What is the impact of the Arizona Government Agreement on non-profit entities?

The new Belgian Federal Government Agreement introduces important updates for non-profit organisations (hereafter: “NPOs”), including revised filing procedures, tax regulations, and enhanced oversight measures aimed at improving transparency and financial stability.

Key takeaways:

• Mandatory filing of annual accounts will shift from the clerk’s office to the National Bank of Belgium for NPOs, eliminating costs for small NPOs.
• The tax deductibility for donations will decrease from 45% to 30%, potentially impacting fundraising capabilities for NPOs.
• Measures will be taken to prevent the potential misuse of NPOs for abusive, criminal and fraudulent purposes.
• Action will be undertaken to align the Belgian Companies and Associations Code and the non-profit taxation regimes within the evolving non-profit sector.

The Federal Government Agreement includes some important updates that will influence non-profit organisations (hereafter: “NPOs”). These updates aim to modernise regulations, enhance transparency, and ensure the financial stability of NPOs.
 

Main changes

The most important changes impacting your NPO are the following:

Filing of the annual accounts
One of the changes concerns the shift of the mandatory annual filing of the annual accounts of NPOs. Instead of filing these with the clerk’s office of the competent Enterprise Court (which was still the case for NPOs having a simplified accounting), all NPOs will now have to file them with the Central Balance Sheet Office of the National Bank of Belgium (“NBB”), at no cost. This revision aims to simplify and level out the filing procedure and reduce associated costs for small NPOs, allowing them to allocate more resources to their main non-profit purpose and activities.
 

Digitalisation of filing procedures
In addition, it is also intended to digitalise filing procedures. The Just-on-Web portal of the Federal Public Service Justice will be adapted to enable electronic filing and consultation of annual accounts and statutory amendment deeds, including those signed under private deed. This enhancement will provide easier access to key documents and is part of the broader movement toward digitalisation in public administration.
 

Addressing concerns of fraud and enabling bank access for NPOs
Increased digitalisation may however raise concerns about exposure to crime. To address these worries, the government will launch awareness-raising campaigns targeting consumers and SMEs. As far as banks are concerned, on the one hand they will be tasked with facilitating easier bank account blocking, but on the other hand the government will review existing legislation on basic banking services for NPOs (thereby addressing the phenomenon of de-risking by banks and credit institutions). This proactive approach aims to secure the safety of NPOs against potential fraud and enhance the security of their financial transactions.
 

Stricter supervision of suspect NPOs
In addition, the government will implement stricter supervision of suspect NPOs. This initiative, developed in cooperation with local police forces, aligns with recommendations from the parliamentary committee of inquiry into the terrorist attacks of March 22, 2016. The goal is to remain vigilant against the potential misuse of NPOs for criminal purposes.
 

Revision of the Belgian Companies and Associations Code (BCAC)
In more general terms and in cooperation with the non-profit sector, the Belgian Companies and Associations Code (hereafter: “BCAC”) is also to be revised with special consideration for the personal needs and challenges faced by NPOs. This revision is necessary to ensure that the law remains relevant and beneficial to the evolving environment of the non-profit sector. Additionally, the government is addressing suspected abuses related to private foundations. This will involve clarifying federal law regarding "non-profit purposes" and examining existing sanctioning mechanisms. Notaries will have an increased responsibility in identifying “foundation abuse”, and tax authorities will have the authority to call for the dissolution of foundations in cases of abuse. These measures aim to support the integrity of the non-profit sector and assist foundations in fulfilling their non-profit purpose.
 

Adjustments in non-profit taxation
Another important change is that the application of non-profit taxation, including corporate income tax, is to be aligned with the BCAC. The government will examine the effectiveness of the prohibition for NPOs to distribute profits. There are growing concerns about the use of NPOs for criminal activities and private enrichment, particularly when NPOs do not remit funds to the State. This also includes an evaluation of the different taxes that can apply to NPOs, such as the patrimonial tax, corporate income tax, etc. The changes aim to create a more straightforward and legally enforceable system that supports the economic success and integrity of NPOs, while discouraging fraud.
 

Tax deductibility of donations & impact non-profit fundraising
Lastly, there will be a significant impact on non-profit fundraising due to a shift in tax policy. The tax deductibility of donations will decrease from 45% to 30%. This adjustment will affect non-profit fundraising campaigns and influence donor behavior, shaping the overall economic landscape for charitable donations.
 

Conclusion

The planned changes, while not yet concretised, reflect the Federal Government's commitment to reshaping and reinforcing the non-profit sector. NPOs must stay informed, engage with policymakers, and prepare for the forthcoming changes that will impact their daily operations and sustainability. By remaining vigilant and proactive, NPOs will be better positioned to adapt to the evolving regulatory environment and continue their valuable work in society.

The updates outlined in the Federal Government Agreement represent an important step for NPOs, aiming to enhance their integrity, transparency, and financial viability.
 

Action points

• NPOs need to assess the impact of the reduced tax deductibility for donations on their fundraising strategies and consider alternative funding sources.
• NPOs should engage with the authorities and stakeholders to stay informed about the upcoming changes and participate in discussions that shape the future of the non-profit sector.