Tax Incentives for Charitable Giving: Evidence from the Canton of Geneva, Switzerland

Switzerland is one of the countries whose legal framework includes a system of tax deductions to incentivize charitable giving (OECD 2020).1 Under the current Swiss law, taxpayers can deduct charitable donations from their taxable income (individuals) or taxable profits (corporations) subject to a specific threshold. In order to be deductible, the donation must be made to legal entities that benefit from a tax exemption as a result of the fact that they are pursuing public service or public-interest goals.2 The law and case law specify the tax-exemption conditions for such entities, notably that economic goals cannot be considered public-interest purposes and that acquiring and managing significant corporate equity is considered a public-interest goal only when the interest in keeping such an entity is subordinate to the public-interest goals [Art. 56 (g) LIFD]. Such exoneration requirements apply to the entities subjected to limited and unlimited tax liability in Switzerland, that is, both to resident entities and to permanent establishments. Legal entities governed by public law and semi-public companies do not fall into this scope.3