Charities in tax conventions

This chapter focuses on tax incentives for charities. The OECD observed in its 2020 tax policy study Taxation and Philanthropy that most countries provide tax incentives for philanthropic giving and philanthropic entities. Charities cross borders in various ways including through international initiatives, investments, and fundraising. This may result in double taxation, both by the resident state of the charity and by the source state of the income. Many countries have concluded bilateral treaties to avoid double taxation (double taxation conventions (DTCs)) to solve or mitigate situations of double-income taxation. Model conventions (MCs) usually serve as the starting point for negotiations. The chapter first analyses the reason why many countries restrict tax incentives to resident charities as this is often the cause of double or single taxation where the purpose of a tax incentive is no taxation. It then assesses whether charities have access to DTCs and, if so, whether they have a special position.