Court of Justice 27 January 2009: from approval of cross-border giving to recognition of a non-profit sector.
A decision by the Court of Justice of the European Union served as a reminder that community law can also play a significant role in the emergence of the non-profit sector. The Persche decision provided a remarkable example in this respect by acknowledging the principle of cross-border tax deductions for gifts made by individuals to organisations established and recognised of general interest in another country of the European Union. It should first be noted that most Member States have rules about tax deductions for gifts made by their residents to organisations 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.
Involved in a preliminary issue, the CJEU noted that, when a taxpayer requests a tax deduction in a Member Country for gifts made to organisations established and recognised in the public interest in another Member State, the gifts are governed by the provisions of the treaty on the free movement of capital (Article 56 EC) even if they are made in cash in the form of everyday consumer goods. The judges therefore clearly established that Article 56 EC opposes the legislation of a Member State by virtue of which the benefit of a tax deduction is only granted for gifts made to organisations established in the country with no possibility for the taxpayer to demonstrate that a gift made to an organisation established in another Member State meets the conditions of the legislation for the granting of such a benefit. This decision sanctioned the emergence of cross-border giving.