EUROPEAN COMMISSION

Brussels, 5.9.2023

SWD(2023) 293 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

Proposal for a Directive of the European Parliament and of the Council

on European cross-border associations

{COM(2023) 516 final} - {SEC(2023) 306 final} - {SWD(2023) 292 final} - {SWD(2023) 294 final}

Table of content

1.INTRODUCTION

1.1 Scope of the initiative

1.2 Political context

1.3 Legal context

1.4 Market Context

2.Problem definition

2.1Preliminary remarks

2.2 What is the problem?

2.3 What are the problem drivers?

2.3.1 Driver 1: Key cross-border aspects for associations are either unregulated or regulated in varying ways in each EU Member State

2.3.2 Driver 2: Lack of mutual recognition of legal personality of an association when operating cross-border

2.3.3. Driver 3: Excessive administrative practices and processes when operating cross-border

2.4 How likely is the problem to persist?propo

3.Why should the EU act?

3.1Legal basis

3.2Subsidiarity: Necessity of EU action

3.3Subsidiarity: Added value of EU action

4Objectives: What is to be achieved?

4.1General objectives

4.2Specific objectives

5What are the available policy options?

5.1What is the baseline from which options are assessed?

5.1.1Socio-economic context

5.1.2Costs of operating cross border (baseline)

5.1.3EU level action

5.1.4International level

5.2Description of the policy options

5.2.1Option 1: Establish an EU-level legal form of association

5.2.2Option 2: Harmonise common minimum standards for cross-border activities of associations

5.2.3Option 3: Create at Member State level an additional legal form of association designed for cross-border purposes (“the cross-border association”) and recognised by Member States

5.3Options discarded at an early stage

6What are the impacts of the policy options?

6.1PO1a and PO1b: Establish an EU-level legal form of association: ‘the European Association’ (PO1a)” or ‘The European cross-border Association’ (PO1b)

6.1.1Economic impacts on associations

6.1.2Indirect economic effects

6.1.3Impacts on Member States

6.1.4Stakeholders’ views on policy option 1

6.1.5Specific impacts related to Policy option 1b: EU level legal form covering cross-border aspects: ‘The European cross-border Association’

6.2PO2: Harmonisation regarding common minimum standards for cross-border activities of associations

6.2.1Economic impacts on associations

6.2.2Indirect economic effects

6.2.3Impacts on Member States

6.2.4Stakeholders’ views on policy option 2

6.3PO3: Creation of an additional national legal form of association designed for a cross-border membership and/or cross-border purposes or activities

6.3.1Economic impacts on associations

6.3.2Indirect economic impacts

6.3.3Impacts on Member States

6.3.4Stakeholders’ views on policy option 3

7HOW DO THE OPTIONS COMPARE?

8Preferred option

9HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?

ANNEXES

Glossary

Main working definitions

1.INTRODUCTION 

The non-profit sector

The non-profit sector is instrumental for bringing together the social, green and digital objectives of the European Union. It does so by showing “another way” to generate value and meet societal needs that the market and, in some areas, the State cannot address. 1  For instance, the non-profit sector enables grassroots initiatives to emerge and contributes to face challenges such as, more recently, the COVID-19 pandemic and the crisis originated by Russia’s aggression in Ukraine, while it can also help ensure a just green transition for all parts of the society. 2  Unlocking the potential of the non-profit sector can strengthen its positive role in generating value in economic and societal terms across the European Union. It can also help underpin civic participation, EU values and fundamental rights. 

The legal form of association

Out of almost 4.6 million organisations within the non-profit sector at EU level around 87% (3.87 million) have the legal form of associations. 3  Associations are also the largest in number of the four legal forms traditionally encompassed by the social economy, 4  which includes both non-profit and profit-making entities with or without economic activities that prioritize social or public interest goals and share common principles and features. 5  Associations are also present in the so called third sector. 6 It is important to note that, in some Member States, there are legal statuses connected, for example, with fiscal privileges or access to public funding, which associations may decide to acquire in addition to their legal form, provided that they satisfy specific requirements for such qualifications and depending on the jurisdiction where they operate. 7

Figure 1 provides an overview of the legal forms commonly present in the social economy ) the non-profit sector and the third sector, as well as the legal statuses (or qualifications) that associations may decide to acquire. Annex 9 provides more information on the legal forms in the social economy and the non-profit sector.

Figure 1: Overview of common legal forms and statuses present in the non-profit sector, the social economy and the third sector.

Non-profit associations are membership-based legal forms that may or may not perform entrepreneurial/economic activities, serving a collective or social interest or public benefit, and any revenues they generate exceeding expenses must be committed to the entity’s purpose (contrary to entities operating as a business aiming to generate profit and distribute it to it owners or shareholders). Associations are active in all Member States, where they provide goods and services, addressing needs ranging from local communities to broader societal challenges, and lower the threshold for civic participation in sectors such as sports, recreation and culture, as well as in social and health services, education and training. While they largely operate at local and national level, there are already associations that operate in several Member States.

Associations are regulated through legislation and rules specific to them in 24 out of 27 Member States (Annex 10 provides an overview of the legal regimes of associations in the Member States). 8  

According to the legal comparative analysis conducted in the IA study underpinning the preparation of the impact assessment, national regulatory frameworks are, in principle, adequate for the development of associations operating at national level. At the same time, rules on cross-border aspects of associations are generally not provided for in national legislations or, when provided, they differ or they may be effectively constraining associations operating in more than one Member State. This results in regulatory fragmentation legal uncertainty about the applicable rules and unjustified administrative practices and costs for associations, creating barriers for those associations engaged or wishing to engage in activities in more than one Member State (Annex 11 summarises national rules on cross-border aspects of associations).

Against this background, the initiative assessed in this impact assessment report (‘IA Study’) focuses on non-profit associations as the predominant legal form in the non-profit sector and aims create an enabling framework for cross-border activities of associations in the single market.

