1. Would a corporate legal entity in your jurisdiction be entitled to make a corporate income tax deduction in respect of donations made in favour of a public benefit organisation based in the EU outside of your jurisdiction (“EU PBO”)? Are there restrictions/conditions for such tax deductibility (e.g. maximum cap per annum for the deductibility of the donations, etc)?
  2.  Would an individual in your jurisdiction be entitled to make an income tax deduction in respect of donations made in favour of an EU PBO? Are there restrictions/conditions for such tax deductibility (e.g. maximum cap per annum for the deductibility of the donations, etc)?
  3.  Would an EU PBO be entitled to the same treatment as a national non-profit organisation (charity) in your jurisdiction based on the EU law principle of equal treatment of EU entities? Is an EU PBO obliged to pay gift tax in your jurisdiction if it receives a donation from a donor who is resident in that country?
  4.  Would it make sense to channel the donations from your jurisdiction to a third country-based charitable foundation (in e.g. the US or Ukraine) rather than to an EU PBO?

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A corporate legal entity in Sweden is not entitled to make corporate income tax deductions in respect of donations made in favour of an EU PBO.

As a main rule in Sweden, companies are solely able to deduct expenses for acquiring and maintaining incomes. Thus, in order for a corporate legal entity to make income tax deductions (wholly or partly), the legal entity must receive some form of compensation from an EU PBO in exchange. A company may, for instance, be granted the right to make income tax deductions if the compensation is given due to a sponsorship agreement in which the sponsor receives publicity through an EU PBO.

2. Would an individual in your jurisdiction be entitled to make an income tax deduction in respect of donations made in favour of an EU PBO? Are there restrictions/conditions for such tax deductibility (e.g. maximum cap per annum for the deductibility of the donations, etc)?

Individuals are not entitled to make income tax deductions in respect of donations made in favour of PBOs. However, individuals can, under certain circumstances, receive tax reductions on such donations.

The tax reduction amounts to 25% of the donation and may not exceed SEK 3,000 per calendar year (i.e. a total donation of SEK 12,000). The tax reduction is calculated against Swedish municipal income tax, Swedish state income tax and property tax.

In order for an individual to receive tax reductions on donations made in favour of an EU PBO, the following conditions must be met:

  • the individual must have turned 18 years old at the end of the calendar year in which the donation is given
  • the individual shall have been liable to tax in Sweden during (at least part of) the calendar year
  • the individual shall donate at least SEK 200 to the same recipient on each occasion, and
  • the individual shall donate at least SEK 2,000 during the calendar year.

Furthermore, the recipient of the donation (an EU PBO) must be approved by the Swedish Tax Agency as a recipient of such donations.

In order for an organisation to be approved as a recipient (and maintain the approval), several conditions must be met:

  • the recipient shall be a foundation, a non-profit association or a registered religious community
  • the recipient shall be subject to reduced tax liability (in order to be subject to reduced tax liability, certain conditions must be met)
  • the recipient must aim to promote social aid activities or scientific research or carry out such activities
  • the donations shall be used for the activities mentioned above
  • the recipient shall have book-keeping and financial accounts available to the Swedish Tax Agency in order for the authority to review how the recipient has received and used the donations, and
  • the recipient must have at least one authorised or approved auditor.

A foreign organisation that corresponds to a Swedish foundation, non-profit association or registered religious community can be approved as a recipient. In this regard, the requirements above apply on the foreign recipient. The foreign organisation must, however, provide the Swedish Tax Agency with a written commitment to deliver control information for the donations that the organisation receives.

3. Would an EU PBO be entitled to the same treatment as a national non-profit organisation (charity) in your jurisdiction based on the EU law principle of equal treatment of EU entities? Is an EU PBO obliged to pay gift tax in your jurisdiction if it receives a donation from a donor who is resident in that country?

As stated in Q1 and Q2, an EU PBO is treated as a Swedish non-profit organisation regarding income tax reductions given that certain prerequisites are met. Since 2004, there are no gift taxes in Sweden. An EU PBO will, thus, not be obliged to pay gift tax in Sweden on donations received.

4. Would it make sense to channel the donations from your jurisdiction to a third country-based charitable foundation (in e.g. the US or Ukraine) rather than to an EU PBO?

As a general rule, a foreign non-profit organisation that corresponds to a Swedish non-profit organisation is liable to tax on income in Sweden according to the same principles as Swedish non-profit organisations.

Therefore, donations from Sweden to a Ukrainian charitable foundation or a US public charity will be treated in the same way as described in Q1 and Q2 if such charity organisations comply with Swedish domestic law.