Trumpeted by French Finance Minister Christine Lagarde as a pivotal and unique reform, intended to encourage patronage and foster philanthropy, the introduction of endowment funds in France, or ‘fonds de dotation’, is designed not only to entice a greater number of donors to finance projects of general interest, but also to reward those donors, by allowing them to benefit from welcome tax relief.
Based on the Anglo-Saxon model, and recently instituted during the drafting of a new law, aimed at modernising the economy, endowment funds constitute a major step forward for both prospective benefactors and beneficiaries. They are intended to benefit non-profit organizations, such as universities, hospitals, or museums.
Key advantages of endowment funds, relative to the existing ‘fondations’ or foundations, are their simplicity and increased flexibility, widening the scope for donors to finance more modest projects, and within a shorter time-frame.
Likening endowment funds to both an association, due to the ease with which the funds are established, and to a foundation, in terms of their financing and tax benefits, the finance minister explained that the funds could be created by one person, or indeed, by several individuals, following a simple declaration to the ‘préfecture’, or French administration, in the area in which the fund is to be set up. A board of directors, consisting of at least three people, is then responsible for managing the fund on a voluntary basis. Gifts bestowed to these funds, however, do not have to be declared.
Emphasising that many legal safeguards have been put in place to control the process, Lagarde alluded to the crucial role assigned to the ‘préfet’, or state representative, who may elect to suspend the fund’s activity for six months in the case of suspected abuse.
Regarding tax relief, donations made to an endowment fund entitle donors to benefit from income tax deductions amounting to 66% of all donations, up to a limit of 20% of taxable income. Endowment funds do not, however, alleviate wealth tax. Companies are also able to claim a tax credit on a proportion of money given to endowments.
The government plans to put endowment funds into effect by the end of the year.
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