The article discusses the challenges and considerations for tax incentives of cross-border charitable giving, as well as barriers which might appear on the way of donors and donees. As per author "this article serves as a catalyst, setting the stage for subsequent articles that will propose innovative and forward-thinking legal solutions to overcome these barriers"
*Introduction by ArtLaw.club
Evelyse Carvalho Ribas**
CROSS-BORDER CHARITABLE GIVING
Challenges and Considerations for Tax Incentives
Each country has its own set of detailed rules regarding the eligibility criteria for charitable giving. Generally, these criteria depend on factors such as the donor, donee, nature of the donation, and where the gift occurs. The determination of these factors has implications on the tax incentives that are used to support charitable giving.
Depending on the rules to support donors (and indirectly the donees), the donor's location and the donee's legal form, status, and purposes all become relevant for tax matters. In situations where charitable donations and purposes are carried on internationally, tax-deductibility schemes require both the beneficiary (donor) and the benefactor (donee) to comply with the home-country and the host-country sets of national laws. However, the laws may differ.
Tax barriers in charitable giving arise when narrow eligibility criteria or a lack of shared understanding of concepts, meanings, and beneficiary determination prevent donors/donees from accessing tax incentives. Additionally, a lack of legal certainty on requirements, and inconsistencies or incoherence in rules create difficulties for those seeking to participate in charitable giving across borders. These factors result in tax barriers that may deter applicants from taking full advantage of the opportunities that tax incentives with international scope offer to them.
The following illustration may help visualise the obstacles that applicants and recipients can face. Presume an investor resident in country-I (home-country) who allocates part of his assets globally. He resolves to donate a collection of sculptures and a heritage building to a museum carrying charitable purposes in various jurisdictions, including in country-D. The donor decides to apply for the country-D (host-country) tax incentive. Under this host-country scheme, if the application has been successful, a certificate is issued by the Minister approving the donation and specifying the value of the object donated – donors will receive a tax credit or tax deduction on expenses based on a proportion of that certified value.
However, this host-country tax incentive is conditioned upon diverse requirements, as follows: tax residence of donors; the donation of ‘cultural goods’; the recipient must be a charity with purposes of public benefit; and the recipient must be a public non-profit organization, specifically, an ‘art foundation’.
In this hypothetical case, it is possible to visualise how governments link diverse requirements with tax incentives for charitable giving and how those conditions raise potential obstacles. Without meeting the requirements, donors cannot gift, and donees cannot receive the donation through a tax incentive. However, it is often challenging for the beneficiaries and the benefactors to meet the eligibility criteria in both countries. Requirements conditioned upon the tax residence of the donor limit the eligibility criteria. Depending on governments' conditions, it may prevent donors from qualifying as such under a foreign jurisdiction. Besides, the Minister from host-country in control of approving the donation may have a diverse understanding of the concepts of the terms ‘cultural goods’, ‘charity’, and ‘public benefit’. Or still, the nature of the recipient as an ‘art foundation’ cannot be compatible with the home country's legal form.
This article is dedicated to the identification of tax barriers to charitable giving that exist within tax incentives, specifically those that arise from requirements based on the donor's location and personal and geographical elements of the donee.
To accomplish this objective, the article delves into the practical realm of national tax incentives, accompanied by a series of thought-provoking examples designed to illuminate the hurdles faced by applicants when seeking tax incentives on an international scale. The first section, delves into the conditions upon the donor which includes the physical presence and personal circumstances of individual donors, as well as the legal and economic conditions of corporate donors. While the second section, review conditions upon the donee which consists of the donee’s status and legal form, charitable purposes (public benefit, direct or ancillary, profit and non-profit), and purposes and donations carried out internationally.
Identifying the application of eligibility criteria and their interpretation is interesting because it reflects conceptual differences in the notion of who the donor and donee are, and what constitutes a charity and public benefit. These differences are even more intriguing when charitable giving involves an international element, as national provisions may or may not provide similar criteria to define the beneficiaries, benefactors, and linked purposes.
In essence, this article serves as a catalyst, setting the stage for subsequent articles that will propose innovative and forward-thinking legal solutions to overcome these barriers. By identifying and understanding tax barriers that donors and donees encounter, these categories can make informed decisions and fully capitalize on the opportunities presented by tax incentives with a global scope.
II. THE LOCATION OF THE DONOR CRITERION
Charitable giving tax incentives benefit the donors, who can receive tax credits or deductions when they donate to eligible organizations. To qualify for these incentives, donors must first apply as qualified beneficiaries. Once approved, these beneficiaries can get receipts from their deductible gift recipient (DGR) under a tax credit/deductible scheme. Eligibility as a qualified beneficiary typically requires having a business number in the country where the tax incentive applies, being located in that country, and having tax liability to that country. For individual donors, having a personal income or capital gains tax liability is usually a prerequisite. For corporate donors, having tax liability as a corporation is required. If these criteria are met, eligible beneficiaries can receive a tax credit or deduction, depending on the applicable rules and the type of donor (e.g. an individual or a legal entity).
Tax liability presupposes tax residence, which means that if a donor fails to pass the tax residence test, they cannot make a charitable gift that qualifies for a tax incentive. This raises the question of what factors governments use to determine a donor’s geographical location. For individual donors, what are the most common techniques for determining fiscal residence? And for corporate donors, what are the typical strategies used to establish their fiscal residence? Are multiple approaches used, and if so, do they differ under national and international law? This section addresses these critical elements that are used at the national level to assess a qualified beneficiary of the tax incentive. For individual donors, physical presence and tests of personal economic and social circumstances are typically used, while for corporate donors, legal and financial criteria are common.
This overview of tax incentives for charitable giving provides insight into how countries link the benefit to the fiscal residence condition of both individual and corporate donors.
2.1 Individual donors – physical presence and personal circumstances
Individuals can donate to the deductible gift recipients (DGRs) during their lifetime or through testamentary giving upon death to receive refundable or non-refundable tax credits. However, to take advantage of these tax incentives, individuals must have a tax liability to the country-provider, such as personal income tax or capital gains tax, depending on the rules governing their donations in-cash or in-kind to a DGR. Hence, determining the fiscal residence of individual donors is crucial.
Most countries use a combination of approaches to determine an individual’s fiscal residence. The two common methods are the physical presence test and the personal economic and social circumstances test. The physical presence test involves measuring the number of days an individual spends in a particular country, which varies from 183 days in a tax year to a calendar year or any consecutive 12 months. However, using the time-based alone can often lead to unsatisfactory results due to difference in time-based rules.
Therefore, it is often used in conjunction with the personal economic and social circumstances test. Germany and the Netherlands are examples of countries that base their decisions on an individual’s specific facts and circumstances. This technique is not codified in civil code or income tax regulations, and decisions are often based on precedents or tax authority interpretations. Factors that may be considered include medical insurance arrangements, possession of a driver’s license, employment, and school attendance. This approach provides some flexibility in determining fiscal residence, but it also allows for a certain margin of discretion in decision-making.
In short, the most commonly used techniques to determine the fiscal residence of individual donors are the time-based rules and the personal economic and social circumstances. However, these rules vary across jurisdictions, and there is a potential for bias in decisions on personal circumstances. Moreover, legal discrepancies and a lack of shared understanding in determining beneficiaries between the host-country and the donor’s home-country can create tax barriers.
