Operating as an NGO in Europe: A Comprehensive Guide and Comparison

For most international nonprofits, having a presence in Europe is key for fundraising, staffing, and strategic purposes. Where to establish the entity is a crucial decision that can lead to or avoid compliance headaches, long setup times, or restrictions. 

The content below evaluates some of the factor's organizations should consider when deciding which country will host their NGO European regional hub. This report focuses specifically on setting up a nonprofit presence in Denmark, Germany, Switzerland, the Netherlands, Austria, and the UK so it is by no means exhaustive. 

Country Comparison Table for NGO Expansion in Europe 

*This metric shows the relative cost of living / salary level among the countries in the table, ranked 1-6 (1 being the most expensive). Social Security indicates the employer’s burden as a percentage of gross salary (this is sometimes variable or a fixed number, so some of these are approximations). Payroll tax shows the employer’s share of payroll tax as a percentage of gross salary. 

Analysis & Commentary 

 Overview and Fundraising 

From the general perspective of overall ease of setup and benefits available, the six countries evaluated have few dramatic differences. Following nonprofit registration in Europe, the ongoing compliance requirements are relatively similar; with the norm being an annual statutory report on the organization’s activities, governance, and finances. The list of relevant tax exemptions differs somewhat across the six jurisdictions, but the majority entail an additional application or request to be enjoyed. All countries formally recognize the importance of international organiz­­­­­ations to their foreign relations, local economies, and global reputation, though the extent of the governments’ tax-incentives and other official forms of encouragement to these INGOs differ of course. ­­  

Regarding international fundraising, the only controls to be aware of are Anti-Money Laundering concerns: no matter the destination in Europe, organizations should plan to keep complete records of donor information, especially for substantial amounts coming from individuals or unknown sources internationally, as banks are likely to flag these and request additional details and context. Additionally, gift tax should not be an issue with any country, but it will be important to confirm any exceptions to nonprofit foundations’ exemption. The only one discovered in the scope of this research was in the Netherlands and Denmark: in which gift tax applies to domestic donations by default, and nonprofits must seek an exemption. 

Lacking any stark discrepancies or obvious standouts within the broad themes of cost/difficulty of entry and benefits available, determining the most advantageous location for setup requires a closer look at the details of the tax exemptions offered, relative benefits of quasi-international organizations, and more basic factors such as employment costs, labor market, and geographic location. 

Tax Exemptions Available for Nonprofits in Europe 

All six of these countries offer corporate income tax exemption for NGOs, but the Netherlands allows nonprofits to skip registering as an income taxpayer upon setup (all others require an additional registration or application following incorporation). The process to obtain this status, for the other five countries, is generally not overly cumbersome or time intensive. For Switzerland, Austria, Denmark, and Germany, this comes in the form of a special application to the tax authorities to confirm your status and grant a certificate. Denmark’s process, especially, is rather specific as certain types of nonprofit income (subsidiary dividends, inheritance, grants, insurance) are outside of the tax framework already for nonprofit foundations, while others (gifts, donations) require an application to the Tax Agency for exemption. Finally, in the UK, organizations register with the Charity Commission, and must wait to use their first annual nil filing in their application paperwork.  

From here, however, the countries begin to diverge slightly. The next most common exemption is donor tax relief, allowing corporations and individuals to deduct donations to the organization in question from their own income taxes. Technically, all evaluated locations offer some form of this, but it is effectively unavailable in Austria – only very specific industries in the nonprofit sector qualify for the exemption, representing about 5% of NGOs in the country (it is worth noting that a law allowing broader tax deductibility has been a pending item for some years now, with the opposition maintaining that the change would result in decreased government support for NGOs and increased, cannibalistic competition for private donors). The degree to which this is significant, though, depends on whether your organization expects to perform mostly domestic or international fundraising activities, as the host country has no jurisdiction over the treatment of foreigners’ donations on tax returns in their respective countries.  

Some form of VAT relief or exemption is also available in several countries, though in varying forms. In the UK, for example, nonprofits are not obliged to include VAT on invoices in revenue-generating activities and can reclaim VAT paid on purchases. In Austria and Germany, certain industries operate with reduced VAT rates, including nonprofits. For Denmark and Netherlands, your organization would likely pay full VAT on some transactions and none on others (e.g., fundraising). Swiss nonprofits can also receive a ruling from the tax authorities that exempts them from VAT. 

International Organization Status 

If your organization is quasi-governmental and international in nature (e.g., World Health Organization, United Nations, etc.), Austria’s “Federal Law on the Granting of Privileges to Non-Governmental International Organizations” offers the broadest list of advantageous exemptions applicable to you, and Germany also has a comprehensive law (the “Host State Law”) aimed at assisting and encouraging the work of these institutions. The Netherlands offers personal assistance to organizations’ employees through the same department that coordinates diplomatic visits. The other three countries have more vague relationships with international organizations and seem to grant exceptions more on a case-by-case basis. Most commonly, they open up the possibility for employees of these organizations to travel with diplomatic status, though this depends primarily on the purpose of the trip. Most countries also exempt UN employees from federal income tax, and in Denmark this applies to select other organizations as well. Lastly, Switzerland’s interpretation of the privileges and immunities granted to UN representatives (which includes exemption from payroll taxes, local and federal) leaves room for “non-governmental organizations which enjoy a consultative status to the United Nations.”  

Analysis of Employment Costs and Labor Law Considerations 

Somewhat coincidentally, the countries in this list hold a relative tradeoff between higher salaries and costs vs. lower social security burden, or vice versa. Though we have not conducted a full analysis of the relevant salary ranges for various fundraising roles across each country with considerations for typical benefits packages, etc., we can surmise from this preliminary information that the UK and Germany will typically be the cheapest countries in total payroll cost, with the Netherlands, Austria, and Denmark on the more expensive side (Switzerland would likely be in the middle).  

Most of these countries also maintain labor laws which are very favorable to the employee for issues such as leave and severance pay, with Switzerland and the UK as the exceptions, falling closer to the US on that spectrum. The Netherlands, additionally, is quite popular with expats in highly skilled fields due to the “30% ruling,” which allows employers to grant up to 30% of gross salaries as tax-free allowances. 

 We hope this guide is helpful in your evaluation of potential countries in Europe in which to register your nonprofit. Please reach out to our General Manager of NGO Services, Aidan O’Neill, at aidan.o’neill@topsourceworldwide.com with any questions, or for a complementary consultation. You can also visit https://topsourceworldwide.com/ngo-expansion-services.