1.1 Scope of the initiative 

With the view to unlocking the potential of the non-profit sector in the EU, this initiative captures “non-profit associations” having a legal personality and seeks to address barriers that they face in their cross-border activities and mobility in the single market (as described in Section 2). The entities in the scope of the initiative will be hereinafter referred as “associations”.

As associations represent the predominant legal form among non-profit organisations at EU level and through their membership-based structure, they have a direct leverage effect on citizens who are members, donors or beneficiaries of their activities. Therefore, creating an enabling framework for cross-border activities of associations has potentially a multiplying positive impact on the largest part of the EU non-profit sector.

This said, cross-border obstacles faced by associations in the areas of taxation and labour law will not be addressed by this initiative, taking into account the EU limited competence in these areas and the principles of proportionality and subsidiarity (notably taxation aspects will be tackled through specific factsheets on legislative frameworks and case-law, as explained in Sections 1.2 and 2 and in Annexes 9 and 12).

Other legal forms present in the non-profit sector and the social economy, such as foundations, 9 cooperatives and mutual societies, are excluded from the scope of this initiative (as explained in Annex 9). 

Entities excluded from the scope of the initiative are outlined in Box 1.

Box 1: Non-profit sector and social economy entities and types of associations excluded from the scope of this initiative and not assessed in this IA.

1.2 Political context

The initiative is embedded in the broader political objectives of the European Green Deal and the Digital Decade 2030.

More specifically, it addresses the political priority “ An economy that works for people ” 13 , contributing to the objective of “an economy that can fully respond to the needs of EU citizens thereby ensuring social fairness and prosperity”. In this sense, the initiative interlinks with the other measures announced in the Social Economy Action Plan and forms with them the Social Economy framework as follows:

First, a proposal for a Council Recommendation on developing social economy framework conditions in the Member States which will recommend Member States to integrate the social economy into their socio-economic policies and create a favourable environment for the sector, including through targeted public policies and adapted  legal frameworks. Having as objective to foster access to the labour market and social inclusion, it will touch upon a variety of areas of relevance to the social economy, such as employment policy, education, skills and training, social services, green transition, territorial cohesion, data and research, access to funding, access to markets, State aid, taxation, public procurement, and social impact measurement. Despite the difference in scope, the proposal for a Council Recommendation is particularly linked with the current initiative in that it is promoting an enabling environment for social economy entities, including associations, but it does not touch upon cross-border activities of associations specifically and its recommendations are non-binding for the Member States. Therefore, there is no overlap between the two initiatives.

Second, two Commission Staff Working Documents (notably on “relevant taxation frameworks for social economy entities” and on “non-discriminatory taxation of charitable organisations and their donors: principles drawn from EU case-law,”) are planned to be presented together with this initiative. They will provide factual information as to the state of play of legislative frameworks in Member States and the case-law on taxation matters, thus tackling cross-border taxation obstacles falling out of the scope of this initiative. 14

The Social Economy Action Plan recognised that associations face constraints in operating cross-border and referred to a forthcoming European Parliament initiative 15 , which was eventually adopted in February 2022. This  European Parliament resolution  aims to promote associations and other non-profit organisations in the EU in completing the single market, protecting their fundamental rights and fostering an EU democratic space. It asked the Commission, under Article 225 TFEU, to submit two new legislative proposals: a Regulation (under Article 352 TFEU), which creates the legal form of “European Associations”, and a Directive harmonising common minimum standards for NPOs (under Article 114 TFEU).

Sharing the need to create an enabling environment for the non-profit sector, as stemming from the EP resolution, and building on the objectives of the Social Economy Action Plan, the Commission committed to pursue the matter. This initiative is, therefore, included in the Commission work programme 2023 , as part of the Social Economy framework, and is complemented by the measures mentioned above. The Social Economy framework will address the broader scope of issues raised in the European Parliament resolution, combining legislative and non-legislative actions, in line with the principles of subsidiarity and proportionality (details are provided in Annex 9). 

Furthermore, this initiative may have links with the ‘Defence of Democracy package’ (see the Call for Evidence of 16 February 2023), announced under the political priority of “A new push for European democracy”.

Addressing cross-border aspects of non-profit associations as civil society actors, this initiative is also in line with the findings of the 2022 Annual report on the application of the EU Charter of Fundamental Rights , which stresses that civil society organisations may advocate policies and legislation beyond the borders of Member States and that their role is particularly relevant in the context of current challenges the EU if facing. 16  In this connection, the Conference on the Future of Europe recognises the important role of the civil society and mentions the need for a statute for European cross-border associations and non-profit organisations. 17

This initiative further underpins the political priority “a Europe fit for the digital age” by seeking to facilitate the cross-border activities of associations and thereby enabling them to play an active role in responding to the opportunities and challenges of the digital transformation. 18 This is relevant for strengthening freedoms of information and expression in civil society (e.g.  European Media Freedom Act ), as well as for boosting civic engagement, especially for youth, and volunteerism in general. In this regard, the European Solidarity Corps , financing volunteering and solidary projects in the EU and partner countries aiming at addressing unmet societal needs, constitutes a concrete illustration.

This initiative also supports the objectives of the EU Industrial Strategy and its update of May 2021, 19  and in particular the Proximity and Social Economy ecosystem, one of the 14 industrial ecosystems identified as critical for post-COVID recovery, for the resilience of the EU economy and for the green and digital transition. In this context, the transition pathway for Proximity and Social Economy presented in November 2022, 20 mapped barriers and opportunities and identified, in co-creation with stakeholders, 14 areas of shared action to fulfil the potential for the green and digital transition of the actors in this ecosystem, including associations. 

Lastly, the initiative contributes to the Sustainable Development Goals (SDGs) and it particularly supports the SDG 8 ( Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all ), by supporting job creation and improving equal and inclusive access to economic opportunities. It further addresses the SDG 16 ( Peace, justice and inclusive societies ), by strengthening civil society through protecting associations among other entities. This initiative also indirectly supports SDG 3 ( Ensure healthy lives and promote well-being for all ), by facilitating cross-border activities of associations mainly active in sectors such as health, care and social services.