2.2 Corporate donors – legal and economic conditions
Corporate donors can benefit from tax incentives through tax deductions (on costs, expenses, and losses that reduce the taxable profit) and tax credits linked to corporate income tax. However, these benefits may be limited to a specific percentage or share of total revenue, taxable income, turnover and wages, corporate income tax liability, or the value of the gift itself. These limitations are referred to as tax relief ceilings, and corporations can use a combination of these to claim the maximum possible tax benefit. Once the tax liability has been calculated, corporations can use tax credits to reduce their income tax liability by deducting a share of the donation's value. It is crucial to determine the fiscal residence of corporate donors to take advantage of these tax incentives fully.
When it comes to determining the fiscal residence of corporate donors, countries like the USA and Russia rely solely on the legal concept. In the USA, companies incorporated under the laws of the federal states are treated as fiscal residents, while all other corporations are considered non-residents, even if they have commercial and economic activities within the USA. Similarly, Russia also relies purely on the legal concept of fiscal residence. However, the most common approach in many countries is to use a combination of legal and economic criteria. Countries such as Australia, England and Wales, Netherlands, and New Zealand use the test of incorporation and consider the economic approach as well. But, different countries interpret the economic approach differently. Some take it to mean the legal head office, some the policy-making, others the operational management, and some rely on where the board meetings are held.
Australia: charitable giving tax incentives are regulated under diverse rules and guidelines. According to the Charities Act 2013, donors can be individuals (with a liability to the Australia personal income tax or capital gains tax); or corporates (with a liability to the Australia corporation tax). Donors must first apply for endorsement as qualified beneficiaries. The requirements as a qualified beneficiary include: having an Australian business number; being in Australia; and when the donation is in-kind, the beneficiary must be legally entitled to the object. To determine the tax residence of corporates, Australia uses a combination of legal and economic approaches. Under Australian rules, a company is a resident in Australia if the central management and control test concept relates to high-level decision-making and not day-to-day management and will not necessarily be where legal power or authority is located. Australia recognises that no single factor alone will determine where a company’s central management and control is exercised.
England and Wales: apply various tax incentives for charitable giving. The Finance Act 2012, is a scheme for gifting pre-eminent objects in exchange for tax reductions based on a proportion of the value of the donated object. Objects may only be transferred to eligible institutions. The incentive is a reduction in income tax or capital gain tax for individuals and corporation tax for companies. Another permanent measure is the Museums and Galleries Exhibition Tax Relief (MGETR). Under the MGETR, the qualifying companies must put on a qualifying exhibition: a curated public display of an organised collection of objects or works which are considered to be of scientific, historical, artistic or cultural interest. To determine the tax residence of corporates, England and Wales use a combination of legal and economic approaches. Under the British rules, an entity will be tax resident in England and Wales where it is incorporated or managed and controlled in England and Wales.
Netherlands: the ‘effective management’ differs slightly from England and Wales's idea of strategic management. The Inheritance and Gifts – Tax Act 2012 provides that the beneficiaries are the donors and heirs, and the benefactors (donees) are individuals, companies, deceased, and cultural institutions. According to the Dutch legal framework, donors can be individuals (with a liability to Netherlands personal income tax or capital gains tax); or corporates (with a liability to Netherlands corporation tax). The requirements as a qualified beneficiary include: having a Netherlands business number; being in the Netherlands; and when the donation is in-kind, the beneficiary must be legally entitled to the object. Article 4 of the Dutch General Tax Act (AWR) deals with the tax residence of individuals and corporates. Under Article 4 of the AWR, the tax residency of individuals or entities is based on facts and circumstances. An entity is a tax resident in the Netherlands if its place of effective management is in the Netherlands. The main facts and circumstances that determine whether the place of effective management is in the Netherlands are where: the critical business decisions are made; the directors work and meet; the business records are kept and the financial statements are prepared; the shareholders live and meet; the entity is registered; the place of incorporation or organization.
New Zealand: also applies various tax incentives for charitable giving. The Charities Act 2005 encourages individual and corporate giving to charities or other organisations with donee status (DGR). Individual philanthropic donations are eligible for tax credits, while corporate gifts are eligible for tax deductions. The corporate donors can deduct the total amount of donations from their yearly taxable income as long as it is not more than the company’s net income. Under the Subpart LD2 of the Income Tax Act 2007, the requirements as a qualified beneficiary include: having a New Zealand business number; being in New Zealand; and when the donation is in-kind, the beneficiary must be legally entitled to the object. To determine the tax residence of corporates, New Zealand uses a combination of legal and economic approaches. According to the Income Tax Act 2007, Subpart YD2, a company will be a New Zealand resident for tax purposes if any of the following apply: the company is incorporated in New Zealand; the company has its head office in New Zealand; the company has its centre of management in New Zealand; the company’s directors, in their capacity as directors, exercise control of the company in New Zealand, even if the directors’ decision-making also occurs outside New Zealand. Despite subsection (1), for the international tax rules, a company is treated as a remaining resident in New Zealand if it becomes a foreign company. Still, it is resident in New Zealand again within 183 days afterwards.
In short, the most common techniques for corporate donors to determine their fiscal residence are the legal incorporation and the central management and control. Some countries rely exclusively on the legal concept of tax residence, while most countries use a combination of legal and economic criteria. Especially the economic criteria reveal that no single factor alone determines where a company's central management and control is exercised. However, these rules vary across jurisdictions, and there is a potential for bias in decisions on economic circumstances. Legal discrepancies and a lack of shared understanding in determining fiscal residence can create tax barriers.
III. THE DONEE PERSONAL AND GEOGRAPHICAL CRITERIA
Tax barriers to charitable giving can also arise from requirements based on personal and geographical elements related to the donees. In order to benefit from charitable giving tax incentives, donees must first apply for endorsement as a deductible gift recipient (DGR). Once approved, they can issue receipts to their donors for tax credits or tax deductibility of donations. These receipts are then used for refundable or non-refundable tax credits for personal income or taken as deductions in the case of corporations. To register for approval to receive such gifts, an applicant must first meet its home-country legislative requirements.
However, the criteria for receiving DGR status differ among countries, and a foreign donee may not be able to register as such in the country-provider of the tax incentive. In that case, the donors in that jurisdiction cannot use the applicable tax incentive to donate to that donee. This raises questions such as: what is the definition of a deductible gift recipient, and what are the descriptions of the purposes? Are these descriptions consistent across different countries? Who decides whether the purposes are charitable? What is the public benefit-condition? Are the purposes and donations carried out internationally disqualifying for the gift recipient?
To answer these questions involves assessing personal and geographical elements related to the donee. However, it can be problematic when the criteria used to determine the donee differ between jurisdictions. Divergences in rules and examiners' decisions may result in a qualified DGR in one country that does not meet the conditions to become an eligible recipient in a host-country, creating tax barriers to charitable giving.
