While our giving should be motivated by the heart, tax breaks are also an important part of generosity. Charitable-minded donors may take advantage of tax codes to make tax-efficient, practical, and impactful charitable contributions with the right strategy.

Multiple factors are considered to find the most tax-efficient way to accomplish philanthropic goals — for example, the individual’s tax situation, country of residence, and the tax codes. In addition, the amount donated and whether the person itemizes deductions may also determine the strategy.

Understanding the tax situations and incentives can help donors make the best decisions about their giving strategy.

Cross-Border Giving

Fortunately, generous donors don’t limit their gifts depending on their location. Instead, they make decisions based on needs rather than boundaries determined by people. However, country laws and regulations govern the incentives and constraints of making and receiving cross-border donations, which can impact a donor. 

Unfortunately, a recent report found that more countries are passing laws as governments try to block foreign donors from funding human rights groups and other nonprofits. That means that donors must be savvy to ensure that their contributions reach their destination and generate incentives to maximize tax breaks.

Member States of the European Union (EU) are legally required to provide a degree of reciprocity in the tax treatment of cross-border giving and philanthropic entities that operate across borders, subject to a ‘comparability’ assessment. 

However, beyond the European Union (EU), countries provide little tax support for cross-border giving. Most countries do not offer tax relief for foreign philanthropic entities operating domestically. However, many countries allow domestic entities to operate abroad without losing their tax-favored status, though they are potentially subject to additional restrictions or reporting requirements.

Giving Strategies and Philanthropic Tools

Donor-Advised Funds

Funding charities outside your country can be complicated and costly. A donor-advised fund (DAF) — a charitable giving vehicle created by an individual, family, or organization — streamlines the process for the donor. Rather than researching and vetting organizations to ensure their legitimacy and attempting to understand each government’s complex banking regulations and tax incentives, the DAF handles due diligence.

DAFs offer many tax benefits for international philanthropy. 

Donating Shares and Other Assets

The smartest donations often aren’t cash. Some charities cannot accept assets other than cash. With a DAF, you may donate different types of assets. For example, if you have appreciated shares in your portfolio, you may donate the shares to your DAF account, eliminate the capital gains tax liability and write off the market value of the shares on your income tax return. 

Immediate Tax Benefit, Payout Flexibility

The pressure of deciding which charities to support can be overwhelming when you receive a windfall, like a large bonus, inheritance, or going through a liquidity event. A DAF allows you to contribute assets to your account when it makes the most sense from a tax planning perspective and decide later which charities to support in your own time. 

Grow Your Donation, Tax-Free

Your charitable assets grow tax-free while deciding which community initiatives or nonprofit organizations to support. In addition, sponsoring organizations typically offer various investment options for your charitable assets based on your projected grantmaking timeline.

Streamline Your Global Philanthropy

International donations made with a TrustBridge Global Charity Fund deliver more of your gift to charity, so more of your contributions are used to make a difference in the world. With the TrustBridge Global Network, your funds are distributed where they can make a meaningful difference to create a stable world. In addition, a TrustBridge Global DAF can handle the complexities of cross-border giving to increase the power of your donations.