The Fondation de Luxembourg is a member of Transnational Giving Europe, and promotes cross-border donations to and from 19 countries of the network (Austria, Germany, Belgium, Bulgaria, Croatia, France, Hungary, Italy, Luxembourg, Netherlands, Poland, Portugal, Ireland, Romania, United Kingdom, Slovakia, Slovenia, Spain and Switzerland).

Since July 20, 2009, the Luxembourg Direct Tax Administration has recognized the tax deductibility of donations made to public-benefit organizations located in another European Union (EU) Member State, a Member State of the European Economic Area (EEA), or Switzerland. As a result, Luxembourg-based donors can benefit from the applicable tax advantages in the Grand Duchy, even for donations made beyond national borders.

More information, here. 

Outside of TGE, cross-border donations are not currently mutually recognized by EU Member States and do not always entitle donors to tax benefits.

Donors based in the United States can now benefit from tax deductibility on their contributions to “Friends of the Fondation de Luxembourg”, a dedicated fund set up within Myriad USA (formerly King Baudouin Foundation United States / KBFUS). As a charitable organization under Sections 501(c)(3) and 509(a)(1) of the U.S. Internal Revenue Code (IRC), donors may claim the maximum tax deduction allowed by U.S. tax law.
If you would like to support us from the United States, please contact us first at: secr@fdlux.lu.

The Fondation de Luxembourg has been bestowed with an endowment of 5 million euros to cover its immediate needs. In the further course of its work, the Fondation de Luxembourg is authorized to charge commissions to the sheltered foundations in order to cover management, oversight and administration costs.

• For an endowment foundation, the Fondation de Luxembourg may charge an annual management commission of 0.8% of the value of the endowment.
• In the case of a turnover foundation, fees of 5% will be levied on outgoing moneys.
• In both cases, the minimum fee is set at €5,000 per year.
• These costs cover all of the services provided: management, accountancy, audit and administration of the sheltered Foundation, organization of the management committees and implementation and follow-up of the decisions taken by these committees, together with project selection, monitoring and reporting on the initiatives which are supported.
• The Fondation de Luxembourg also invoices initial costs when the sheltered foundation is set up.

The Fondation de Luxembourg exists to support individuals and companies wishing to structure and implement a philanthropic project. If the founder already has in mind a public utility project, the Fondation de Luxembourg can set up the appropriate structure (sheltered foundation) and accompany the project (optimization and reporting to the founder). The only conditions are of course that the project be in the public interest and in compliance with the statutes of the Fondation de Luxembourg. 

There are many arguments in favour of structuring a philanthropic commitment in Luxembourg. The following are often cited:

• Political and economic stability which safeguards the permanency of the existing legal framework; that is particularly important for long-term commitments.
• Luxembourg is acknowledged to be a highly international financial centre within the European Union.
• Luxembourg offers a high concentration of crossborder expertise on tax, legal and financial issues.
• The Government provides and maintains strong support for public utility initiatives.
• Last but not least, Luxembourg has been able to develop widely acknowledged expertise in the areas of micro-finance and development aid.

Today, Luxembourg has become the ideal European centre to structure interests, especially if these have an international slant. Many entrepreneurs and businessmen therefore see high added value in setting up the structure to shelter their philanthropic commitment close to the same actors and advisors who advise them on their core business, all this at the heart of the European Union.

Persons who have some form of connection with Luxembourg often wish to group all of their interests in this country, including the philanthropic side of their business. The European Court of Justice has handed down a clear ruling to the effect that, in compliance with the principle of freedom of movement of capital, donors must be able to benefit from the fiscal advantages in force in their country of tax residence for donations made to causes in the general interest in another Member State of the European Free Trade Association. On this subject, see the case law of the Court in the Persche ruling C-318/07 http://www.bailii.org/eu/cases/EUECJ/2009/C31807.html

However, this ruling has not yet been transposed into domestic law by a good number of countries in the Union. Donors who do not wish to take legal action in the European Court of Justice against the tax authorities of their own country may therefore envisage an alternative solution:Transnational Giving Europe.

