Enterprise Foundations as ‘Non-profit Organizations’ Under the EU Pillar Two Directive

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The authors explore the highly debated 15% minimum corporate tax rate better known as Pillar Two. More specifically, the focus is on ‘public good enterprise foundations’ and the potential applicability of the ‘non-profit organization’ definition in the EU Pillar Two Directive (2022/ 2523) from December 2022. A public good enterprise foundation typically controls one or more operating enterprises but can only distribute income to the public good purposes stipulated in the foundation charter. This ‘distribution restraint’ is supplemented by a ‘disbursement duty’ as the governing board must make distributions to the foundation’s public good purposes. In some instances, the founder has – in addition to one or more public good purposes – explicitly stipulated ownership of (specific) operating entities for the purpose of raising funds for the public good purposes in the charter. Consequently, whereas corporations make profit for their owners, the public good enterprise foundation’s purpose is not to operate for profit-making but instead to operate for promotion of the public good purpose in the foundation charter.

Illustrated by Danish public good enterprise foundations (DK: Erhvervsdrivende fonde), it is analysed whether public good enterprise foundations in Europe should be considered as ‘non-profit organizations’ excluded from the EU Pillar Two Directive despite owning (controlling) interests in operating entities that are conducting commercial business. The impact is significant as this would exclude the income and tax of the public good enterprise foundations (and their holding companies) when calculating the jurisdictional effective tax rate of the group and prevent the application of the income inclusion rule and the under taxed payment rule on their income. While self-owned foundations may be unfamiliar in some Member States, it will have significant impact on other Member States such as Denmark where some of the largest businesses (e.g., Maersk, Novo Nordisk, Carlsberg, and Lundbeck) are owned by such public good enterprise foundations. The authors argue they should be considered as non-profit organizations and therefore excluded entities under the Directive.
Udgave nummer6-7
Sider (fra-til)472-486
Antal sider15
StatusUdgivet - 2023


  • Non-profit definition
  • International tax law
  • EU tax law
  • Pillar II
  • EU directive 2022/2523
  • Enterprise foundations
  • Industrial foundations
  • Foundation purpose
  • Foundation objective