3.1 What a deductible gift recipient is
Based on the aforementioned considerations, this section explores diverse criteria to determine the status of a deductible gift recipient (DGR), including their legal form, charitable purposes, public benefit, direct or ancillary, profit and non-profit purposes. While all these conditions are interrelated, the distinction between them can become problematic when the country-provider of a tax incentive targets donees with specific characteristics that do not align with a host-country's conditions. Tax barriers arise when eligibility criteria are too narrow or when legal inconsistency or incoherencies in determining a DGR exist between the host-country and the home-country. The following national provisions give a flavour of how problematic it may be to identify a DGR.
3.1.1 Status and legal form of a DGR
Australia: a DGR notably meets a charity status. The legal form of a DGR may include incorporated associations, charitable trusts, funds, and companies limited by guarantee (Corporation Act 2001, n 50). To meet a ‘deductible gift recipient’ status, the entity must be endorsed under Sub-Division 30-BA of the ITAA 1997. This Sub-Division sets out the rules about supporting entities as deductible gift recipients. Under the Section 30-15 of the ITAA 1997, the benefactors of the tax incentive may be one of the following institutions located in Australia: Private Ancillary Funds (Private AFs); a public library; a public museum; a public art gallery; the Commonwealth (for Artbank); one of the National Trust of Australia. The Division 30 of the ITAA 1997 deals with the deductibility of gifts or contributions.
Belgium: a DGR includes meeting a non-profit organization (NPO) status. To be an NPO in Belgium, the organization must satisfy the definition of an NPO in the Code of Companies and Associations (BCCA). Under the BCCA, an NPO is an institution established for non-profit purposes only. Belgium charities are understood to be associations and foundations (BCCA). It includes four legal forms of NPOs: non-profit association, international non-profit association, private foundation and foundation of public interest. Under the BCCA, a non-profit association is an association that pursues a disinterested purpose by exercising one or more activities that constitute its object (Article 1(2) of the BCCA). An international non-profit association is essentially the same as a non-profit association. A non-profit association is international if it is meant to further the realisation of a disinterested purpose of international relevance (Article 10(1) of the BCCA). Under the Belgium provision, a private foundation is a legal entity created by allocating one or several founders of personal or tangible assets to implement a selfless aim. It must not provide tangible benefits to the founder(s), the directors, or other third persons, except when the distribution of funds to third persons is precisely the foundation's purpose. The BCCA states that a private foundation can conduct commercial operations without distinction between principal and ancillary activities. In a similar fashion to the non-profit association, the profits generated by the activities of a private foundation must be allocated to the implementation of the foundation's aim and not distributed to the founders or directors. Finally, the rules relating to private foundations also apply to foundations of public interest – the forth eligible legal form. A foundation of public interest must necessarily be intended to implement a purpose of a philanthropic, philosophical, religious, scientific, artistic, educational or cultural character (Article 11(1) of the BCCA).
Canada: a DGR must meet a charity status. Under Canadian rules, there are three types of charities: private foundations (corporations or trustees), public foundations, and charitable organizations (incorporated or unincorporated) (Sections 149(1)-(2) of the Income Tax Act). Appendix A of the Guidelines for Registering a Charity: Meeting the Public Benefit Test (CPS-024 – The Guidelines) claims to be necessary to look to common law (case law or court decisions) to determine the charity’s meaning.
England and Wales: a DGR includes notably meeting a charity status. To be a charity in England and Wales, the organization must satisfy the definition of a charity in the Charities Act 2011. It includes diverse legal forms such as charity trustees, charity companies, incorporated and unincorporated organisations, and special trustees (Parts 9-14 of the Charities Act 2011).
Germany: a DGR notably meets a charity status. In Germany, charity as a legal term is only relevant in tax law. It means there is no specific body of law for charities. To be a charity in Germany, the organization must satisfy the definition of a charity in the Fiscal Code. Charities gain legal recognition as tax-exempt entities from recognising the charitable nature of their objectives, as stated in their statutes. There are no specific rules for the various charitable legal forms relating to foundations, associations and corporations. Since there is no uniform tax law for charities, the recognition that an organisation is pursuing charitable purposes is reflected in individual tax laws, for example, the Corporate Income Tax Act and the Inheritance and Gift Tax Act.
Netherlands: a DGR includes meeting a charity status. To be a charity, the DGR must have charitable purposes. Dutch charities are understood to be associations and foundations. For a foundation or an association to be recognised as a charity, an application for the following status must be made with the Dutch Tax Authorities: Public Benefit Organisation (PBO), Organisation Representing Social Interests (ORSI), or Foundation Supporting an ORSI (State Taxes Act). The following requirements must be met to obtain the PBO status: the organisation is not a company with capital divided into shares, a co-operative, a mutual insurance society or another body that can issue participation certificates. To obtain the ORSI status, the charitable organisation must pursue social interests reflected in its articles of association or the organisation's regulations; its activities should reflect the organisation's objective; the charitable organisation will use donations or inheritances for its objective. While to obtain the Foundation Supporting an ORSI status, the following requirements must be met: the ORSI, supported by a Foundation Supporting an ORSI (Foundation), must be active in the field of sports or music; the Foundation must be established for a one-off expenditure or investment for a special anniversary held every five years of the supported ORSI; and others. Then, in the Dutch context, some charities have the legal form of an association, a public body (e.g. museum), or even a company (e.g. theatres). Dutch ‘foundation’ is not equal to ‘charity’ as not all foundations are charitable, and not all charities have the legal form of a foundation.
New Zealand: a DGR include meets a charity status. To be a charity in New Zealand, the organization must satisfy the definition of a charity in the Charities Act 2005. New Zealand charities are understood to be trusts, societies, and institutions (Section 13(1) of the Charities Act 2005). The requirements for the trustees and societies or institutions to qualify for registration as a charitable entity differ. For trusts, an amount of income must be derived by the trustees in trust for charitable purposes. For societies or institutions: the community or institution must be established and maintained exclusively for charitable purposes; it must not carry on for the private pecuniary profit of any individual; the entity must be incorporated under Section 15 of the Charities Act 2005; all of the officers of the entity must be qualified to be officers of a charitable entity (under Section 16 of the Charities Act 2005).
In short, the status and legal form are requirements to be met to qualify for registration as a DGR. However, these conditions differ between jurisdictions, and the identification can be problematic. Although the most common status for a DGR includes meets a charity status, some countries choose the non-profit organization (NPO) status (e.g. Belgium). Even more significant is the variation conditioned upon the legal form criterion. It ranges from private to public entities – including corporations, funds, trusts, associations, foundations, institutions, and organizations. Divergences in the status and legal form criteria may result in a qualified DGR in one country that does not meet the conditions to become an eligible recipient in a host-country. Narrow eligibility criteria and a lack of legal consistency and coherence in determining a DGR can create tax barriers.
3.1.2 Charitable purposes of a DGR
The previous section evidenced that meeting a charitable purpose is the most common status for a DGR. Therefore, it is necessary to determine what constitutes a charitable purpose. Typically, governments provide a list of broad categories that a purpose must fall under to be considered charitable. In this research, descriptions related to culture and arts are relevant. National provisions include purposes such as advancing culture (Australia and the Netherlands); having an artistic, educational or cultural character (Belgium); promoting arts, culture, heritage or science (England and Wales); supporting art and culture, as well as protecting and preserving historical monuments, local heritage and traditions, active citizenship in support of public-benefit and charitable causes (Germany). These lists cover everything recognised as charities in each country, and each description serves as a general heading under which various charitable purposes fall. However, there are problems with these lists of purposes. The lists do not provide definitions for each purpose description, and when definitions are provides in guidelines or rulings, they may not be consistent or coherent with definitions applied by other countries.
