In the case of Hein Persche v Finanzamt Lüdenscheid the ECJ has confirmed that Article 56 of the EC Treaty prevents a blanket ban on tax relief for donations to non-domestic charities.  The decision has confirmed that a donor can receive tax relief on donations to a charitable body in another EC country to the donor, provided the gift would have been eligible for tax relief if made to a charitable body in the donor’s country.

So for example if a UK donor made a gift to a French charity providing care for the disabled, that gift would be eligible for UK tax relief because a gift to a UK charity caring for the disabled would be eligible for tax relief.  On the other hand a gift to say a German political party would not be eligible for UK tax relief because a gift to a UK political party would not be eligible for UK tax relief.

The “Persche” case logically follows on from the 2006 ECJ decision in the case of Centro di Musicoligica Walter Stauffer which confirmed that an Italian charity should not be subject to German tax on property situated in Germany because if the charity had been based in  Germany it would have been exempt from the tax.

However, readers should be aware that the UK government has a long history of being unwilling to provide UK tax relief on gifts/income for overseas charitable organisations that are outside the control of H M Revenue & Customs and the Charity Commission.  There has been no change to the domestic legislation following the “Stauffer” decision, and it is sadly unlikely that any changes will be made anytime soon following the “Persche” case.

In the short term, UK donors who wish to receive UK tax relief on donations to EU charities will have to challenge HMRC in order to obtain tax relief.

The “Persche” decision should in the long term be good news for the charity sector in the European Community and will hopefully in due course increase cross border giving.  It is highly likely that the UK Government will in time be pressurised by the EU to change its domestic laws.  However it may take a few more decisions in the ECJ to build up enough momentum to make this happen.

In the meantime, it is to be hoped that the UK Government does not decide to deal with the issue by restricting the tax reliefs currently available to UK charities, thereby meaning that tax reliefs to charitable organisations in the EU are also restricted.  It will be interesting for the sector to see how this develops over the coming years.

For more information, please contact:  
  

If you require any further advice or guidance please contact our Charity & Social Enterprise Department

Stephen Lloyd  
Charity & Social Enterprise Department
T: 020 7551 7777
F: 020 7551 7800

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The information contained with this e-bulletin is necessarily of a general nature. Specific advice should always be sought for specific situations.