1.3 Legal context

EU level

The right to freedom of assembly of association is a fundamental right enshrined in the EU Charter of Fundamental Rights (Article 12). 21  The Court of Justice of the European Union (CJEU) has recognised it as one of the essential foundations of a democratic and pluralistic society. 22  

In terms of the regulatory conditions for associations in the single market, there is no dedicated EU-level legislation, such as there is for companies 23 and cooperatives 24 . The Commission proposed creating a European legal form for associations, the European Association, in 1992, based on the current Article 114 TFEU. 25 The proposal was, however, criticised by some Member States on grounds of subsidiarity and unsuitability of the legal basis compared to its scope and purposes and because according to their view it did not answer to any proven need, its provisions did not embody the diversity of national legislations and it laid excessive administrative burden on associations. 26  The European Parliament was supportive and continued to ask for progress on the proposal until 2005 when it was eventually withdrawn by the Commission due to lack of progress at the Council. Section 5 and Annex 9 provide further information on the Commission proposal of 1992 and explain differences with the current initiative, including the reasons why it failed and how the situation has evolved since then.

Furthermore, there are additional legal forms at EU level that aim to facilitate cross-border co-operation and which do not exclude associations: in particular, the European Digital Infrastructure Consortia (EDIC) 27 , the European Research Infrastructure Consortium (ERIC) 28 , European Grouping of Economic Interest (EEIG), 29 and European Territorial Cooperation Grouping (EGTC) 30 . As their names imply, these focus on cooperation of entities. As such, their personal scope may partially cover associations with cross-border activities, to the extent that these are eligible entities, but they do not address the specific challenges faced by associations wishing to extend operations in more than one Member State and that this initiative targets. For a detailed overview of existing legal forms and how they relate to the entities and the scope covered by this initiative, see Annex 9.

Regarding the cross-border activities of associations in the single market, CJEU case law has confirmed that the right to establishment and the free movement of services apply to “undertakings”, which are defined broadly as not limited to persons seeking to make a profit, as long as activities are remunerated. 31  Moreover, CJEU jurisprudence in EU competition law establishes that NPOs - associations in this case - may be considered ‘undertakings’. 32 A further analysis of the specificities of associations and, broadly, the non-profit sector under EU law is found in Section 3 of this IA. Associations benefit from the freedom of movement of capital in the single market. Article 63 (1) TFEU states that all restrictions on movements of capital with a cross-border dimension are prohibited. In this context, the term “movement of capital” 33 is to be understood in cross-border contexts as including, inter alia, inheritances and gifts, and funding, as well as financial loans or credits, sureties or other guarantees, while the concept of “restriction” 34 is intended to cover any obstacle to the free movement of capital with a cross-border dimension.

Member State level

Associations are subject to dedicated regulation in 24 Member States (in the majority of cases separate laws, otherwise their regulation can be either found in the civil code or in a few Member States they are regulated in one legal act together with foundations 35 ), with the exception of Denmark, Ireland and Sweden. In general, these are comprehensive laws, regulating associations in detail. Fundamental aspects and features of association regimes have common points across the 27 Member States, including the possibility for associations to undertake economic activities, although usually with varying limitations. This said, cross-border aspects essential to mobility and activities of associations are not comprehensively regulated in any Member State. Individual cross-border aspects are regulated to some extent with different approaches, with eighteen Member States having some rules on different aspects (see comparative table of national rules on cross-border aspects for associations in Annex 11).

Overall, from the perspective of an association active in more than one Member States, the applicable legal rules and resulting administrative practices vary depending on where (i.e. the specific Member State) it is domiciled and where (i.e. the specific Member State) it is active.

International level

The freedom of association is a human right, recognized by the Universal Declaration of Human Rights (Article 20), the International Covenant on Civil and Political Rights (Article 22) of the United Nations and the European Convention on Human Rights (Article 11) of the Council of Europe. 36

The Council of Europe has adopted initiatives to facilitate within its membership the cross-border operation of non-governmental organisations, including associations. These initiatives emphasize a non-profit making objective, while the possibility to conduct economic activities is present to support the said objective. The European Convention on the Recognition of the Legal Personality of International Non-Governmental Organisations of 1986 includes elements of mutual recognition and attempts to harmonise many aspects of association law: contracting parties agree to recognise “as of right” the legal personality and capacity as acquired by the contracting party where the organisation has its statutory offices. So far, only twelve Council of Europe Member States (out of 46) have ratified the Convention, eight being EU Member States. 37  In addition, two non-legally binding initiatives are: the Recommendation on the legal status of non-governmental organisations in Europe, 38   suggesting minimum standards for non-governmental organisations on a number of topics such as formation, legal personality, governance, funding, and transparency, and the Fundamental Principles on the Status of Non-governmental Organizations in Europe 39 building on the above Recommendation.

1.4 Market Context

This Section provides the measure of the socio-economic value of associations in the EU and thereby an indication of their untapped potential in terms of activities offered for citizens’ participation, services, goods and assets for the public benefit. First, this is done by analysing the “socio-economic impact of associations in the EU” in terms of their presence at EU level, their economic contribution to the EU Gross Domestic Product (GDP) and to the European labour force; second, by focusing on the main cross-border activities that they perform across Member States. The Section is complemented by Annex 6 which provides evidence on the market context, looking at those associations operating cross-border and sectors where they are most active.

Box 2: Treatment of data constrains on associations in the market context.

Based on the methodology of this IA, when it comes in particular to the impact of associations at EU level, the analysis establishes and builds on an estimated number of 3.87 million associations at EU level (see table 1). 40  These data suggest that, while NPOs encompass other types of organisations (as explained in Section 1), data for NPOs are likely to be mostly driven by associations.

Table 1: Overall estimates of the number of NPOs and associations in the EU-27.