Discrepancies between national rules on whether market activities are included or excluded as ancillary or non-profit charitable purposes are even more evident. In community economic development matters, identifying ancillary or non-profit charitable purposes is not always straightforward. The presence of such activities may or may not prevent an institution from qualifying for registration as a DGR. For instance, museums and arts organizations may charge entrance fees that are compatible with the public benefit principle. Examiners may consider various factors when determining whether such fees are compatible or not with the public benefit principle. In some cases, the presence of industry and commerce purposes is largely acceptable. In this context, it is essential to ask how governments link charitable purposes with the presence of those ‘non-charitable-purposes’. Does the presence of an incidental or ancillary purpose prevent an institution from qualifying as a DGR? Can the conduct of commercial or industrial activities disqualify an institution from registration as a DGR? The following provisions touch on the ancillary and non-profit conditions.
Australia: to be recognised as a charity, an organisation must be not-for-profit; have only charitable purposes that are for the public benefit; purposes that are incidental or ancillary; not have a disqualifying purpose; and not be an individual, a political party or a government entity (Charities Act 2013 – Part 2, Division 1). Australia specifically includes ancillary funds to provide money, property or benefits to a fund, authority or institution gifts which are deductible. Charities Act 2013 clarifies that an organisation must have charitable purposes. It can have other purposes, but these must only be incidental or ancillary purposes that further or assist the charitable purpose, such as the private ancillary fund. Division 2(9-2) of the Private AFs states that a private ancillary fund must be established and maintained solely as described in item 2 of the table in Section 30‑15 of the ITAA 1997. This section brings a table of deductible gifts. It claims that the ancillary funds which have the following purposes are eligible for approval: the purpose of providing money, property or benefits to a fund, authority or institution gifts to which are deductible under item 1 of this table; and for any purposes set out in the item of the table in Sub-Division 30-B that covers the fund, authority or institution; or the establishment of such a fund, authority or institution. Under the Private AFs, the fund must have the following characteristics to be endorsed: be a fund; established and maintained under a will or an instrument of trust; established and operated on a not-for-profit basis; allowed, by the terms of the will or instrument of trust, to invest money in ways that Australian law allows trustees to invest trust money; established and maintained solely to provide money, property or benefits to DGRs (except other private AFs or public AFs) or the establishment of such DGRs; each of its trustees is a constitutional corporation (a corporation to which paragraph 51(xx) of the Australian Constitution applies); each trustee has agreed, in the approved form, to comply with the rules in the Private Ancillary Fund Guidelines 2019 and none of the trustees has revoked that agreement. Again, the Private AFs says that a fund is an institution established and operates for non-profit purposes only. Trust deeds and wills are instruments of trust. The fund must be a constitutional corporation. Less frequently, it may be incorporated under associations’ incorporation legislation in a state or territory and have an association or incorporation number.
Belgium: the Belgium Code of Corporations and Associations (BCCA) claims that although the non-profit association must refrain from distributing profits to its members, it has the freedom to conduct commercial or industrial operations, whether they are ancillary or not. Under the BCCA, a private foundation can conduct commercial operations without distinction between principal and ancillary activities. In a similar fashion to the non-profit association, the profits generated by the activities of a private foundation must be allocated to the implementation of the foundation's aim and not distributed to the founders or directors.
Canada: to be a charity, the DGR must meet two fundamental requirements: have charitable purposes only and be established for the benefit of the public or a sufficient segment of the public. It cannot have some charitable purposes and some that are not. The Guidelines list factors that would likely prevent an organization from being registered; one is whether the organization is established to make a profit. However, the profit purpose is not decisive as The Guidelines use the term ‘likely’ prevent to. Indeed, the examiners can consider various factors when determining whether the profit or an incidental purpose, such as charging fees, is incompatible with public benefit. It may include: the effect of the charge would be to exclude members of the public, in which case, the organization would ordinarily not be considered charitable; charges should be reasonable in the circumstances and should typically aim at cost recovery; exceptionally, charges may, if appropriate to the overall purposes of the charity, be set at a rate that generates a surplus to help fund the organization's charitable programs and activities for the benefit of the public; any charge should not be set at a level that deters or excludes a substantial proportion of those served by the charity; the service provided should not in practice cater only to those who are financially well-off; it should be clear that there is a sufficient general benefit to the community, directly or indirectly, from the existence of the service.
Netherlands: the legal entities may or may not be established exclusively for charitable purposes. It means they also may pursue private or commercial purposes. Under the Dutch Civil Code, a foundation is defined as a legal person created by a legal act with no members whose purpose is to realise an objective stated in its articles using capital allocated to such purpose. There are no different types of foundations in the Netherlands. A foundation does not necessarily have a public-benefit purpose; it means it can pursue almost any purpose, including private or commercial.
In short, to qualify for registration as a DGR, the charitable purpose condition must be met. However, this condition differs between jurisdictions, making identification problematic. The language used to describe the classes is unclear, and the rules do not precisely define each purpose. Additionally, there is a significant variation conditioned upon whether charitable purposes might include or exclude market activities. The presence of ancillary or profit purposes has a different application to the various categories of charities. Some countries require that a charity be established for non-profit purposes only, while others allow commercial and industrial operations, whether ancillary or not to qualify. The lack of consistency in determining whether ancillary or profit purposes are compatible with the charitable purpose creates incoherencies between examiners and national tax rules, creating tax barriers to the global allocation of arts-related. Obviously, donors can consult country tax authorities to check which donees can receive gifts that qualify for a tax deduction. However, depending on the requirements of the home-country and host-country, foreign donees may not qualify under a foreign jurisdiction. The narrow eligibility criteria and a lack of legal consistency in determining charitable purpose can create tax barriers for donors seeking to make charitable contributions and for donees to receive such gifts. This is particularly true when there are incoherencies between the laws and requirements of different countries, making it difficult for donors to identify eligible recipients and maximize the impact of their gifts.
3.1.3 Public-benefit-condition of a DGR
The public-benefit condition is another tax barrier to charitable giving. This condition is problematic because it reflects conceptual differences in what is meant by ‘public benefit’ and how such public benefit must be identified. Examiners may use subjective elements to analyse whether the applicant meets the public-benefit condition. Some determine whether constitutes the public benefit aspect by analogy, while others analyse each aspect (‘benefit’ and ‘public’) separately and interrelated. Still, others consider the presence of a particular interest to the country. This creates discrepancies between examiners and national tax rules regarding the definition of the concept ‘public benefit’. The following provisions evidence a myriad of concepts and the diverse ways to meet the requirements.
Australia: the benefit of a charitable purpose does not have to be for everyone in a community to satisfy the public element – it can be for a section of the community, as long as that section is appreciable. The examiners may evaluate whether a particular public group comprises a sufficient segment of the public by considering the charitable purpose and an estimated number of those benefiting. This numerical criterion may be objective. But, the rule claims that the notion of what is for the public benefit is constantly evolving; it is not limited to a closed or historical list. As needs are satisfied, new needs arise. Also, community views change, and what constitutes a purpose for the public benefit can also vary.
