The foundations’ activities result in tax liability and payment of taxes in several ways, and the foundations are therefore subject to a range of specific tax regulations.
The foundations are liable to tax on any profits; the grants result in payment of taxes on the recipient side; and furthermore, the financial relationship between the foundations and the VKR Group of companies is subject to several specific tax regulations.
The foundations are subject to the same tax regulations as corporations and limited liability companies. They are also subject to the Foundation Taxation Act, which requires that foundations pay taxes on their income, but permits deductions for philanthropic contributions and operational costs.
Each krone granted, generates 41 øre in state revenue
454 million kroner in 2019
Tax and VAT on grants made by the foundations
When grant recipients spend the money they receive in the form of grants from the foundations, the spending is subject to taxes and fees. This generates considerable income for the Danish state. Each krone distributed in grant money to Danish and foreign recipients, generates 41 øre in state revenue, according to PwC. In 2019, this amounted to 454 million kroner.
The VKR group, the foundations and taxation
VILLUM FONDEN is a co-owner of the VKR group of companies, known collectively as VKR Holding A/S. The group’s companies pay taxes according to the laws of the country in which they do business, either as incorporated firms or limited liability companies. The foundation is jointly taxed together with VKR Holding, from which it receives an annual dividend. In return, the foundation is obliged to make philanthropic contributions of an amount equal to the dividend received from VKR Holding.
VELUX FONDEN receives funding each year from VILLUM FONDEN. The funds must be used for philanthropic contributions according to the same guidelines that apply to VILLUM FONDEN.
Deduction for endowment consolidation
Danish foundations can protect the value of their endowments by hedging their assets against inflation. Currently, the tax deduction for consolidation of the foundation’s endowment is 4% of its philanthropic contributions.