Donations to foundations and non-profit organisations: what advantages?

14.12.2022

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Donations to public bodies and legally recognised foundations or associations whose exclusive purpose is the pursuit of socially deserving purposes are not taxable

Liberal donations to educational institutions or research centers are deductible

For exemption on gift tax for transfers to foundations or nonprofit organizations, it is necessary to have regard to the purpose pursued by these entities

When does the exemption operate?

Donations or bequests made to entities, foundations, and nonprofit organizations, which have as their purpose activities of public utility or assistance, study, promotion of scientific research, education, or instruction, do not discount inheritance taxes.
If we take Article 3 of the Consolidated Act on Inheritance and Donations as a reference, it is easy to learn how an exemption applies to gratuitous transfers addressed to: State, regions, provinces, and municipalities
Public bodies, foundations, and legally recognized associations that have as their exclusive purpose assistance, study, scientific research, education, or other public benefit purposes, nonprofit organizations and banking foundations.
This means that, under our law, all transfers of money or other movable property made to entities whose purpose is to pursue a public benefit are to be considered tax-free. But that is not all. The exemption also applies to real estate transfers, where the benefit also extends to mortgage and cadastral taxes.

Exclusion of exemption

As can be gleaned from, among other things, Supreme Court ruling No. 1149 of 2021, the purpose and aims of the entity or foundation are essential for the exemption to operate. In this sense, under certain circumstances, before making a donation or bequest to a foundation or entity, a judicious assessment must be made, as the activities carried out by it must be analyzed on a case-by-case basis.
Sometimes, in fact (in the case dealt with by the Supreme Court, it was an ecclesiastical entity), the exemption and benefit cannot exist if the entity receiving the donation carries out, even marginally or instrumentally, other kinds of activities; thus, activities not aimed at pursuing public benefit.
If the entity or foundation also engages in other activities, the objective prerequisite for the total benefit is "ex ante" lacking since it could be inferred that the donation or bequest was made to finance these "other activities"; that is, activities for which the system does not recognize a public benefit function.

Deductibility of charitable donations

Under certain conditions, when making liberal disbursements to nonprofit organizations, foundations, and recognized associations, it is also possible to take advantage of the benefit of the deduction. More specifically, liberal disbursements made, for example, by companies and enterprises in favor of:
- educational institutions of all levels
- study and scientific research centers
Are deductible for IRES (and IRAP) purposes, for a total amount not exceeding 2 percent of declared business income, and in any case, to the maximum extent of 70,000 euros annually.