Canada: a purpose must be directed to the public benefit to be a charitable purpose. To satisfy the public character, examiners verify who constitutes the public. This requirement attaches to all categories of charity. The Guidelines express that there are two public benefit aspects: the ‘benefit aspect’ and the ‘public aspect’. To satisfy the ‘benefit aspect,’ the purpose must achieve a universal good that is not harmful to the public and must meet three basic requirements: a tangible benefit be conferred, directly or indirectly and a socially valuable endeavour. These are the three basic requirements to test the benefit aspect. Under Canada's provisions, a charitable purpose must be directed to the public or a sufficient section of the public to satisfy the ‘public aspect'. Conversely, one could say that a purpose will not be charitable if it confers private benefits. According to The Guidelines, a private benefit occurs when one of the reasons for the organization's existence is to confer personal benefits to a limited group of persons based on criteria that are not relevant to the charitable purpose at hand. But The Guidelines does not exclude private benefit as it stresses that by assessing the balance between private benefit versus public benefit, the examiners might accept indirect benefits favouring private individuals as charitable.
England and Wales: have a similar view of the Australian rules. The public benefit requirement is expressed in the Charities Act 2011. To be a charitable purpose, a purpose must be for the public benefit. There are two public benefit aspects: the ‘benefit aspect’ and the ‘public aspect’. To satisfy the ‘benefit aspect,’ the purpose must be beneficial, and any detriment or harm that results from the purpose must not outweigh the benefit. While to meet the ‘public aspect’, the purpose must benefit the public in general or a sufficient section of the public and not give rise to more than incidental personal benefit.
Germany: a corporation shall serve public-benefit purposes if its activity is dedicated to the philanthropic advancement of the general public in material, spiritual or moral respects.
Netherlands: the public benefit requirement is the requirement in the Civil Code that a purpose must be for the public benefit (general good) to be a charitable purpose.
New Zealand: the public benefit requirement is the requirement in the Charities Act 2005. To be a charitable purpose, a purpose must be for the public benefit. The New Zealand Charities Services assesses applications on a case-by-case basis in light of those previous court rulings about charitable public benefit. The Charities Services clarifies that the general principles apply to all organisations: the benefit must be very similar but does not need to be identical to another charitable purpose; the benefit must be for the public or a sufficient section of the public; the benefit must be capable of being identified and defined; illegal purposes or purposes that result in harm to the community do not benefit the public; the benefit cannot be for the private profit of individuals.
In short, the requirement for ‘public benefit’ in the definition of charitable is widely recognized across countries. However, the public-benefit condition is applied differently depending on the category of charities, and there is a lack of clarity in the criteria to determine whether a recipient meets this condition. This results in inconsistencies between examiners and national tax rules, with a risk of bias in decision-making due to the lack of transparency and excessive margin of discretion. Therefore, a clear definition of ‘public benefit’ is necessary for tax incentive purposes, and a single international standard definition would be preferred to avoid inconsistencies, incoherencies, and subjective criteria.
3.1.4 Purposes and donations carried out internationally
Charitable institutions have the ability to open and establish branches in various countries. The foreign entity remains governed by its home-country laws and must comply with regulations in the jurisdiction where they operate (host-country). Although it can be assumed that most charitable activities in the home-country would also be charitable abroad, some charitable activities in the home-country may not be charitable when carried out in a different country. This raises the question of whether a donation or a purpose carried out internationally may prevent charitable giving from qualifying for tax incentives, or if there is consistency in the internal laws of jurisdictions that apply tax incentives to charitable giving with an international scope. The following provisions provide insight into how governments assess the purposes and donations carried out internationally in charitable giving schemes.
Australian: Charities Act 2013 claims that charitable purposes may be carried out within frontiers or internationally. While the Australian Private AFs state that the fund must have an Australian business number and be in Australia. Similarly, the Australian Guideline 2019 claims that a private ancillary fund must be established and operated only in Australia. So, under the Private AFs and the Guideline 2019, a charity not incorporated in Australia and carrying out charitable purposes internationally would not be a DGR while it would be under the Charities Act 2013.
New Zealand: to be registered in New Zealand, charities do not have to be incorporated in New Zealand. However, if an overseas organisation is an incorporated body, it must be incorporated under the Companies Act 1993 to be considered 'established in New Zealand'. According to the Charities Services, New Zealand entities will not fail the charitable purpose test simply because they have an overseas purpose or their public benefit is directed overseas. However, under the Income Tax Act 2007, a charity with mainly overseas purposes may not qualify for donee status. Yet, to be eligible for registration under the Charities Act 2005, overseas charities must either be established in New Zealand or have a ‘very strong connection’ to New Zealand so that the Charities Services can monitor the charity and carry out ‘our compliance functions’. In reviewing the connection an overseas charity has with New Zealand, the Charities Services will consider matters including: whether it has a centre of administration in New Zealand; how many of its officers are resident in New Zealand; how much of its property is held in New Zealand; and if it has any other substantial connection with New Zealand. According to the Charities Act 2005, the funds can be used for overseas charitable purposes if the funds' rules permit funds to be spent overseas.
Canada: the Income Tax Act allows a registered charity to operate, both inside and outside Canada, in only two ways: carrying on its charitable activities through its staff or an intermediary; or making gifts to qualified donees (it means a qualified donee in the home-country and in a host-country). The Canadian legal framework on charitable giving applicable to international activities includes extensive guidelines. It covers four aspects, as follows: (i) the commuter’s charitable donations between Canada and USA – where a gift made by an individual resident in Canada near the boundary between Canada and the United States, to a charitable organization created or organized in or under the laws of the United States that would be allowed as a deduction under the United States Internal Revenue Code shall be deemed to have been made to a registered charity; (ii) the Canadian registered charities carrying on their charitable purposes through activities outside Canada (CG-002 – The Guidance), usually by an intermediary, which must make sure their resources are devoted to charitable activities and that they meet the requirements of the Income Tax Act. Under the Act, to meet the own activities requirement, when a charity transfers resources to its intermediary (separate legal personality), it must direct and control the use of those resources. This means the charity must make decisions and set parameters on significant issues related to the activity, on an ongoing basis, such as: who will benefit from the activity and what goods and services the charity's money will buy; (iii) a Canadian registered charity acquiring and transferring a real property such as heritage buildings to a non-qualified donee in a foreign country (CG-002 – The Guidance - appendix B). According to The Guidance, a transfer of real property to a non-qualified donee might be acceptable in three situations: the country where the charity is operating does not permit foreign ownership of the real property; the real property is transferred only as part of a development project to relieve poverty by helping a community become self-sufficient; the charity can show that it made every reasonable effort to gift the real property to another qualified donee and that it also made every reasonable effort to sell the real property for its fair market value, but was not successful. In any of the three situations above, the charity should get documentation from the non-qualified donee stating that the real property will be used only for charitable purposes. The documentation should also provide reasonable assurances that the property will benefit the whole community; (iv) a charity affiliated with a non-qualified donee (CG-002 – The Guidance - appendix C). In this case, a charity is a Canadian representative or affiliate of another organization that is non-qualified donee under Canadian law (often located outside Canada). These non-qualified donees sometimes require payments from their Canadian charity affiliates in royalties, memberships, or similar transfers. The requirements for directing and controlling resources still apply to the charity in these circumstances. The charities must ensure they receive goods and services equivalent to the amount they send to the affiliate. Otherwise, any amounts the charity sends will be considered a gift to a non-qualified donee, which is not allowed under the Income Tax Act.
