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The rise of the non-profit organizations

Qué son las entidades sin ánimo de lucro y cuales son sus ventajas fiscales

We explain why foundations are beneficial and what the steps are to set one up in Spain.

What are non-profit organizations? 

When we talk about non-profit organizations, we are referring to foundations, associations, federations and NGDOs (Non-Governmental Development Organisations), that is to say, they are entities that are not set up to obtain economic profits but rather to attain objectives that are of general interest.  

What are objectives of general interest? 

Objectives of general interest are, among other things, defending human rights, social welfare, objectives related to education, culture, science, sport, health, along with cooperation for the development and promotion of voluntary and social work, environmental protection, etc. 

Out of the different aforesaid types of non-profit organisations, the most well-known and well-established in Spain is the foundation. 

What are foundations? 

Foundations are non-profit organisations that, according to the wishes of their founders, use the patrimony on a permanent basis to attain objectives that are of general interest.  

According to this definition the conclusion can be drawn that foundations: 

Pursue objectives that are of general interest. 

Do not seek profit. 

Must have patrimony. 

Do not have shareholders. 

The profits that might be made by the foundation are not distributed; instead they are used to attain its objectives of general interest. 

Impact of the foundations. 

The data from the foundations in Spain highlights how important they are in our country. Traditionally Spain has been distinguished for its charity and generosity (year after year, for example, the growth in the food donation campaigns can be observed, putting Spain in the lead in this area among the European countries). 

At the moment, Spain is the second country (after Germany) with the highest number of active foundations. There are about 9500 foundations; employing a total of more than 250,000 people and about 8000 million euros are spent on public interest projects. According to the data from the Spanish Foundation Association, with regard to the source of the financing, 85% of the money comes from individuals or companies, while only 15% comes from the Public Authorities or any of the associated agencies. 

Out of these 9.500 foundations, in the Valencia Community, there are 665 foundations that are active and operative at the moment. 

This underlines the importance of this type of organisation in Spain and in our Autonomous Community, foundations stand for 7% of those that are currently active in the country. 

Tax benefits for the foundations in Spain

Deductions for donations to non-profit organisations 

The foundations have a special tax system, which benefits both the Foundations and the people that give donations, because they can claim tax relief (with certain tax thresholds) for these contributions in the IRPF Spanish personal income tax (if the tax payer is an individual), or IS corporate tax (if the tax payer is a legal entity).
The general interest objective that is pursued is to benefit society, which therefore improves (or even starts) the services and/or the activities organised for the group of beneficiaries of the Foundation. The tax benefits granted to the foundations are justified by the fact that they cover the needs that the public Administration cannot, which is why they get relief on the majority of their taxes.
In Spain, the rise of the foundations has been spurred on by the Corporate Social Responsibility (RSC) of the companies, seeing as the benefits for setting up a business foundation can be summarized as follows:

Objectives that are of public and general interest and charitable causes can be attained. 

A long-term commitment is determined. 

An independent structure is set up. 

The possibilities of being able to collaborate with other entities are promoted. 

How can a foundation be set up in Spain? 

The foundation is set up in a public deed and the founders cannot benefit from it, seeing as the objective is to attain the objectives that are of general and public interest. These objectives must be perfectly defined in the articles of association of the foundation. 

The foundation in Spain has a governing body called the board of trustees, which is in charge of making sure that the objectives of the foundation are obtained. 

Given the applicable regulations, it is essential to ask an expert about the different points associated with setting up the foundation, controlling it, running it, processing the necessary forms before the Authorities, etc. This is all without forgetting the specific details that might exist in each Autonomous Community for the foundations. 

We can advise you and answer your questions about your non-profit organisation here.

Pablo Quiles Marín / Lawyer

GESEM SERVICIOS JURÍDICOS Y ECONÓMICOS, SLP

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