Concerning their growth, the number of associations in the EU remained roughly stable in the last years 41 and they are most present in the social and health sectors, communication and information (i.e. advocacy), culture, education, recreation (i.e. sports) and entertainment. 42

Associations’ economic contribution to the EU GDP is estimated at EUR 420 billion (i.e. 2.9% of EU GDP) 43 . In terms of job creation, the IA study estimates that associations are employing about 5% of the European labour force (8.8 million employees) 44 , without counting the non-paid jobs their volunteers represent. However, there is considerable variation across Member States in the number of employees per association, as well as the share of all employees that associations account for. For example, in Belgium, people employed by associations accounted for about 11% of the total employees in 2022, and the average employment per association is above the EU average. Contrary to this, in Croatia, on average less than one person is employed per association, and the total number of people employed by associations account for only 1% of employment overall. Besides paid staff, many associations rely fully on volunteers to perform their activities. 45 For example, data for France 46  and Austria 47 suggest that the work delivered by volunteers amounts to an additional 580 000 and 230 000 Full Time Equivalent workers (FTEs) 48  per year respectively. 49  

Annex 6 and Annex 4 offer more details and additional indicators on market context.

2.Problem definition

Box 3: Treatment of data constrains on associations in the problem definition.

2.1Preliminary remarks

Stakeholders’ views collected through the Public Consultation and further substantiated by a targeted survey and interviews underpinning the IA study, identified a clear need for associations to operate and perform activities in different Member States or having the potential to do so, as follows:

Table 2: Stakeholders’ views on the need to operate and perform activities in other Member States. 50

For the purpose of understanding the scale of cross-border activities of associations, this IA reflects the input of a total number of 3 026 associations (including individual associations and umbrella organisations) throughout the overall consultation activities 52 , either in cases where an association directly contributed to a consultation activity, or indirectly, when the contribution was made via the umbrella organisation the association is a member of. In total, 29 umbrella organisations representing the interests and needs of their members were reached out during the consultation activities (more details in Annex 2, Table 1), thereby reinforcing the representativeness of the collected evidence. The following Member States competent authorities contributed to the consultation activities: Estonia, Denmark and France 53 (Public Consultation 54 ); Belgium, Croatia, Italy, Denmark, Finland, Cyprus, France, Latvia (Targeted Survey 55 ); and for the in-depth interviews: Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Germany, Latvia, Lithuania, Sweden. 

To further support the collected evidence base, the need to facilitate associations to engage in activities and move across different Member States is further corroborated by recent literature. 56

2.2 What is the problem?

Based on the stakeholder input gathered from different sources – the Public Consultation, the preparation of the IA study, the European Parliament Resolution and its supporting study, as well as two recent independent studies commissioned by the European Commission 57  the following problem has been identified:

Figure 2: Problem statement.

The problem refers to both conducting cross-border activities and the possibility for cross-border mobility for associations across the Union, as described below.

Associations concerned by the identified problem

To identify current associations with cross-border activities 58 , there is no direct data available for most EU Member States. An estimate was developed based on reliable data for Austria and Germany, assuming that 8% of EU associations perform cross-border operations: 310 000 cross-border associations in the EU. 59  These associations appear to be organised in several Member States. They are active at the EU or international level in areas such as healthcare and social services, social inclusion, sports, humanitarian aid, as well as in cross-border innovation and research projects. It is important to note that these figures are best estimates and, therefore, present a risk of overestimation, as extrapolations had to be made, as explained in Annex 4, Section 2.5.

Table 3: Estimated total number of associations and number of cross-border associations at EU level.

The consequent contribution of cross-border associations to EU GDP is estimated between EUR 5.7 billion and EUR 7.0 billion (see table below). 60  These estimates should be treated with cautiousness, as there might be a risk of overestimation due to limited official data.

Table 4: Estimated contribution of cross-border associations to the EU GDP (2021).

Among cross-border associations, there are associations active in border regions. The IA study survey showed that 70% (30 out of 43 replies) of the associations acting cross-border had activities in at least one border region. 61  In addition, qualitative and quantitative information, building on the participation of civil society organisations, including associations, to implement Interreg programmes, 62  supports that associations active in border regions are (or desire) undertaking cross-border activities in neighbouring Member States (see box 2).

Box 4: Associations present in Interreg Cross-Border Programmes.

A second group to be considered as concerned by the identified problem are associations that are not yet active in more than one Member State, but which would potentially expand cross-border, if barriers to be specified below were removed. These are associations active domestically with an interest to go cross-border. Arguably, estimating the size of this group of associations is the most challenging, as no clear-cut information is available. Several estimation techniques (based on company data and surveys) 65 were used to arrive at a “theoretical maximum potential” of 350 000 associations that could be engaged in cross-border activities, should identified barriers be removed. This corresponds to 9% of the total number of associations 66  in the EU. This is the most conservative approach (e.g. compared to the stakeholder survey showing 17%). This corresponds to a theoretic maximum ‘opportunity cost’ of EUR 7.9 billion (annual contribution to EU GDP) and 140 000 jobs (FTEs working cross-border) 67 . This estimate is the most conservative result that could be used amongst applied methods.

Furthermore, as it is not realistic to assume that any policy option assessed in the IA could solve all identified barriers (as some of them are outside the scope of intervention such as those relating to taxation or labour), the IA study estimated 68 that at maximum 185 000 associations could be expected to consider operating cross-border in the event of sufficient policy intervention. 69  A further element to mitigate the risk of a potential overestimation builds on the fact that, as compared to SMEs in the service sector, associations (i) have more limited operational and financial capacity (ii) are mostly small to micro-organisations and (iii) are much rooted to the territory with missions and business models addressing local markets.

Based on the above qualitative arguments, the table below shows three lower growth scenarios for associations expected to consider operating cross-border in the event of sufficient policy intervention.  

Table 5: Different scenarios of associations that could realistically consider operating cross-border in the event of sufficient policy intervention (as a share (%) of “current cross border associations” of 310 000 associations).

