The Ministry of Finance has presented two positive proposals for the non-profit sector. One of the proposals implies that compensation for the leasing of rights in conjunction with the support of activities of public benefit is to be exempt from taxes. The other proposal addresses the obligation of service fulfillment applying to foundations based on collective agreements.
Sale of rights on behalf of non-profit associations with activities of public benefit
There is an increasing interest on behalf of companies to sponsor non-profit associations with activities of public benefit and it has become more common for companies within the framework of their CSR work to support the operations of non-profit organisations. In such a cooperation, the association can lease various rights, for example, the right to the association’s brand, in order that the company can use the brand in its own marketing.
Currently, there is a degree of uncertainty as to whether the compensation received for the leasing of rights by a non-profit association with activities of public benefit can be seen to comprise tax-free revenue. This is the case even when the leasing is very closely linked to public benefit activities and contributes to an increased interest in the association and its activities.
Against the background of the important work undertaken in society by the non-profit associations with activities of public benefit, the Ministry of Finance is now presenting a proposal that the leasing of rights by a non-profit association with public benefit activities, in the situation described above, is to be tax exempt for these associations. This proposal also covers registered religious communities.
Obligation of service fulfillment by Job Security Foundations
Job Security Foundations are liable for taxes only on income from real estate as long as they meet the obligation of service fulfillment. This obligation of service fulfillment implies that the organization is to use their revenues in a reasonable scope for public benefit purposes.
Job Security Foundations are founded on the basis of “adjustment agreements” (sometimes referred to as “agreement on transition”) or on job security agreements and have the purpose of providing security to individuals who are or risk becoming unemployed through the provision of support in the form of adjustment activities or severance pay. The employers who are parties to the agreement pay in fees to the Job Security Foundation which are calculated on a certain percentage of the employers’ salaries.
The Job Security Foundations undertake operations which, to a large degree, are sensitive to economic cycles. These foundations have, therefore, a major requirement to accrue assets which can be used when the need of adjustment activities support is more extensive as a result of significant changes in the labour market. Consequently, the Job Security Foundations risk incurring non-compliance in fulfilling their statutory obligation of service fulfillment when they necessarily build up capital to meet future requirements. As a result, LO (Swedish Trade Union Confederation), Svenskt Näringsliv (Confederation of Swedish Enterprise) and PTK (council for negotiation and cooperation), together with a number of Job Security Foundations, have presented a petition for a change in legislation as regards the statutory obligation of service fulfillment for Job Security Foundations. This implies that the Ministry of Finance now proposes that fees paid by employers who have entered into Job Security Agreements with Job Security Foundations are not to be included in the assessment of compliance with the obligation of service fulfillment.
The replies from the consultative bodies are to be presented on no later than 23 February 2017 and the changes in the law are proposed to come into effect on 1 January 2018. Both proposals are positive for the non-profit sector and for society in general and imply relief for the organisations concerned in their tax management. The proposal on income tax regarding tax exemption for certain leasings of rights will also imply that the revenues from these leasings will be exempt from VAT.
Kristina Lundqvist arbetar på PwC:s kontor i Stockholm med inkomstskattefrågor inom ideell sektor. Kristina har tidigare arbetat med skatteprocesser på Skatteverket och är specialiserad på skattefrågor rörande stiftelser och ideella föreningar.
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