24 January 2018

An Anbi (Algemeen nut beogende instelling) is a public benefit organization. Anbi is a Dutch concept. In the Dutch Caribbean it doesn’t exist. That’s a shame. In the Netherlands, an Anbi enjoys various very attractive tax benefits and exemptions.

Usually an Anbi is a foundation. That’s the core of the idea. A long time ago, a foundation was intended as a tool to isolate money for a good cause. This could be, for instance, a retirement home, a hospital or an institute for the blind. Because of the charitable cause and the lack of a profit motive, various tax exemptions applied, in particular with regard to tax on profits. That makes sense, because a foundation is not focused on making a profit. Nowadays things are different. A foundation is a legal entity that can also be used in the context of performing a business activity. In such a case the foundation does pay tax, including tax on profits (i.e. corporate income tax).

To create more clarity as to when a foundation only works for a charitable cause, the Dutch legislator has designed the Anbi status. If an organization, irrespective of its legal form, meets a number of requirements, this organization can get the Anbi status. That is very attractive. Not only does an organization that is recognized as an Anbi not pay any corporate income tax, it can also receive tax free gifts and inheritances and make tax free donations. An Anbi can employ personnel and, under certain conditions, be exempted from paying the normal employer’s contributions. In short, every organization would love to be an Anbi. But what are the requirements? Among other things, the following criteria must be met.

First of all, the Anbi must make it plausible that it has no profit motive and that at least 90% of its activities are indeed in the general interest. Second, the directors and members of the Supervisory Board may only receive limited remuneration. Third, they need to have an up-to-date policy plan as well as a proper administration and both must be made public (on a website).

This is a smart move by the Dutch legislator. After all, by promising considerable tax benefits, any organization that feels attracted to these benefits is forced by the associated conditions to properly organize its governance. An Anbi must have its finances in order, must publicly account for the spending of its funds, have a good management structure, and so on. This improves the quality of the organization and management of these entities considerably. And that’s also good for the realization of the worthy goals that they strive to achieve.

There’s another advantage. Many organizations for the general good receive subsidies and contributions from the government. That is tax money paid by you and me. Due to the requirements that obtaining the Anbi status entails, the probability that these subsidies are used in the appropriate manner is much greater. Ultimately, that’s to the benefit of everyone.

“We could also do this over here with our government-affiliated foundations: make the regulation of tax advantages and disadvantages dependent on good internal governance.”

For me, a final interesting aspect of the Anbi is the positive way in which good governance is enforced. Basically, the state makes you an offer you cannot refuse. That is much more useful than making legislation and then trying to enforce it through sanctions. We could also do this over here with our government-affiliated foundations: make the regulation of tax advantages and disadvantages dependent on good internal governance. The governance of private foundations in the welfare and health care sector could be significantly improved in this way as well. By limiting the deductibility of donations for the donors if they don’t donate to an Anbi, the receiving institutions are forced to improve their governance. In short, let’s introduce the Canbi, Banbi, Xanbi and Anbi in the Dutch Caribbean.

This blogpost is also available in Papiamentu. Click here to download a pdf version.

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