N.B.: to note that only scenarios 1 and 3 will be further used to measure the impacts (IA, Section 6). As scenario 2, 3 and 4 are more conservative scenarios proportionate to the benchmark scenario, only one lower scenario will be further used in the assessment of impacts. For clarity purposes, scenario 1 and 3 will be referred to thereafter as ‘scenario A’ and ‘scenario B’, respectively.

Table 6: Summary of best estimates for associations operating and potentially operating cross border.

When considering the sectors and size of associations active or willing to operate across-borders, the IA study highlights that no clear evidence exists at hand. In terms of sectoral activity, assumptions can be made that associations operating in sectors with comparable internationalisation degree in the for-profit sector might be more likely to pursue cross-border ambitions, despite of associations generally being rooted to the territory and with potentially fewer international ambitions. In terms of size, the IA study offers arguments supporting the assumption that bigger and more professionalised associations are more likely to operate across border than small ones, as they have more capacity, resources, scaling potential and are more likely to operate in international context driven by trade or knowledge sharing. The deterring effect of costs to operate cross-border is likely to be bigger for smaller associations with little or no paid employees that need to spend additional time to gather information, establish the cross-border activities and comply with any potential legal requirements if no policy intervention occurs. Furthermore, according to interviews during the scoping phase underpinning the IA study, the need to carry out cross-border activities mostly concerns: (i) fields which tend to cover a cross-border dimension (e.g. education, culture, health, environmental and fundamental rights) and (ii) associations with presence in many Member States (as an indication, around 5 000 International NPOs 70 exist in the EU. Their number has increased by about 30 % since 2010).

Description of the identified problem

As emerged from the Public Consultation, the survey conducted for the IA study and further corroborated by anecdotal evidence, associations face a fragmented landscape of diverse rules or the lack of enabling rules in the Member States applying to their cross-border activities, mobility, and cross-border internal organisation elements (i.e. membership or governance functions). 71  This fragmentation creates an uneven playing field for associations preventing them from enjoying their freedoms in the single market and resulting in regulatory and administrative barriers and unnecessary excessive costs. 72  This is further confirmed by the legal analysis conducted.

Based on the comparative analysis of laws in the Member States, as conducted in the IA study and building on a recent comparative legal analysis of associations laws and regimes in the EU, 73 it appears that, while the legal framework in the Member States is, in principle, adequate for the development of associations in a domestic context, barriers in the single market exist in four areas: 1) the cross-border activities of associations in relation to their right to establishment, thereby hampering associations’ capabilities to provide services and goods in the single market; 2) the movement of capital in the single market; 3) the possibilities for cross-border membership and participation in governance bodies; and 4) associations’ possibilities for cross-border mobility.

As it will be described in more detail under the respective problem drivers below, barriers consist of de jure or de facto uncertainties, restrictions or requirements resulting in burdensome administrative processes and costs, in particular, regarding the recognition of the legal personality, registration formalities, secondary establishment, cross-border mobility, cross-border donations, membership and governance. Overall, it is rare that a specific restriction is present across all Member States. On the contrary, in many cases, only a few Member States retain a certain type of restriction, as is explained in Annex 11.

The above-mentioned barriers are distinct to associations and have been invoked by interviewed associations 74  as one of the causes of their reduced cross-border capacity, including to be active in the single market as providers of services and goods. Other barriers are in line with generic barriers in the single market, such as difficulties in obtaining information on the relevant regulatory requirements, problems related to registration of economic activities in another Member State, and burdensome procedures due to differences in tax systems and administrations. 75 Furthermore, associations present in services sectors face general barriers, as do entities established in other legal forms, including those related to requirements of having a specific legal form, as indicated by reports published by the European Commission. 76  

Main barriers encountered by associations operating across borders (as identified in the IA study) are:

 Figure 3: Barriers encountered by associations operating cross- border.

To note that some of the identified barriers, such as obtaining recognition of tax-benefits (e.g. value added tax [VAT], income tax and tax breaks linked with charitable donations) and administrative procedures and controls when opening or closing bank accounts will not be addressed by the current initiative, taking into account the limited EU competencies in the area of taxation, as well as the overall single market focus of the initiative. To note that a common denominator in many Member States 77 is the so-called public benefit status, which often unlocks access to both of the said aspects. 78  There are significant challenges in having this status recognized in cross-border contexts, despite CJEU case law establishing a principle of non-discrimination (details are found in Annex 12). This said, these aspects will be covered by the Commission Staff Working Documents on the state of play of taxation frameworks in Member States and on non-discriminatory taxation of charitable organisations and their donors, as explained in section 1.2 and elaborated further in Annex 9. Furthermore, regarding VAT, as of 2025, associations engaging in economic activities that qualify as SMEs can benefit from the new simplification rules which will open the VAT exemption to small businesses established in other Member States and help reduce VAT compliance costs, 79  thereby also positively affecting the situation for associations operating cross-border. When pertaining to the EU anti-money-laundering and counter-terrorism legislation, the stakeholder consultation of this IA has raised problems associations face when opening bank accounts and accessing other financial services. 80 These will also not be covered under this initiative.

The identified barriers, as developed under the problem drivers below, illustrate the range and scale of the problems faced by associations in the single market. This situation hampers associations currently active across borders in the Union (310 000 already active across borders) or discourages associations wishing to go cross-border (350 000 estimated as theoretical maximum potential number to expand their activities cross border, yet the IA takes 185 000 as a more realistic proxy to base the analysis) to benefit from the freedoms granted by the single market and reach their full potential as economic and civic actors.

2.3 What are the problem drivers?

The relationship between the problem itself, its drivers, as well as its consequences is set out below in the problem tree table, Figure 4.

Figure 4: Tree table of the problem definition.

