Charitable donations and philanthropy

Lisa Cornwell Partner, Private Clients & Family Offices - International, PwC Switzerland 12/04/22

Climate change, food insecurity, global health issues, poverty and instability are some of the key challenges facing the international community today. These crises are becoming more complex and pose a unique threat to the world’s poorest and most vulnerable. Charitable giving and philanthropy can be a powerful way for individual donors to make a difference.

Many people want to do something to help the less fortunate or people in need. In some instances, this help is really practical – donating items to use on the ground (and click here to learn about how one PwC colleague has recently taken a very pragmatic approach to providing support ). Others want to make a financial contribution; and when doing so, understanding the tax consequences for you personally (as the donor) is perhaps not front and centre, but is useful to know. In many jurisdictions (including Switzerland) if you’re making a donation to a registered charity, you can take this as a deduction at the end of the year on your tax return. The most obvious benefit of this is that you can effectively gross up the amount you’ll gift – overall the financial costs to you will be the same as making a gift without claiming the relief. Some countries have restrictions on the types of charity that will attract tax relief, so it’s worth checking the position in advance.

In some countries – such as the UK – the way in which the gift is made can also impact how much the charity ultimately receives. Claiming ‘gift aid’ in the UK means that not only can the individual taxpayer claim tax relief, but more importantly it allows the charity to claim additional money from the government – effectively turbo-charging the value of your donation. Some charities will also accept donations in kind of stocks and shares, so it’s worth checking what your routes are to maximising the value of any donation.

Setting up your own charitable foundation

We’ve also seen a huge increase in enquiries of individuals wanting to set up their own philanthropic foundation to enable the provision of support in a very tailored way. At PwC we can support our clients at all points of the foundation life cycle, from the initial establishment to working with our market-leading team on assessing how donations are being used.

However, before jumping into setting up your own vehicle, we recommend that our clients look into existing options; we work with them to assess the options available already – there are so many great existing charities offering a huge array of ways in which you can provide donations directly to those who need it most. There’s plenty of data available to help you understand what will happen to your donation – and the huge benefit of using an existing charity is that there’s no red tape or administrative steps to slow things down; your money can go directly to helping those in need.

If establishing your own philanthropic foundation is still the route that appeals the most, we can support our clients in the end-to-end process of setting a foundation up from both a strategic and practical perspective. This may include identifying the mission statement and family objectives for the foundation, all the way through to identifying the canton to house the foundation and obtaining a tax ruling to ensure gift tax will not be charged on the initial donation made.