Court of Justice 27 January 2009: from approval of cross-border giving to recognition of a non-profit sector
A decision by the European Court of Justice is a reminder that EU law can also play a substantial role in the emergence of the non-market sector. In this respect, the Persche judgment provides us with a remarkable example by recognising the principle of cross-border tax deductibility of donations made by individuals to a body in another EU Member State recognised as charitable. It should first be noted that most Member States have rules about tax deductions for gifts made by their residents to charitable bodies within their borders. While some national foundations such as the Fondation de France were already trying to implement the principle of cross-border tax deductions for gifts made to organisations in the public interest, it took the Persche decision for the Court of Justice to adopt the principle.
In a preliminary ruling, the ECJ noted that when a taxpayer claims tax deductions in one Member State for donations to bodies established and recognised as charitable in another Member State, these donations are subject to the provisions of the treaty regarding the free movement of capital (Article 56 EC), even if they are made in kind, in the form of everyday consumer goods. The judges therefore clearly established that Article 56 EC is opposed to Member State legislation whereby the benefit of tax deduction is granted only in respect of donations made to bodies established within that Member State, with no opportunity for the taxpayer to demonstrate that a donation to a body established in another Member State meets the conditions set out by said legislation for such benefit to be granted. This decision planted the seeds of cross-border sponsorship.