2.3.1 Driver 1: Key cross-border aspects for associations are either unregulated or regulated in varying ways in each EU Member State

The differences in legislation across Member States concerning the recognition of their legal personality and related formalities, economic activities (provision of services and goods), cross-border mobility, cross-border capital transfers and internal organisation elements of associations create legal uncertainty and burden cross-border associations in several ways, including through additional costs or effort in order to find basic information about applicable rules on regulatory requirements and administrative procedures in the Member State(s) in which an associations seeks to operate. 81

More specifically, when asked in the context of Public Consultation about the most important needs for associations that operate or want to operate in more than one Member State, about one fourth (i.e. 24% - 48 out of 64) of respondents indicated the provision of services in another Member State without registration as most important. In this context, it is worth noting that challenges SMEs are facing when it comes to understanding regulatory requirements 82 also apply to associations engaging in economic activities and concurrently falling within the definition of SMEs. 83  Among the needs based on the replies to the Public Consultation, were also cross-border mergers (i.e. 39% 25 out of 64 respondents) and conversions (i.e. 40% 26 out of 64 respondents). 84  

According to the comparative analysis of national laws and as outlined earlier in Section 2, while there is a number of common traits when it comes to association laws at Member State level (illustrated in Annex 10), significant differences exist. Furthermore, most national legislations do not attempt to facilitate cross-border issues, which is the targeted focus of this initiative.

As said above, regulatory and administrative barriers concerning this driver and affecting cross-border associations exist in four particular areas: 1) related to the right to establishment and thereby hampering associations’ capabilities of the provision of services and goods; 2) related to the movement of capital (i.e. donations, membership fees), 3) related to the possibilities for cross-border membership and participation in governance bodies, and 4) related to their possibilities for cross-border mobility.

Regarding establishment, a key challenge is the variation in the Member States of the recognition of a non-domestic association’s legal personality. While no mechanism exists at EU level, practices vary from automatic recognition to no recognition, requiring expanding associations to set up a new legal entity or branch in the other Member State. This point will be elaborated separately under Driver 2 below.

Concerning cross-border mobility, key aspects are largely unregulated, including cross-border conversions, mergers and divisions. 85 This causes legal uncertainty for interested associations. Moreover, a few Member States explicitly impose restrictions, such as excluding the possibility for an association to transfer its registered office abroad, without going through a process of liquidation. 86  

Concerning movement of capital (i.e. donations, including gifts, and inheritances), which is a crucial foundation of the existence of many associations 87 , they face varying requirements such as transparency duties, 88 additional duties of care 89 or even State approval 90 which, although applied also for domestic associations, especially affect foreign associations, 91 thereby restricting the free movement of capital relied upon by associations.  92 This links also to Driver 3. According to the in-depth interviews conducted with associations, 22% (4 out of 18) reported difficulties in receiving donations from other countries.

Box 5: Example of restrictions for an association to receive donations. 93

Furthermore, legal restrictions that associations face exist in relation to their cross-border governance and membership. In Poland, non-nationals cannot establish an association, but can join it only after it is established. In Finland, the chairperson of the executive committee of an association must be resident in the country. These issues are further specified in Annex 11. Further, results from the Public Consultation show that 23% (15 out of 64) of the respondents identified differences between Member States in membership requirements as one of the restrictions when associations engage in activities across borders. Further challenges arise from the differences and legal limitations in possibilities to use modern technology in the governance of associations, such as arranging meetings of the general assemblies virtually. 94  

2.3.2 Driver 2: Lack of mutual recognition of legal personality of an association when operating cross-border

When asked what they considered to be the causes of the restrictions that associations face when operating across borders in the single market, 58% (i.e. 37 out of 64 respondents) of the respondents to the Public Consultation identified the lack of recognition of an association’s legal personality in other Member States. There is a general absence of rules at EU level and at Member State level allowing for automatic recognition of an association’s legal personality in the EU, which creates uncertainty and fragmentation. For cross-border associations, this results in either mandatory legal requirements for establishing a new legal entity or a branch, as is the case in a few Member States 95 or legal requirements for registration in a public register, only after which the association’s legal personality is recognized, which is the case in another few 96  

The main exception to this concerns eight EU Member States that have ratified the Council of Europe Convention on the Recognition of the Legal Personality of International Non-Governmental Organisations (see also Section 1.3), given that these Member States have agreed to mutually recognise “as of right” the legal personality and capacity of associations meeting the criteria set in the Convention (such as non-profit aim of international utility, and activities in at least two Member States), as acquired by the Member State where the organisation has its statutory offices. To benefit, associations would need to operate between these Member States which have ratified the Convention, which leaves the single market fragmented.

Box 6: Example of an association facing various challenges in border regions. 97

Box 7: Example of burden resulting from absence of recognition of an association’s legal personality.

2.3.3. Driver 3: Excessive administrative practices and processes when operating cross-border

In the Public Consultation, when asked about the most often mentioned types of restriction faced by associations when engaging in economic activities across borders, more than half (i.e. 52% - 33 out of 64) of respondents referred to: administrative formalities to implement actions in another Member State without prior registration and registration procedures in another Member State (cost, case handling time, uncertainty about constitutive elements etc.). The replies from the Public Consultation refer to registration requirements as a condition for being able to operate in another Member State, in some cases for the purpose of achieving recognition for their legal personality (as also described in Driver 2 above). In addition, close to half (i.e. 47% - 30 out of 64) of respondents reported as barrier registration requirements in relation to VAT when conducting activities abroad.

Another example concerns the transfer of seat, which is restricted in some Member States, 98 requiring an arduous process of dissolution. This is supported by evidence from the Public Consultation, where 40% of the respondents (26 out of 64) identified ‘transfer of seat’ as one of the most important needs for associations operating or willing to operate in more than one Member State.

This leads to the understanding that administrative practices and processes are a barrier in cross-border contexts. To be precise, it is not the case only for associations. When identifying existing barriers in the single market, several surveys consistently quote complex administrative procedures as being one of the most serious obstacles in the single market, particularly for SMEs. 99  The scale is however magnified for associations when taking into account their limited operational and financial capacity and their non-profit character, as well as in comparison with those of other actors in the single market. 100  For example, the requirement to set up a distinct legal entity or a branch regardless of the nature of operations in question or the obligation to seek approval for or register cross-border capital transfers in certain Member States, as described under Driver 1. In the Belgian example below the process for seeking approval for receiving a donation from abroad may take up to three months. 

