Governments across various countries let nonprofit organizations offer tax incentives as tax deductions, tax credit, etc for individuals who donate to charitable organizations. In the UK, Gift Aid allows charities to claim back the basic rate tax already paid on donations by the donor. In the US, the Charitable Contributions Deduction allows taxpayers to deduct contributions…
Governments across various countries let nonprofit organizations offer tax incentives as tax deductions, tax credit, etc for individuals who donate to charitable organizations.
In the UK, Gift Aid allows charities to claim back the basic rate tax already paid on donations by the donor. In the US, the Charitable Contributions Deduction allows taxpayers to deduct contributions of cash and property to charitable organizations, and in Ireland, the Charitable Donation Scheme allows tax relief on qualifying donations made to approved charity bodies.
In this post, we have compiled a list of tax programs for charitable donations in various countries, across the world.
We have gathered this information to provide you with an overview of tax programs in different countries using only the sources freely available on the web.
Here’s a list of countries that we will cover in this post:
In Austria, the public can deduct donations up to the value of 10% of the previous year’s taxable income, but this only applies to gifts to 5% of charitable organizations (6,500 of all 123,000 charities and foundations combined). This includes 5,200 fire brigades and charities working to support social causes, science, arts, culture, and conservation. Endowments to foundations are also tax-deductible.
This scheme was introduced in 2017 and around 18% of Austrian taxpayers donate in this way (source: Spendenbericht 2017). Charities are required by law to identify private donors by name and date of birth and to report their donation to the tax authority for the deduction.
Companies also benefit from a tax deduction of up to 10% of the last year’s taxable income on gifts to eligible charities and/or foundations.
Tax relief is payable on charitable donations and, although the specifics can vary according to the level of income tax paid, it typically equates to approximately 45% of the value of the gift. Donors provide certificates of charitable donations to the tax authority and receive a refund of tax paid. Tax relief is capped at 10% of the individual’s taxable income. Corporate donations are also tax-deductible up to 5% of the total net income of the taxable period or EUR 500,000.
The Czech tax system enables the public to donate to all charities registered for the public benefit and exempts these donations from taxable income, up to a total value of 10% of the taxable income. Charities simply provide a ‘gift confirmation’ receipt to donors on request. Currently, just over 3% of taxpayers give in this way. Companies can also exempt donations to registered charities up to the total value of 5% of their taxable income.
There are no tax incentives for individuals that donate to charity in Finland, except for those giving to select universities in the European Economic Area. In this case, tax incentives apply only on donations from individuals or companies giving between EUR 850 and EUR 500,000, who can deduct it from their income or profit respectively. Only companies are eligible to claim a tax deduction on donations beneath the threshold of EUR 850.
Individuals in France can claim an income tax reduction (tax credit) of 66% of the amount donated or a 75% reduction in wealth tax. Donations to certain causes (including charities working with people in need) can qualify for a 75% reduction. However, tax relief is capped at 20% of annual taxable income. More than four in ten (43%) of donors give tax-effectively. Charities provide a tax receipt of donations, but do not need to submit information about donations to the tax authority unless verification is sought. Companies can deduct 60% of the value of their gift from corporation tax up to a maximum of 0.5% of their annual turnover.
Individuals in Germany can deduct up to 20% of their pre-tax income as a donation to any nonprofit organization, so long as it is recognized by the tax office. There is a little administrative burden for charities, with donors requiring receipts only on donations exceeding EUR 250 and no formal interaction required between charities and the tax office. Donor surveys indicate that over a third (37%) of taxpayers donate in this way.
Both the Irish and UK tax incentive schemes gross up the value of donations, enabling charities to benefit from the tax that supporters have already paid on their gift. In Ireland, it is the charity that benefits from the taxable income that individual donors have already paid on their gift. This applies to donations from taxpayers giving between EUR 250 and EUR 1,000,000 during the year. Charities must file letters of donor consent with the tax department before they can claim the tax payment or credit. However, when it comes to corporate giving, companies claim the tax benefit for themselves.
Several tax incentive schemes exist in Italy, with different structures and benefits available depending on the cause or type of charitable organisation. This includes tax deductions on gifts to charitable organisations qualifying as ONLUS (Organizzazioni non lucrative di utilità sociale), the Art Bonus scheme, which offers the public a 65% tax credit against the cost of donations to arts or cultural institutions, a social bonus scheme for public buildings, gifts to schools (School Bonus), universities and scientific research. The limits vary according to the particular incentive scheme, but for general donations, people can give up to 10% of their taxable income. Similar incentive schemes exist for corporate giving.
Donors can deduct the value of their donations from their taxable income, so long as the charity is registered as a public benefit organisation. Income tax rates in the Netherlands range from 19%-52% and the tax benefit on donations is capped at 10% of the annual taxable income. Currently the scheme is used by about 8% of taxpayers. Charities are not required to submit information to the tax authorities about donations received. Companies are also entitled to deduct the annual value of their gifts up to a maximum of 50% of their annual profit/revenues.
Tax-effective giving in Norway has more than doubled since 2005, with almost 3.5 billion Norwegian krone (NOK) donated in this way in 2015. Individuals who donate 500-40,000 NOK to charity annually are eligible for a tax deduction against the value of those donations. A similar scheme exists for corporate giving. Charities are required to register for approval to receive such gifts and must submit details of donations to the tax authorities (with donors’ permission) in order for them to access the tax break.
