Direct Taxation: Commission requests Belgium to end discrimination against foreign charities
European Commission - IP/06/1879 21/12/2006
Brussels, 21 December 2006
The European Commission has sent Belgium a formal request to end discrimination against foreign charities. Belgium allows tax relief for gifts to charities, on condition that they are established in Belgium. Charities in other Member States are excluded from the relief. The Commission considers that this discrimination is contrary to the free movement of capital guaranteed by Article 56 of the EC Treaty. The request is in the form of a ‘reasoned opinion’ under Article 226 of the EC Treaty. If Belgium does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.
The Belgian income tax law provides that donations to charities are tax deductible, on condition that the charities are established in Belgium. Donations are capital movements, on the basis of the nomenclature of Council Directive 88/361/EEC. The condition that the charities are established in Belgium is contrary to the free movement of capital, guaranteed by Article 56 of the EC Treaty. This was confirmed by the European Court of Justice in its ruling on Stauffer, Case C-386/04 of 14 September 2006.
In reply to the letter of formal notice that the Commission sent earlier Belgium acknowledged the infringement, but it did not indicate when and how it would eliminate it, nor how it would apply EU law in the period before the new rules would enter into force. The Commission has therefore decided to move to the second stage of the infringement procedure.
The Commission's reference number of this case is 2005/5062.