Box 8: Examples of excessive administrative practice.

Finally, the burden emanating from administrative formalities, for instance from the effort needed to organise and collect documents and arrange for translations, is linked to an insufficient degree of administrative cooperation between authorities of the Member States. In-depth interviews in connection with the IA Study highlighted that language capacity is observed as a barrier for both associations’ staff and administration employees. Formal documents usually need to be submitted in the official language of the relevant Member State. 101  In part, this burden could be alleviated by improving the access to information and administrative cooperation, by leveraging digitalisation and digital tools.

2.4 How likely is the problem to persist?

Without any policy intervention, the identified barriers associations are facing in the single market are likely to persist. These barriers are of legal or administrative nature resulting from the application of law, hence it cannot be expected that non-binding initiatives, such as those announced in the Social Economy Action Plan or the mentioned initiatives of the Council of Europe (as outlined in Section 1), can resolve them fully or to a meaningful extent.

There is no indication of Member States planning legislation in this space and there is currently a general lack of legislative measures in Member States addressing specifically the cross-border activities and mobility of associations. Only one Member State (Belgium) has a dedicated legal form concerning international activities and only three Member States (Bulgaria, Croatia and Cyprus) regulate individual elements, such as explicitly mentioning the possibility to establish a branch in another country. Overall, Member State-level measures are of limited benefit, in the absence of a simple way to obtain recognition of the legal personality of associations, facilitating mobility as well as the free movement of capital, and the provision of goods and services cross-border. Moreover, as already indicated, a cross-border conversion requires dissolution of the association and liquidation of its assets in two Member States. (These cases are described in Annex 11).

Furthermore, the magnitude of the social and economic consequences is expected to grow for the following reasons:

·Bearing in mind data limitations, there appears to be an increasing need for associations to operate cross-border – involving not only recurring activities, but also cross-border restructuring and mobility – based on the results from the Public Consultation, where 45% of the respondents strongly agree that associations are likely to increase cross-border activities in the EU single market in the future and that these organisations might be inclined to enhance their activities further if barriers were removed. 102  

·The nature and scale of successive crises (pandemic, the Russian aggression on Ukraine, high energy prices, disrupted supply chains), current challenges (fight against climate change, digital divide, migration, aging demographics, disinformation) and a “Just Transition leaving no one behind” require mobilisation of all actors, including the non-profit sector. These challenges call for long-term action across Member States, especially in sectors in which the presence of associations is strong such as health, fundamental rights, humanitarian aid, communication and advocacy, education, culture. 103

·The civic space is reported to be shrinking in parts of the Union, and pressure on civil society organisations, associations included, from state authorities and non-state actors is increasing. 104  Overall civil society organisations report a range of challenges, obstacles and restrictions in certain Member States that have limited their ability to carry out their activities, thereby hampering associations capacity to fulfil their purposes and restrict their fundamental rights and those of their members. 105

·While the IA study generally suggests that the developments in the number of associations have been dynamic across Member States between 2011 and 2017, 106 the growth trend seems to slow down in recent years. As suggested in the IA study, although year-on-year changes in their numbers are relatively small, associations seem to remain an important social and economic driver. However, when it comes to International NPOs, there is a growth trend (30% increase in 10 years time). This trend confirms the growing interest of associations to operate across borders, and more precisely in a pan European context. 107

3.Why should the EU act?

3.1Legal basis

In light of the identified problem and objectives, as well as their socio-economic value in the single market created by associations, the initiative could be based on Article 114 TFEU on the approximation of national rules for the establishment and well-functioning of the single market, Article 50 TFEU on attaining the freedom of establishment for associations in the single market or on article 352 TFEU, which provides an appropriate legal base when no other provision in the Treaty gives the necessary powers for EU institutions to adopt a measure, depending on the precise content.

The main aim of this initiative is to address the barriers described in section 2 which create fragmentation with regard to applicable rules on associations in the single market, resulting in legal uncertainty, undue administrative burden and costs. Therefore, Article 114 TFEU could be an appropriate legal basis for measures aiming at harmonising aspects of national legislations on cross-border activities of associations, for instance the conditions for recognition of the legal personality of associations, which is the one of the most basic conditions, if an association seeks to conduct activities in another Member State and thus enable associations to enjoy their freedom to provide services and goods in the single market. Article 114 TFEU could also be the appropriate basis for measures aiming at the approximation of national laws concerning the freedom of movement of capital (excluding any measure on taxation) and the capacity of associations to send/receive capital in the single market, in particular to benefit from cross-border funding and donations.

Article 50 TFEU could serve as legal basis for measures that facilitate the exercise of the right of establishment of associations and their mobility (cross-border conversions and mergers of associations). This could also cover rules on the registration and the formalities linked to the registration which limits the possibility for associations to operate cross-border and thus enable them to enjoy their freedom of establishment and association in the single market.

Article 352 has been used for the creation of new forms of legal entities at EU level, 108  which leaves unchanged the different national laws in existence and does not aim to approximate the laws of the Member States. 109    

The legal basis will depend on the final content of the proposal. For each of the available policy option, it is necessary to assess which could be the appropriate legal basis. In light of the single market objectives, the scope, and the approach of preferred option (see section 8), this initiative is likely to be based on either Article 114 TFEU, Article 50 TFEU or on a combination of the two. This initiative is subject to the shared competence of the EU, and therefore the subsidiarity and proportionality principles apply.

3.2Subsidiarity: Necessity of EU action

The key problem drivers result from regulatory diversity and/or restrictions among Member States. The current situation, as described in previous sections, demonstrates that the problem is not properly addressed at national level and that, in the absence of mutual recognition mechanisms among Member States, its cross-border character requires a European solution to remove identified barriers to the cross-activities and cross-border mobility of associations in the EU single market.

