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Legal system and status of FOUNDATIONS in FRANCE

Posted on October 11, 2022

A foundation is defined by article 18 of law n°87-571 of July 23, 1987 on the development of patronage as “the act by which one or more natural or legal persons decide the irrevocable allocation of property, rights or resources to carry out a work of general interest and non-profit”.

The association is a group of people while the foundation is a heritage made up of goods, rights and/or resources and irrevocably assigned to the realization of such a work.

It is a group of legal or natural persons to carry out a common project (as in the case of the association), but an irrevocable financial commitment from its founders with a view to carrying out a non-profit work of general interest. A foundation has no members. A board of directors, a management board and/or a supervisory board directs it.

A foundation pools private capital to work for a public cause.

The endowment fund enjoys legal personality from the date of publication in the Official Journal of the declaration made to the Prefecture. Amendments to the articles of association follow the same procedures.

I – Conditions of existence of a foundation in France :

There are corporate foundations, which can receive public subsidies but are prohibited from donations, bequests, subsidies and appeals to public generosity (but can, since 2003, benefit from donations from their employees).

The first condition for the existence of a foundation, whatever it is, is to be recognized by:

– The Prime Minister (currently Bernard Cazeneuve; address at 57, rue de Varenne, Paris) for foundations recognized as being of public utility;

– The Prefect of the department of their future headquarters.

A foundation is the realization of a work of general interest for a non-profit purpose. The general interest is an evolving tax concept, and this in several varied areas.

A foundation is of a philanthropic, educational, scientific, social, humanitarian, sports, family or cultural nature, or contributes to the enhancement of artistic heritage, the defense of the natural environment, the dissemination of culture, French language and scientific knowledge.

A foundation recognized as being of public utility can be created by an individual, a family, an association, a group of people, individuals or companies, when its purpose is to allocate resources on a perpetual basis.

Thanks to a donation, the founder can organize his foundation. The goods and resources he offers permanently spoils him.

The donation is made by notarial deed if it relates to real estate. The donation only takes effect when the foundation is recognized following the publication of the decree of public utility.

The risks of this situation arise if the founder dies before the acceptance of the endowment by the foundation or the seizure of the property subject to the endowment, before the transfer of ownership has become opposable to the creditors.

The request must be addressed to the prefect of the department where the foundation will have its headquarters with the filing of its statutes.

The Prefect will forward the request to the Ministry of the Interior.

The Minister of the Interior can decide at his sole discretion not to respond to the request or to investigate it.

After his instruction, the Minister of the Interior can transmit the request to the Council of State, which will issue an “opinion”, which the government will not be obliged to follow.

The most advantageous, fiscally, is an endowment fund. Christine Lagarde while she was the minister responsible for “creating, alongside foundations and associations, endowment funds that will be fast, flexible and inexpensive. It can be created by one or more natural or legal persons, for a fixed or indefinite period.

An endowment fund is created by simple declaration of its founders to the prefecture of the department where its head office is located. This declaration must be accompanied by the statutes and contain: the surname, first name, date and place of birth, profession, domicile and nationality of the persons responsible for its administration and a form completed with the information necessary for publication in the Official Journal.

Endowment fund: article 140 of the law on the modernization of the economy of August 4, 2008 for a fixed or indefinite period.

No public funds of any kind may be paid into an endowment fund.

This prohibition may be waived, on an exceptional basis, for a specific work or program of actions, with regard to its importance or its particularity.

Exemptions are granted by joint order of the ministers responsible for the economy and the budget.

The fund may appeal to public generosity after administrative authorization, the terms of which are set by decree.

It is made up of the capital endowments made to it, to which are added the donations and legacies granted. Donations may entitle you to tax reductions in terms of both income tax and corporation tax, in the same manner as donations to associations.

The endowment fund is administered by a board of directors which includes at least three members appointed, the first time, by the founder(s).

Each year, the endowment fund draws up accounts that include at least a balance sheet and an income statement (the deadline being a maximum of six months to publish these accounts).

The fund includes at least one auditor and one deputy.

II – Tax regime of a foundation in France:

For an endowment fund, as for foundations, it is necessary to constitute an initial endowment; but the amount of this is free (subject to the following reservation), contrary to what is required de facto by the Council of State (whose opinion is necessary) for foundations recognized as being of public utility (minimum endowment of 1,500,000 EUR to 2,000,000 EUR, payment in 10 years maximum).

To date, an endowment fund can still be created without an initial capital endowment.

However, from the decree implementing article 85 of law no. 2014-856 of July 31, 2014 (relating to the social and solidarity economy) published in the official journal on August 1, 2014, the founder(s) must justify , at the time the fund is set up, a minimum amount for the endowment (this minimum amount may not, however, exceed EUR 30,000).

The amount of capital for the creation of a corporate foundation cannot be less than EUR 150,000 over 5 years.

The initial endowment of an investment fund may not exceed EUR 30,000.

A foundation pools private capital in order to work for a cause of general interest: in principle, this capital is entirely spent within a defined period of time.

An endowment fund pools assets with a view to capitalizing them.

It is the income from this heritage that is used to serve a work of general interest.

If it meets the requirements of Articles 200 and 238 bis of the General Tax Code, an endowment fund benefits, from its creation, from tax reductions on donations and exemption from transfer duties free of charge on donations and legacies.

Article 200 of the General Tax Code: “Opens the right to an income tax reduction equal to 66% of their amount, sums taken within the limit of 20% of taxable income which correspond to donations and payments, including the express abandonment of income or products, made by taxpayers domiciled in France within the meaning of Article 4 B, for the benefit of: Foundations or associations recognized as being of public utility subject to 2 bis, university foundations or partnership foundations mentioned respectively in articles L. 719-12 and L. 719-13 of the Education Code and, only for employees of the founding companies or of the companies of the group, within the meaning of article 223 A, to which the founding company belongs , corporate foundations, when these bodies meet the conditions laid down”.

These fixed conditions are: “Works or organizations of general interest having a philanthropic, educational, scientific, social, humanitarian, sporting, family, cultural character, or contributing to the development of the artistic heritage, in particular through subscriptions opened to finance the purchase of objects or works of art intended to join the collections of a French museum accessible to the public, for the defense of the natural environment or for the dissemination of culture, French language and scientific knowledge”.

So undertaking to safeguard endangered species corresponds to these conditions. Consequently, it is possible to benefit from tax reductions since the foundation has a specific object of general interest.

A foundation recognized as being of public utility is a permanent institution whose recognition is the subject of a decree by the Council of State, possibly supplemented by external resources and/or services rendered.

A corporate foundation promotes sustainable corporate sponsorship, but its lifespan is more limited, and so are its legal capacities. They cannot receive legacies, nor appeal to public generosity, but can, since 2003, benefit from the donations of their employees (the simplicity is in the creation of the foundation, since it is only necessary administrative authorization).

An arbitrated foundation serves the general interest, so all donations made to these accounts benefit from the tax advantages attached to foundations through this intermediary.

This formula allows management fees to be pooled.

The income tax reduction scheme from which individuals can benefit is equal to 66% of the sums paid, withheld within the annual limit of 20% of taxable income (law of 1 August 2003).

Donations can be sums of money, but also donations in kind (for example, works of art).

File to download:
170223 Fondations en France

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