England and Wales: there is a specific tax incentive scheme for cultural gifts known as the Cultural Gifts Scheme, which is only applicable to the ‘devolved nations’. When an object is recommended for acceptance under this scheme, a Panel determines which relevant Minister should consider the recommendation, based on the location of the object on registration date (i.e., England, Wales, Northern Ireland or Scotland), and whether the applicant has expressed any preference for the object’s display location in an eligible institution in one of these countries (as outlined in paragraph 23 of Schedule 14 to the Finance Act 2012).
German: tax law provides charities do not lose their tax-exempt status if they pursue their purposes outside Germany. Where the tax-privileged purposes are achieved abroad, the tax privilege shall be conditional upon natural persons who have their residence or their habitual abode within Germany being advanced or the activity of the corporation, alongside achieving the tax-privileged purposes, also being able to contribute to the reputation of the Federal Republic of Germany abroad. These criteria must be fulfilled by a domestic or foreign entity promoting charitable purposes in Germany. In practice, this provision becomes relevant if a foreign organisation is subject to tax liability in Germany without carrying out charitable purposes in Germany. So, German tax law allows donations to a charity in a foreign country to be tax-deductible in Germany under two main criteria: the German tax authority can verify whether a foreign charity fulfils its charitable purposes and has control over amendments to the charity's purposes. To be tax-exempt in Germany, a foreign charity must meet the same conditions as a German entity. Accordingly, Germany's foreign organisations subject to limited tax liability can generally be tax-exempt. However, it has not been determined which German tax authority is competent to recognise the tax exemption of a foreign charitable that has no German income.
Netherlands: domestic and foreign public benefit entities (PBEs) that engage in public cultural activities can obtain Cultural PBE status from the Netherlands (Dutch) tax authorities. Charitable organisations that are registered in another jurisdiction can, under certain conditions, be recognised by the Dutch Tax Authority and receive the same tax benefits as domestic charitable organisations. Under Dutch law, charitable organisations can be recognised by the Dutch Tax Authority if they are domiciled in: the Kingdom of The Netherlands (including The Netherlands, Aruba, Curaçao, Saint Martin, Bonaire, Saint Eustatius and Saba); an EU member state; other states in specific cases. Other designated states include jurisdictions the Dutch government has agreed on treaties regarding the relevant taxation rules. Also, on an ad-hoc basis, individual foreign charitable organisations are granted public benefit organization (PBO) or organization representing social interests (ORSI) status. In these cases, the Dutch Tax Authority will assess whether they meet specific additional requirements to obtain the PBO status. In principle, these charitable organisations must provide, on an annual basis, information to the Dutch Tax Authority to verify whether the organisation still meets the requirements for recognition as a PBO. It is possible to register a charity in another jurisdiction. The Dutch government has also agreed on certain tax-related treaties relevant to charitable organisations.
In short, international donations and purposes do not prevent charitable giving through a tax incentive. However, the international element has a different application to various requirements. Inconsistencies were observed in the internal laws of countries that apply tax incentives to charitable giving with international scope (e.g., Australia and New Zealand). Moreover, meeting the eligibility criteria in both the home-country and host-country is challenging. Host-country examiners may consider matters such as the fiscal residence of the charity, the fiscal residence of officers, and any substantial connection with the country-provider. The decisions made by host-country examiners may conflict with the conditions applied in the home-country. Additionally, when a national donor wants to donate to an overseas charity through a tax incentive, examiners may review whether the overseas charity fulfils its charitable purposes. The inconsistencies between examiners and national tax rules in determining each element – qualified donees, purposes, and donations carried out internationally – are problematic. The differences in regulations, examiners' decisions, and the lack of clarification about these essential elements increase the tax barriers to the global allocation of arts-donations.
3.1.5 Who decides?
Someone has to determine if the applicant to a deductible gift recipient (DGR) meets the conditions, such as having charitable purposes, and whether the purposes or donations carried out internationally would prevent registration as a DGR or prevent donors from receiving benefits. However, the criteria and competent authorities to verify applications may not always be straightforward in national provisions. Nevertheless, most governments have special commissions or tax authorities that analyse whether the purposes and activities fall within applicable regulations and governing rules.
The research noted that these commissions and authorities commonly base their decision on factors such as the list of purposes, activities, and other relevant matters like statutes, acts of foundation, articles of association, or deeds. They may also refer to the Civil Code or Fiscal Code where applicable. However, incoherencies in national rules have been identified, and tax rulings and guidelines may not always be binding on these commissions or tax authorities. In Australia, for example, the tax rulings on charitable status produced by the Australian Taxation Office (ATO), which deal with how the ATO interprets the meaning of public benefit, are not binding on The Commission. That gives a margin of discretion to examiners.
Public administrations have discretionary power in applying a tax incentive, notably where the criteria for granting the benefit are vague. This can lead to a margin of discretion in determining the beneficiary. The margin of discretion conferred to national examiners for accessing each criterion and granting the tax incentive strongly indicates the obstacles applicants may face to access the benefit. As a result, a qualified DGR in one country may not meet the requirements to become an eligible recipient in another country. Additionally, purposes or donations carried out internationally acceptable in one country may not be compatible with the regulations of another.
In short, the domestic tax incentives for charitable giving, which are used as tax benchmarks, are multiple and complex. The tax-credit and tax-deductibility schemes evidenced how countries link donors and donees with a myriad of requirements and concepts. Although national systems consider the same variables for charitable giving, they do not necessarily define the requirements equally. Connecting factors used to assess qualified donors and donees can be problematic as the national rules differ. The lack of clear eligibility criteria within tax incentives, combined with the margin of discretion conferred to examiners, and lack of transparency in how rules are interpreted within countries and incoherencies between countries’ legislation, are all serious limitations to taxpayers applying and effectively getting access to tax incentives.
Tax barriers to cross-border charitable giving can be attributed to narrow eligibility criteria and a lack of legal certainty or consistency in determining beneficiaries. Tax incentives are typically conditioned upon the donor having a tax liability in the country-provider of the benefit, which presupposes fiscal residence. However, fiscal residence for individual and corporate donors can be challenging, and rules differ between jurisdictions. The use of personal circumstances and financial criteria to determine fiscal residence raises potential biases in the decision-making process. Furthermore, the criteria for determining a qualified donee can also be problematic, as there are factors affecting purposes or donations carried out internationally, and differences in what the law considers a DGR and its purpose. There is often a tension between direct or incidental charitable purposes. The language used to describe these classes is often unclear, and some rules do not specify what constitutes public benefit or a sufficient segment of the public. Governments play a role in ensuring that these systems operate within public benefit policies through registration, approval, and review mechanisms, but the absence of additional clarification can lead to subjective and unclear, creating barriers to the global allocation of charitable donations. Improving the clarity, consistency, and coherence of eligibility and compatibility criteria could help reduce tax barriers for donors/donees seeking to participate in cross-border charitable giving through tax incentives.
