Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55The partners at Russell Advocaten have been on boards of various charities for many years. We have learned how good it is to use our experience and capabilities to the advantage of people that are less well-off than we are. But we have also learned that voluntary work may involve great responsibility. This is not solely because, as a board member, you may have to administer the large sums of money that some charities dispose of, but also because charitable work can be life-changing for the people you work for and with. Therefore, we at Russell Advocaten also value dedication to charities at a professional level. It is not something that you can do at leisure. Companies need to take their corporate social responsibility seriously. Doing good is good, doing good well is better.
Our take on the professionalization of charitable work can best be illustrated by several initiatives we have started. In this article, I will discuss three of them: the post-graduate course Governing Charitable Funds, the survey of charity law in the Netherlands I have written, and finally how we can help charities that want to become active in the Netherlands and other European countries. It is nice to see that our long-term commitment to philanthropy has also led to a niche in our legal practice.
There are not many young people on the boards of charities. When I became active in charities, I discovered that I was usually the youngest of the board members. In meetings of charitable funds, I did not see many people of my generation. This lack of age diversity is not good for charities. Especially not in view of the fact that young people donate less to charities than older generations. This does not bode well for the future. Besides, the nature of many charities requires them to keep in touch with developments in all parts of the society.
The reluctance of young people to participate on the board of a charity is partly due to the priority they give and have to give to their family and career. Another important factor is that they often have no idea what governing a charity entails and which responsibilities come with it. Especially, in the case of capital funds, this may include the administration of large sums of money and the ensuing liability. To tackle this issue, I have, together with other people, initiated a post-graduate training program on Governing Charitable Funds at the Free University Amsterdam. This program offers young professionals the necessary training to act as a professional director of a charitable organization. After all, being a professional in your field of work field does not automatically mean that you are a professional when you become a volunteer board member. The program further aims to promote continuity, diversity and expertise within charitable organizations.
To prevent young people from feeling like outsiders on the boards they are members of, we have founded the Network Young Philanthropic Professionals (NYPP). Young professional directors, who successfully completed the course on Managing Philanthropic Funds, can join this network. The NYPP facilitates continuing training, seeks to bring together young professionals, and is a platform for young philanthropic professionals to exchange experiences.
I have contributed the chapter on the Netherlands to the handbook Charity Law: A Global Guide from Practical Law, released by the renowned international legal and financial publisher Thomson Reuters in 2016. This article is regularly updated as part of the online Thomson Reuters Practical Law Charity Global Guide. Here, I introduce Dutch charity law to an international professional audience. My article in this handbook starts out with a brief overview of the long tradition and legacy of charities in the Netherlands. Did you know that many of the famous museums in the Netherlands are located in former orphanages and homes for the elderly? Examples are the Hermitage Amsterdam, the Amsterdam Museum, and the Frans Hals Museum in Haarlem.
More relevant than this fun fact, however, is the outline of possible legal structures for charities, such as foundations and associations, and the requirements for incorporating these. These requirements have changed recently as a result of the introduction of the Dutch Management and Supervision of Legal Entities Act. It equalizes the structure of associations and foundations with that of companies. This affects above all the nonprofit sector and has major consequences for the liability and legal position of board members and directors of charities.
Very important for charities is the favorable tax regime that could apply to them. The Dutch Tax Authorities offer important privileges to charities that are recognized as Public Benefit Organizations (PBO; in Dutch: ANBI). To qualify as a PBO, a charity has to fulfil a number of requirements, including that at least 90 percent of the organization’s efforts must be focused on the general good and that the PBO’s costs must be in reasonable proportion to its expenditure.
Charities may be recognized as a PBO and receive tax benefits even if they are not domiciled in the Netherlands. This applies to charities from other European Union Member States and from states that the Dutch government has agreed treaties with regarding the relevant taxation rules. However, they may have to fulfil extra conditions, such as sharing their annual reports with the Dutch Tax Authority. This enables the authorities to verify whether a charity still meets the conditions for being a PBO.
We always like to present the Netherlands as the gateway to Europe. This definitely applies to charities. In the Netherlands, there are many charitable organizations that are prominent in society, for instance by collections, lotteries and other public campaigns. In 2018, about 43,000 good causes were active in the Netherlands. They received over EUR 5.7 billion in donations, which equals an average amount of more than EUR 335 per citizen. About 80 percent of the Dutch people donate money to good causes each year. This places the country in the top ten donors in the world.
No wonder that many international charities have decided to start a branch in the Netherlands or have chosen to establish their main office here. Over the years, Russell Advocaten has assisted many of these charities with incorporating their Dutch branch and achieving the status of a PBO. We also advise on their day-to-day operations, such as employment and rent issues. This requires specialist knowledge as charities must meet strict legal standards to keep their favorable tax regime. Our personal experience on the board of charities is definitely a bonus for these clients and we are proud that we can help them to make this world a better place.
To put it briefly: If your charity wants to become active in Europe, the Netherlands is the place to start. It does not matter whether the charity wants to develop its own projects in Europe, aims primarily at broadening its donor base, or needs a hub for activities in other countries.
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