The taxation of non-profit organisations after Stauffer
In the past few years, the question of the tax treatment of nonprofit organisations in the cross-border context has often revisited the agenda of the Court of Justice of the European Union (CJEU). In 2006, the Court delivered its first landmark judgment in Case C-386/04 Stauffer, which was followed by Case C-318/07 Persche, Case C-153/08 Commission v Spain, Case C-25/10 Missionswerk and Case C-10/10 Commission v Austria. In each of these rulings, the Luxembourg judges found a restriction of free movement by national tax laws and provided guidance on how Member States’ discretion in relation to the tax treatment of non-profit organisations is shaped by European Union law. The European Commission has contributed to the enforcement of EU law in this area by investigating and successfully closing nearly thirty infringement cases against EU Member States. These developments have led to the liberalisation of regulation within the Internal Market, generating increased attention in academic publications and debates.
We aim to provide a detailed account of CJEU case law on the tax treatment of non-profit organizations and offer some reflections on the role of the Court, and negative harmonisation more generally, in the elimination of fiscal obstacles in the Internal Market. We introduce the background problems of the legal treatment that led to the Stauffer case; and analyse CJEU case law on the taxation of non-profit organisations, focusing on judicial reasoning and conclusions drawn. We then offer some broader comments on the implications of judicial intervention for non-profit organisations in the EU, and then concludes with a summary of the whole discussion.
In practical terms, we conclude that the regulatory approach imposed by the Court in relation to the fundamental issues of the tax treatment of non-profit organisation in the cross-border context raises a number of concerns from the perspective of all major stakeholders (i.e. nonprofit organisations, donors and tax authorities). However, the solutions proposed by the Commission through a legislative mechanism have generated even wider disagreement and resistance. This lack of political agreement outweighs the deficiencies of negative harmonisation. CJEU jurisprudence in relation to the tax treatment of non-profit organisations provides one of those examples in the field of direct taxation where the “halfway” solution of “equal treatment” proposed under negative harmonisation and horizontally enforced by the Commission offers an acceptable – even if not fully satisfactory – balance.