Countries – Legal Framework
Charities Act 2013
Income Tax Assessment Act 1936 (Part III, Division 3, Subdivision A, and Section 78)
Income Tax Assessment Act 1997 (Division 30, Subdivision 30-B, Subdivision 30-BA, Section 30-15, Subsection 30-15(1), Section 30-17)
Private Ancillary Funds (‘Taxation Administration Private Ancillary Fund Guidelines 2019’)
Legislation Act 2003
Australian Charities and Not-for-profits Commission Act 2012
Taxation Ruling TR 2005/13
Taxation Ruling 2011/4
Taxation Ruling TR 2017/D2
Taxation Ruling TR 2018/5
Charitable Trusts Act 1962 (WA, Section 5(4))
Code of Income Tax
Code of Companies and Associations (BCCA)
Gifts and Income Tax 2021 (Pamphlet P113)
Donations and Gifts
Cultural Property Export and Import Act (CPEIA)
Income Tax Act 1985
Guidelines for Registering a Charity: Meeting the Public Benefit Test - CPS-024
England and Wales
Charities Act 2011
Museums and Galleries Exhibition Tax Relief (MGETR)
Finance Act 2012
Department for Culture, Media and Sport – DCMS, 2015
Cultural Gifts Scheme Leaflet
Guidance ‘What makes a charity (CC4)’ (2013)
Income Tax Act
Corporate Income Tax Act
Inheritance and Gift Tax Act
General Tax Act
Income Tax Act 2012
Donations and Public Benefit Organisations Decree
State Taxes Act 1994
Charitable Trusts Act 1957
Charities Act 2005
Income Tax Act 2007
Incorporated Societies Act 1908
Companies Act 1993
Tax Administration Act
Federal Law n 14-FZ (Limited Liability Companies – LLC Law, 1998)
Federal Law n 208-FZ (Joint-Stock Companies – JSC Law, 1995)
Federal Law n 129-FZ State Registration of Legal Entities and Individual Entrepreneurs – Registration Law, 2001)
United States of America
US Companies Act
OECD, Taxation and Philanthropy (Tax Policy Studies, n 27, OECD Publishing, Paris, 2020)
 Evelyse Carvalho Ribas | practical experience in diverse jurisdictions | consultancy and disputes | expertise in legal & tax aspects of cultural and creative ecosystems including digital assets | PhD Researcher at University of Leeds/UK
 The national laws and guidances commonly use the term ‘must’ to indicate compulsory requirements, meaning that a donor or a donee must comply with those requirements. On the other hand, ‘should’ is often used for requirements that are considered to be good practice but for which there is no specific legal obligation. In this case, it is recommended that donors and donees follow the good practice guidance unless there is a valid reason not to.
 Donors may have a personal motive for making a donation, such as a strong interest or emotional involvement in the work of a specific charity or self-interested commercial or still fiscal objectives rather than conferring benefaction on that charity. As it will be seen in the national provisions below, the rules do not touch on the reasons for charitable giving. It means that a motive of seeking a tax incentive does not disqualify the gift from receiving an indirect public funding.
 OECD, Taxation and Philanthropy (Tax Policy Studies, n 27, OECD Publishing, Paris, 2020).
 Rare cases, such as the USA, use the citizen-based approach to determine the tax residence of individuals. In the USA, individual tax resident includes citizens and resident aliens (a resident alien, satisfies either the ‘green card test’ or the substantial presence-test for the calendar year).
 Germany: relevant tax provisions include Income Tax Act (EStG) (Section 1(1)); Fiscal Code (Sections 8-9).
 Netherlands: article 4 of the Dutch General Tax Act states that the place of tax residency of a natural person is based on facts and circumstances.
 OECD, (n 4).
 OECD, (n 4).
 Under the United States rules (US Companies Act), a corporation residence is based on its place of incorporation, and not where it is managed or controlled. Then, a corporation organised or created in the United States under the law of the United States or of any state is a domestic corporation. A domestic corporation is a resident corporation even though it does no business or owns no property in the United States. Business entities in the United States generally are incorporated, organized or formed under the laws of a specific state. Corporations are incorporated under applicable state law.
 For further information on Russian legal framework applicable to tax residence see Russian Civil Code; Federal Law n 14-FZ (Limited Liability Companies – LLC Law, dated 8 February 1998); Federal Law n 208-FZ (Joint-Stock Companies – JSC Law, dated 26 December 1995); Federal Law n 129-FZ State Registration of Legal Entities and Individual Entrepreneurs – Registration Law, dated 8 August 2001).
 The Australian legal framework for charitable giving tax incentives includes the Charities Act 2013 (N. 100, 2013, An Act to define charity and charitable purpose, and for related purposes); the Income Tax Assessment Act 1936 (ITAA 1936 - relevant provisions under the ITAA 1936: Part III, Division 3, Subdivision A, and Section 78); the Income Tax Assessment Act 1997 (ITTA 1997 - relevant provisions under the ITAA 1997: Division 30, Subdivision 30-B, Subdivision 30-BA, Section 30-15, Subsection 30-15(1), Section 30-17); the Private Ancillary Funds (Private AFs - for further information see the ‘Taxation Administration Private Ancillary Fund Guidelines 2019’); Legislation Act 2003; Australian Charities and Not-for-profits Commission Act 2012 (N. 168, 2012, An Act to establish the Australian Charities and Not-for-profits Commission and a national regulatory framework for the not-for-profit sector, and for related purposes); Taxation Ruling TR 2005/13 (the TR 2005/13 explains the meaning of a gift for the purposes Division 30 of the ITAA 1997).
 To determine the tax residence of corporates under Australian rules see the Taxation Ruling TR 2017/D2 (relevant provisions include the subsection 6(1) of the ITAA 1936); Taxation Ruling TR 2018/5.
 The England and Wales legal framework for charitable giving tax incentives includes the Charities Act 2011; the Museums and Galleries Exhibition Tax Relief (MGETR); the Finance Act 2012; and Guidelines. In the Finance Act 2012 the tax incentive for the gift of works of art and cultural objects is commonly known as the ‘Cultural Gifts Scheme’. Especially relevant the Schedule 14 to the Finance Act 2012; the Department for Culture, Media and Sport – DCMS, 2015; the Scheme and Guidance; the Cultural Gifts Scheme Leaflet.
 The Netherlands legal framework for charitable giving tax incentives includes the Inheritance and Gifts (Income Tax Act 2012, Articles 6.32-6.40 – defines which types of donations are recognised, and in which cases and to what extent they are deductible regarding corporate income tax); the Dutch Civil Code (Article 285 Book 2 provides the legal framework for different legal forms, including the foundation and the association for charitable organisations); the Donations and Public Benefit Organisations Decree (this decree provides further details on the state policy with regard to donations and the recognition of Public Benefit Organisations – PBOs); State Taxes Act 1994 (Implementing Regulations, Articles 1a-1f – includes the basic rules for recognition of PBOs, ORSIs and foundations supporting an ORSI).
