netherlands
Dr.
Wino J.M. van Veen, associate professor, Faculty of Law, Vrije Universiteit,
Amsterdam
Introduction
The Dutch legal system belongs to the Civil Law tradition. An important characteristic of the civil law tradition is a distinction between public law and civil (private) law. With regard to public benefit organizations, the issues generally taken to belong to the domain of civil law include:
Belonging to the field of public law are the issues such as
Admittedly, the boundaries between the areas of public
law and civil law are not always crystal clear. For example, the competencies of
the public prosecutor in relation to the supervision of
foundations are given in the Civil
Code, as well as the consequences of a failure to comply with registration
requirements. [1] Within the legal system, the issue of public benefit
status, is part of public law and not civil law. Both foundations and
associations can be established for public and private benefit purposes under Dutch law,[2]
but in order to be eligible of fiscal privileges, public benefit status is
required. Consequently, the conditions for public benefit status is a matter of
primarily fiscal law whereas the legal form – being a matter of civil law - is
not conclusive.[3] Criteria for Public Benefit StatusThe criteria that apply to public benefit status are
developed in fiscal jurisprudence, in particular the jurisprudence regarding §24(4)
of the Law on Succession Taxes 1956.[4]
This article grants fiscal privileges in the field of gift and death duties[5]
to certain organizations. Such organizations will have purposes which are:
However, these criteria have no basis in the law, and
therefore are not applied by the courts when judging whether or not a specific
organization is actually a public benefit organization. Therefore, the actual
criteria that apply for public benefit status are developed in case law. The
main criteria is that the organization serves the public interest (rather than
being of public utility). An organization serves the public interest
‘if in reasonableness it can be assumed that the that the purpose that
is being pursued, serves the well-being of the population in the (relevant)
country.’[6]
In practice, the test is performed by setting the public interest against
the private interest. Both the statutes and the activities have to be
aimed at serving a purpose of public interest.[7] In order to determine if
an organization is pursuing a purpose of public benefit, the circle of potential
beneficiaries is decisive. If the purpose and activities are explicitly or
implicitly aimed at serving too restricted a group of persons, the organization
is not eligible for public benefit status. This can be because one or more
particular persons- for example persons belonging to a family- are the
beneficiaries, or because the organization is basically member serving, or
supporting of the members of another organization.[8]
When an organization is both member serving, but also has public activities, for
example musical associations that have public performances and educational
activities for non-members, the balance between private and public benefit
should be approximately 50/50 in order to qualify for public benefit status.[9] Organizations that aim to promote violence or the support of violence,
either in the Netherlands or a foreign country, cannot be public benefit
organizations, and in fact are forbidden under Dutch law (§2:20 CC). Otherwise,
there are no restrictions. Political parties and their scientific institutions,[10]
as well as trade unions[11]
are also considered public benefit organizations. Final remarksThe choice of which authority is competent to decide about
granting public benefit status is relevant in certain respects, as well
as the nature of the test. The public benefit test in the Netherlands is
performed by the courts, which are independent from government. Therefore, the
test is a normative one. The courts have no discretionary power,[12]
nor is the outcome of the test related to the public policy.[13]
The choice of which authority that is competent in this matter, in the majority of
countries has a long history. Inevitably, however, the choice has a political and
ideological background, and reveals part of the dominant view in a particular
society regarding the independence of nonprofit organizations from the
government and bodies of the public administration. On this point, Europe is
still widely divided.
[1]
Registration in the Register of Commerce,
held by the Chambers of Commerce and Industry is compulsory for formal
associations (e.g. that have laid down their statutes in a notarized deed)
and foundations. However, registration under Dutch law is not required to
obtain legal personality. A failure to register will result, though, in
personal liability of the managing directors that have acted on behalf of
the association and foundation. Thus registration is required to obtain the privilege
of limited liability. [2]
Respecting of course the non-distribution constraint applying to founders
and members of the managing board of a foundation, and members of an
association. [3]
Thus, a limited liability company can also qualify for public benefit
status, although this form is not commonly used for nonprofit public benefit
purposes. [4]
This article is the most important article with respect to public benefit
status granting privileged treatment regarding gift and death duties (e.g.
higher exemptions, and a favorable rate of
11% of the worth of the donation). [5]
Also, when established that an organisation is a public benefit organisation
in the sense of §24(4) Law on Succession Taxes, it is considered as such
with regard to corporate and personal income taxation for purposes of
deductibility of gifts. [6]
Supreme Court, BNB 1983/176. Organizations that have their activities
outside of the Netherlands, can be public benefit organizations. Also,
foreign organizations can attract deductible donations from Dutch citizens,
however, these organizations
have to be officially recognized and listed as such in order to be able to
do so. [7]
Supreme Court, BNB 1979/314. [8]
Supreme Court, V-N 1997, p. 3594. [9]
Supreme Court, BNB 1994/280. [10]
Resolution State Secretary of Finance of
July, 8 1954. [11]
Trade Unions in the Netherlands typically are not
specific member serving but play an important role in the serving of interests
of non-members as well. [12]
As is the case in France, where the public authorities, Prefet, can decide
whether or not a specific foundation is needed or not. [13]
As is the case in England and Wales. |
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