TGE, or Transnational Giving Europe, is a network of Foundations in 19 European countries recognized as being of public utility. They enable donors to make donations to institutions recognized as being of public utility in any one of these 19 countries via an institution which is acknowledged by the tax authorities in their own country of residence and able to issue tax certificates.

Solutions are also available to enable US tax residents to make fiscally efficient donations in Europe.

The answer is no: a donation to a foundation is irrevocable in Luxembourg.

The wish to continue to benefit from your own assets during your lifetime is perfectly understandable. You can therefore set up a sheltered foundation stipulating its purpose and the assets with which it will be endowed; the foundation will be activated when the estate has passed on these assets. A copy of the founder’s last will and testament will then be attached to the agreement setting up the foundation.

Nevertheless, we advise founders to endow their foundation at least in part before their own death so as to have an opportunity to see for themselves some of the practical benefits of their initiative.

The Fondation de Luxembourg is governed by Luxembourg law on foundations; it must therefore always act in the general interest. Its action must benefit the whole of society rather than a particular subgroup of persons.

However, support can sometimes be provided for a particular individual, provided that the project forms part of a broader framework of support for a cause in the general interest. In a word, the general public must derive greater benefit from the action in question than these private interests.

Since 2009, the Luxembourg tax authority no longer requires the submission of a tax certificate by establishments which benefit from donations in order to validate the corresponding deduction for tax purposes. The taxpayer therefore only has to notify the donation on his tax return to which he must attach a bank statement clearly showing the transfer. This naturally simplifies the management and administration of deductions of donations for tax purposes by the associations and foundations on the one hand and donors on the other.

In that case, the best solution is to contact us directly in order to discuss the project and decide how to take the matter forward. Depending on the degree of progress made by your client in the definition of his wishes, we will then be able to envisage a meeting at an early date and work together to set up a sheltered foundation. As the Relationship Manager, you will be involved throughout the process. Your knowledge and understanding of your client’s situation are in fact essential elements to build the project serenely and effectively.

When the agreement setting up the Sheltered Foundation is ready to be signed, the Fondation de Luxembourg will open with you (unless of course the client stipulates a different wish) an account in the name of the Fondation de Luxembourg/Sheltered Foundation ABC to which the assets that the founder wishes to make available for his project will be transferred.

The Fondation de Luxembourg was set up to provide philanthropic expertise to all the banks established in the financial centre, and also more generally to family offices, notaries, attorneys and tax experts whose clients wish to make a philanthropic commitment. It is there to accompany, on a basis of complete neutrality, any person wishing to implement projects of some size in the general interest.

Because of the relationship of trust which it maintains with its clients, every bank in the financial centre is an important partner of the Foundation.

The Founder chooses the bank and the manager who will be responsible for safekeeping and management of the funds of the sheltered foundation. In the immense majority of cases, this will be the bank with which the founder already has a relationship of trust for the conduct of his own business or management of his assets.

The Fondation de Luxembourg will then open the account of the sheltered foundation at this bank and delegate management of the assets to it.

The Founder has a choice of two solutions:

• To adopt the same management policy as applied to the Fondation de Luxembourg’s own resources and approved by its Board of Directors.
• Or to reach his own decision on the allocation of the assets of his sheltered foundation. 

The second solution is generally preferred as it lends itself to both advisory management and discretionary management.

Philanthropic commitments are generally made with a very long time horizon. The Fondation de Luxembourg therefore recommends conservative management.

However, the Fondation de Luxembourg adopts a pragmatic approach and does not wish to impose excessive constrains on the management of the assets of sheltered foundations. Nevertheless, the two following parameters must be taken in account:

• The degree of risk of the management must be appropriate to the objectives of the sheltered foundation: for example, if the objective of the Sheltered Foundation is to pursue its activities indefinitely, it will be essential to make sure that the management policy does indeed seek to safeguard the assets.
• Moreover, the Fondation de Luxembourg encourages the founders to request management that is compatible with the SRI (Socially Responsible Investment) policy of the Fondation de Luxembourg. This takes into account social and environmental aspects, governance and sustainable development of the investment values. It also seeks to encourage ventures which show a societal commitment on these matters (best in class approach). The SRI policy of the Foundation seeks to maintain cohesion between the objectives of the sheltered foundations and the investments made by them.