 The New Zealand legal framework for charitable giving tax incentives includes the Charitable Trusts Act 1957; Charities Act 2005 (Public Act 2005, N. 39) and the Funding Guidelines; Subpart LD – Tax credits for gifts and donations (of the Income Tax Act 2007); Incorporated Societies Act 1908; Companies Act 1993; Tax Administration Act.
 Australia: Section 30-15 provides a table to explain the special conditions which must be satisfied before a donation is allowable as a tax deduction to the donor. Sub-Division 30B of the ITAA 1997 is organized around 13 general categories of DGRs, including industry, trade and design; philanthropic trusts; and cultural organizations.
 The Belgium legal framework for charitable giving tax incentives includes the Code of Income Tax (CIT – especially the Article 145/33 of the CIT lists the qualified recipients’ institutions, and the Article 63 (18/1-7) of the CIT establishes requirements to qualify for approval); the Code of Income Tax and the Code of Companies and Associations (BCCA).
 The Canadian legal framework for charitable giving tax incentives includes Gifts and Income Tax 2021 (Pamphlet P113); the Donations and Gifts; the Cultural Property Export and Import Act (CPEIA); the Donations and Gifts; Income Tax Act 1985; the ‘Guidelines for Registering a Charity: Meeting the Public Benefit Test’ - CPS-024 (2.0 The fundamentals of charity, and the Appendix A – The legal foundation for the common law definition of charity); other Guidelines.
 The Canadian basis of the standard law definition of charity dates back to the 19th-century decision, Commissioners for Special Purposes of Income Tax v. Pemsel (Pemsel), within the preamble to the Statute of Elizabeth (the Preamble).
 The German legal framework for charitable giving tax incentives includes the Fiscal Code; the Corporate Income Tax Act (EStG, Section 5(1)(9)); the Inheritance and Gift Tax Act (Section 13(1)(16b).
 The Netherlands legal framework for charitable giving tax incentives includes the Inheritance and Gifts - Tax Act 2012; the Donations and Public Benefit Organisations Decree; the State Taxes Act 1994 (Articles 5b, 5c, and 5d); the Civil Code; and relevant Guidelines.
 Australia: the Charities Act 2013 addresses entities that directly or indirectly serve the public benefit. Part 3, Division 1, Subsection (12-1) lists 12 ‘purposes’.
 Netherlands: the Civil Code lists 13 ‘descriptions of purposes’ of a Public Benefit Organisation (PBO). To obtain the Cultural PBO status, the charitable organisation must fulfil the requirements for PBO status and be almost entirely dedicated to cultural objectives. These could be in the fields of visual arts, architecture, heritage, dance, film, music, theatre, and so on.
 Belgium: the Belgium Code of Companies and Associations (BCCA) lists 7 ‘purposes’. It covers everything recognised as charitable in Belgium.
 England and Wales: Section 3 of the Charities Act 2011 lists 13 ‘descriptions of purposes’. Under this research the description in letter (f) is relevant as it states that a charity meet a charitable purpose if its purposes include the advancement of the arts, culture, heritage or science. The Act does not define what each description of purposes mean. However, it does provide some definitions, or partial definitions, for some of the descriptions (see Annex D – Definitions in the Charities Act). Where any of the terms used in the descriptions of purposes has a particular meaning in charity law in England and Wales; the term must be taken as having the same meaning where it appears in the descriptions of purposes. For further information around the England and Wales approach on charities’ purposes, on the public benefit requirement, on the High Court’s charity law jurisdiction, see the Guidance ‘What makes a charity (CC4)’ (published in 1 September 2013).
 Germany: the Fiscal Code lists 25 ‘descriptions of purposes that shall be recognised as an advancement of the general public’ (Chapter 3 – Tax-privileged purposes, Section 52(2) – Charitable purposes). Under this research the following descriptions are relevant as it states that a charity meet a charitable purpose if its purposes include: (5) the advancement of art and culture; (6) the advancement of the protection and preservation of historical monuments; (15) the advancement of development cooperation; (22) the advancement of local heritage and traditions; (25) the advancement of active citizenship in support of public-benefit, charitable or religious purposes.
 Limitations on commercial or industrial activities may not be consistent with the international arena as it will be addressed in the subsequent articles.
 In the Australian rules, only charitable trusts are required to serve the public benefit (Charitable Trusts Act 1962 (WA, Section 5(4)). However, all organizational forms are allowed to engage in public benefit activities. The public benefit requirement is the requirement in Division 2(6) of the Charities Act 2013. Subsection (1) claims that a charitable purpose is a purpose that must be for the public benefit. The purpose is for the public benefit if the purpose's achievement would be of public benefit; and the purpose is directed to a benefit that is available to the members of the general public or a sufficient section of the general public. The public benefit includes benefits, whether tangible or intangible (Subsection (2)); any possible, identifiable benefit from the purpose that is available to entities that are not charities, but is not open to the members of the general public, or a sufficient section of the general public (Subsection (3)). To determine whether the section of the general public to whose benefit the purpose is directed is sufficient, have regard to all relevant matters, including comparing: the numerical size of that section of the general public and the numerical size of the section of the general public to whom the purpose is relevant (Subsection (4)). Sections 15-19 of the Taxation Ruling 2011/4 claims that a purpose is for the public benefit if it offers a benefit to the community that is real and of value, either tangible or intangible; and that benefit is available to the public. The Taxation Ruling 2011/4 states that the benefit of a charitable purpose does not have to be for everyone in a community to satisfy the public element – it can be for a section of the community, as long as that section is appreciable.
 Under the Australian Taxation Ruling 2011/4, the fact that a few people can avail themselves of a benefit at a given time is not necessarily offending the public test. Suppose art organizations that confer prizes to a single but different, meritorious artist on an annual basis will be still charitable – it means, although DGRs cannot be established to confer private benefits, some private benefit may arise in the course of pursuing charitable objects (in this case, the private benefit may be justifiable).
 Under the Canadian legal framework, the public benefit requirement is the requirement in the Income Tax Act and regulated on The Guidelines. The Guidelines also stress that examiners largely determine whether a purpose is charitable by analogy's general approach of reasoning. If, after reviewing similar facts in previous cases, an analogy can readily be found with a previously determined charitable purpose, then the benefit aspect of the test has been effectively established.
 For further information on public benefit requirement under England and Wales, see the ‘Public benefit: the public benefit requirement (PB1)’.
 In Germany, the public benefit requirement is the requirement in Section 52(1) of the Fiscal Code that a purpose must be for the public benefit to be a charitable purpose. According to the provision, a corporation shall serve public-benefit purposes if its activity is dedicated to the altruistic advancement of the general public in material, spiritual or moral respects. It shall not be deemed an advancement of the general public if the group of persons benefiting from such advancement is circumscribed, for instance: by the membership of a family, or the workforce of an enterprise, or can never be other than small as a result its definition, especially in terms of geographical or professional attributes. Advancement of the general public may not have contended merely because a corporation allocates its funds to a public-law entity (Section 52(1) of the Fiscal Code).
 Under this research, a branch is understood as an extension of the entity incorporated in a home-country, without separate legal personality.