Slovakia abolished its former tax deduction scheme in 2004, replacing it with a percentage allocation scheme, as is the case in some other Central and Eastern European nations. Through the current scheme, the public can allocate 2% of their income tax to a non-profit organisation (or 3% if they have volunteered over 40 hours of their time during the previous year) directly from their tax return. A similar scheme exists for corporate donors, who can allocate 1-2% of their corporate income tax to charities, and over a third (35%) of companies donate in this way. Further incentives exist for companies that donate to sports organisations.
As is the case in Slovakia, a fixed percentage allocation scheme exists in Slovenia, but at a lower level. The public can complete a tax statement, allocating 0.3% of their income tax to an NGO, political party or church, which typically equates to EUR 5-50 per person (depending on their income). Companies can also give 0.5% of their taxable income to public benefit organisations, and an additional 0.2% if the donation is for cultural organisations or disaster relief.
The Spanish public can claim a tax credit of 30% of the value of their donations. However, a tax deduction of 75% applies to the first EUR 150 donated from supporters who have given for the past three years or more. Tax relief is capped at 10% of the taxable income. A similar scheme exists for corporate donations. In order for donors to access the tax payment, charities must submit details of the donations received to the Ministry of Finance.
No general tax incentive is available for individuals or businesses that donate to charity in Sweden.
Individual donors in Switzerland are eligible for tax deductions on cash and the value of other donations given (including property, intellectual property and more), providing they have given more than 100 Swiss Francs (EUR 85) during the year. Tax relief is capped at 20% of taxable income and applies on gifts to all recognised charitable organisations. Charities simply provide donors with a statement of donations made during the previous year, which they can file with the tax authorities. It is estimated that 25% of taxpayers use the system. A similar scheme applies for corporate donations.
Similarly to the Irish scheme, Gift Aid enables charities to claim the basic rate of tax paid on the value of donations they receive from taxpayers (increasing the donation value by 25%). Donors must complete a Gift Aid declaration, permitting the charity to claim the tax credit from the state. Higher rate taxpayers are then entitled to claim back the difference between the higher and basic rate of tax. Additional tax incentives apply on donations of land, property, shares, payroll donations, cultural artefacts, legacies and workplace giving. With no minimum donation or cap for Gift Aid donations, CAF’s UK Giving 2018 report indicates that half of all UK donors currently use the scheme. Companies using the scheme gain the tax benefit for themselves, deducting charitable donations from their taxable income.
In Australia, donors can only claim a tax deduction for gifts or donations to organisations that have DGR status. A deductible gift recipient (DGR) is an organisation or fund that can receive tax deductible gifts. Not all charities are DGRs. The person that makes the gift (the donor) is the person that can claim a deduction. The amount you can claim as a deduction depends on the type of gift. For gifts of money, you can claim the amount of the gift, but it must be $2 or more. For gifts of property or shares, there are different rules depending on the type and value of the property.
In Canada, you can claim your charitable tax credit in any one year for donations made by December 31 of the applicable tax year, or for any unclaimed donations made in the previous five years, or for any unclaimed donations made by your spouse or common law partner in the year or in the previous five years. You can claim eligible amounts of gifts to a limit of 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income. There are two charitable tax credit rates for both the federal government and the provinces and territories. Any eligible amount you give above $200 qualifies you for a higher rate.
You may be able to claim a deduction on your federal taxes if you donated to a 501(c)3 organization. To deduct donations, you must file a Schedule A with your tax form. The amount of money that you can deduct on your taxes may not be equal to the total amount of your donations. If you donate non-cash items, you can claim the fair market value of the items on your taxes. If you donated a vehicle, your deduction depends on if the organization keeps the car or sells it at an auction. If you received a gift or ticket to an event, you can only deduct the amount that exceeds the value of the gift or ticket. To claim deductions, it’s important to keep records of your donations to charities.
Legal persons based in Mexico making donations to organizations with authorized donee status can deduct up to 7 percent of the taxable income paid in the prior fiscal year for corporations as well as for individuals. However, only 4 percent of the 7 percent can be granted to governmental entities.
In Brazil, the amount of tax deductions depends on the category of organization the donation is made to. For contributions made to the National Program to Support Oncology Care and National Support Program to Health Care of Persons with Disabilities, companies may deduct up to 50% of donations and individuals may deduct up to 100% of donations from their income tax. For donations to the National Fund for the Elderly and to the Fund for the Rights of Children and Youth, the sum of deductions must not exceed 1% of the income tax due.
In case of contributions to not-for-profit private legal entities with projects approved by councils of public policies for children and youth, and for contributions to sports projects, corporates can avail full deduction of the donation up to a limit of 1% of the income tax due and individuals can get the full deduction of the donation up to a limit of 6% of the income tax due. For contributions to cultural projects, a company may deduct 40% of the value of its donation and an individual may deduct 80% of the value of the donation from taxable income. In the case of contributions to not-for-profit private legal entities with OSCIP, only corporations may claim tax benefits.
Disclaimer: We are not legal advisors, tax advisors or official representatives for any specific country or the government. We have gathered the best information available on the web to help our readers find information about various national nonprofit tax programs.
If you need more information on starting a nonprofit, raising funds effectively, and managing your nonprofit, you should visit our nonprofit blog. We also have dedicated articles for starting a nonprofit in different states in the US, including Texas, Minnesota, Oregon, Arizona, Illinois, and more. This should come in handy to gain insights into the specific processes.
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Jesse is an Account Executive at Donorbox.
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