EU ruling good news for overseas charities, says lawyer
22 Dec 08
Donations could be more tax efficient after German challenge
A recent ruling in a case before the European Court of Justice could mean that more money can be donated to charities overseas.
The ruling, in advice to the court by the Advocate General, could allow people to make charitable donations across EU borders and still receive tax relief after a German philanthropist challenged the tax relief status for those sending money to charities overseas.
The taxpayer claimed relief on a donation made to a Portuguese children’s home and after this was refused by the German Government, he took his case to the European Court. The Advocate General's opinion is not binding on the court, but it is followed in the majority of cases.
Fiona McDonald, associate at legal, financial and property specialists, Pagan Osborne, said: “Perhaps it is the Christmas spirit, but good news is coming out of the European Court of Justice. Up until now, sending money to a favoured charity overseas was not tax efficient.
“The judge ruled that the donor could reclaim the tax from the German authorities because there could be no objection to the Portuguese charity. The children’s home was comparable to other similar projects in Germany and met all legal criteria and was therefore ‘lawful’, within its nation state. Evidence was provided to show this.
“The main objection given by the German authorities was on the grounds that they could not assess its fiscal competence. However, the court ruled that it was not for the donor to provide this and therefore a bit of a red herring."
Ms McDonald however warned that allowing charitable donations to be made tax efficiently across borders could also mean more competition for Scottish and UK based charities. "When money can be sent abroad so easily, choices are widened", she pointed out.