In less than fifteen years, endowment funds have established themselves as a discreet yet powerful pillar of philanthropy in France. Established by the Act of 4 August 2008, they offer a flexible legal framework for funding projects in the public interest whilst benefiting from an attractive tax regime.

The success is undeniable: on 1 January 2025, there were more than 5,800 endowment funds in operation, compared with barely a few hundreds in 2010. Their profile has changed: the founders are no longer just a few of the major fortunes or multinational corporations, but also SMEs, SMEs, mid-sized companies, mid-sized enterprises, and even individuals wishing to organise their philanthropic involvement.

But behind this boom lie complex rules and increasing scrutiny from the tax authorities. This article offers a brief legal and tax guide to endowment funds, covering everything from their creation to their operation, including their advantages and limitations.

What is an endowment fund?

The endowment fund is a non-profit legal entity governed by private law, modelled on the Anglo-Saxon ‘endowment fund’.

It is defined as an organisation set up to receive and manage assets and rights of any kind that are transferred to it free of charge and irrevocably, with a view to funding public-interest initiatives or redistributing funds to other non-profit organisations.

In practice, the endowment fund is:

• Easier to set up than a charity.

• More flexible to manage, as it does not require cumbersome administrative authorisation.

• A hybrid tool, enabling you to invest, manage and redistribute.

Terms of establishment and governance

Creation

An endowment fund is established simply by filing a declaration with the prefecture. Its articles of association must be published in the Official Journal of Associations and Corporate Foundations (JOAFE).

Since 2021, a minimum initial endowment of €15,000 has been required for its establishment, in order to prevent the creation of shell organisations.

Governance

The articles of association set out the internal organisation as the organisation sees fit, provided that the principles of disinterested management are observed. In practice:

• A board of directors comprising at least three members.

• Rules on the prevention of conflicts of interest.

• The requirement to appoint an statutory auditor where annual resources exceed €10,000.

Corporate purpose

The purpose of the fund must be in the public interest: philanthropic, educational, scientific, social, humanitarian, sporting, family-related or cultural. Some funds may also finance environmental conservation or the promotion of culture.

Classification of endowment funds

Traditionally, there are three main models:

1. Operator fund: it carries out activities directly (e.g. organising cultural events, managing a social care facility).

2. Distribution fund: it collects donations and passes them on to other charities or foundations.

3. Mixed fund: it combines both approaches, acting as both an operator and a redistributor.

This classification has tax implications in particular: a redistributive fund must, for example, check that the beneficiary organisations are themselves eligible for the tax regime for charitable giving.

Tax regime applicable to the endowment fund

Tax on corporations (CIT)

In principle, endowment funds are exempt from corporation tax when they carry out non-profit-making activities. However, if they engage in ancillary profit-making activities, these may be subject to corporation tax in accordance with the rules of ordinary law.

VAT

Endowment funds are exempt from VAT in respect of their non-profit-making activities. However, certain services may be subject to VAT if they fall within the scope of VAT.

Transfer duties

Donations and bequests made to endowment funds are exempt from gift tax, provided that the fund pursues a purpose in the public interest.

IFI

Donations made to an eligible endowment fund entitle the donor to a reduction in the IFI of 75 %, up to a limit of €50,000 per year.

Tax regime applicable to donors

Tax benefits depend on the status of the donor:

• Private individuals: an income tax relief equal to 66 % of the amount donated, up to a limit of 20 % of taxable income.

• Businesses: a corporation tax relief of 60 % of the value of donations, up to a limit of 0.5 % of turnover excluding VAT or €20,000 (see Article 1 of this series).

• People liable for the IFI: a 75 % reduction in the IFI due, up to a limit of €50,000.

These benefits are subject to the issue of a valid tax receipt (CERFA 2041-MEC-SD).

Legal obligations and monitoring

Endowment funds must comply with a set of requirements designed to ensure their transparency:

• Keeping accounts in accordance with the rules of the accounting framework for associations.

• Annual filing of accounts with the prefecture and publication in the JOAFE.

• Mandatory appointment of an auditor once a certain threshold is exceeded.

• Audits may be carried out by the Court of Auditors and the General Inspectorate of Finance.

In recent years, endowment funds have been subject to increased scrutiny, given their rapid growth and the risks of them being misused for private purposes.

Recent trends and developments

• Continued growth: +4 % in 2024, with a total of 5,833 funds recorded;

• Profile of the founders: the emergence of young entrepreneurs and of families wishing to organise their philanthropy:

• Diversification of the causes supported: environment, energy transition, social inclusion.

• Digitisation: some charities use digital platforms to collect and redistribute donations.

Risks and limitations

Whilst endowment funds are a flexible and attractive option, they are not without their risks:

• Incorrect classification of the asset or beneficiaries, which may lead to a tax reassessment.

• Inappropriate valuation of donations in kind.

• Conflicts of interest between directors and beneficiaries.

• Tighter tax audits: the tax authorities are now targeting organisations where charitable giving may conceal misappropriated funds.

Conclusion

An endowment fund is a modern philanthropic vehicle that combines simplicity, tax advantages and flexibility in management. It is attracting an increasing number of entrepreneurs and high-net-worth families who wish to ensure their commitment is sustained over the long term.

However, this freedom comes with greater responsibilities: transparency, rigorous accounting and tax compliance. A poorly structured endowment fund can become a major tax risk.

At Qualifisc, we support businesses and organisations in setting up, managing and safeguarding their endowment funds, whilst ensuring both tax optimisation and legal compliance.