The problem is not only limited to certain territories or regions but appears widely as associations are present in all Member States. There is little coordination by individual Member States to facilitate cross-border activities, mobility and capital transfers of associations. Such coordination, although theoretically possible, appears unlikely in the near future 110 . For instance, notwithstanding the withdrawal in 2005 of the Commission proposal for a Council regulation on the statute for a European association, only few Member States have legislated in ways to facilitate cross-border aspects of associations: either by enacting provisions to allow establishing branches abroad 111 , s to allow associations’ cross-border mobility to another Member State in some way 112 , or by ratifying the Council of Europe Convention on the recognition of international non-governmental organizations (which may cover also associations) 113 have introduced measures allowing cross-border mergers and divisions, whereas one Member State expressly prohibits merger and division of domestic associations with associations which are not entered in the national register. 114  In particular, individual action or inaction by Member States, most often, focuses on their specific national context and usually would not seek to facilitate the cross-border dimension. Relying on Member State action alone, it is likely that the legal, administrative, and economic barriers for associations would therefore persist.

The objective of this initiative cannot be achieved sufficiently by the Member States and can be better achieved at Union level.

3.3Subsidiarity: Added value of EU action

Without intervention at Union level, Member States will keep their national rules, resulting in the continuation of fragmentation of requirements and limitations, therefore not allowing a level playing field for associations in the single market. As indicated in the European Parliament’s resolution, the intensity and volume of cross-border activity of associations does not reach its potential. Only EU action would enable the adoption of common or mutually recognised rules that would ease the cross-border activities and mobility of associations. By acting, the EU would provide a clear and predictable framework enabling associations to fully benefit from their single market freedoms. Indirectly, EU intervention may potentially help to promote the diversity and strengthen the potential of the non-profit organisations, of which associations are the dominant legal entities, thereby contributing to unleashing the full potential of the non-profit sector.

4Objectives: What is to be achieved?

The links between the identified problem and the objectives of this initiative are presented in Figure 5 below.

Figure 5: Tree table of the links between problems and objectives.

4.1General objectives

The general objective of the initiative is to improve the functioning of the single market by removing legal and administrative barriers for associations operating in more than one Member State. This includes enabling associations to fully benefit from the single market freedoms, in particular the freedom of establishment (including facilitating mobility of associations), the freedom to provide and receive services and goods, as well as the free movement of capital (such as cross-border donations and membership fees). Removing these barriers would make it easier for associations to engage in activities across Member States and enable them to unleash their full potential to generate economic and societal value in the EU.

Although no direct cause-effect link may be established and while this initiative is centred on the functioning of the single market for associations, improving the conditions for associations to operate in the single market could have indirect spill-over effects on strengthening civil society in the EU and its potential to lower the threshold of citizens’ engagement in different sectors across the Union.

4.2Specific objectives

The specific objective of the initiative are:

1-Improve possibilities for an association to have its legal personality recognized in other Member States, thereby ensuring equal treatment in the single market

Associations conducting cross-border activities do not benefit from the same legal recognition across the EU. Recognition of legal personality – whether automatic across the Union or mutual between Member States – can overcome burdensome bureaucratic procedures to be repeated in each Member State in which associations wish to expand their activities, by notably avoiding multiple registrations or setting up multiple legal entities, resulting in red tape and additional costs.

2-Reduce the regulatory formalities for associations operating in more than one Member State

An enabling regulatory framework for the cross-border activities and mobility of associations is necessary in order for them to operate seamlessly in the single market. Reducing the regulatory formalities, in particular regarding existing barriers to their cross-border activities, such as administrative formalities related to registration, service provision, receiving capital, as well as related to the recognition of legal personality, cross-border conversions, and cross-border mergers. 115 Digital solutions when addressing these administrative and regulatory formalities should be also considered to address problems described under Driver 3 in Section 2.3.3.

The progress to achieving the specific objectives can be measured through the monitoring indicators described in Section 9.

5 What are the available policy options?

5.1What is the baseline from which options are assessed?

In the baseline scenario, no policy intervention is introduced at the EU level, with associations continuing to be governed exclusively by national law. Existing barriers (as described in Section 2) will most likely remain or in some cases worsen in light of societal challenges, future crises and market developments (see Section 2.4).

The baseline includes a brief description of the wider socio-economic context and the relevant policy action at EU and international level that might impact on the magnitude of the problem.

5.1.1Socio-economic context

Associations will continue to play an active role in the society and, many of them, will continue to provide goods and services in areas of limited profitability (i.e. the goods and services they provide are partially at market prices, partially below). 116  In addition, when this is part of their mandate, associations will continue to build awareness and advocate for policies and legislation, as well as the protection and promotion of fundamental rights. They will promote engagement and effective participation of citizens in the policy-making processes and in so doing contribute to the democratic foundations of the Union. 117  They will do all the above either nationally or beyond the borders of individual Member States. Associations will offer essential services for society and will play an instrumental role in the fight against current or new societal challenges. For example, ageing demographics will exponentially increase the need for elderly care and healthcare services, both of which are sectors where associations are key service providers. 118  Such trends will also continue in the absence of policy intervention, with associations continuing to face the identified regulatory and administrative burden when operating across borders.

Although the vast majority of associations operate in a domestic setting, an increasing role for international NPOs and findings from the Public Consultation and the survey conducted under the IA study, are an indication that a growing number of associations are expected to either operate or are exploring opportunities to operate in another Member State, therefore magnifying the identified problem. 119  Not removing the identified barriers burdening associations already active cross-border (an estimated of 8% of all associations in the EU) and discouraging those who would be interested to expand cross-border, would ultimately limit the distribution of the value created by these associations and by their potential individual and corporate donors, instead of diffusing these services, goods and assets across different Member States. Consulted associations expressed the need for a level-playing field to carry out their purposes which often require by nature a cross-border dimension. 120 Solidarity going in principle beyond borders and the societal challenges linked with a ‘perma-crisis mode’ in recent years – including challenges related to the green and digital transitions – require scaling of action of all actors.

Some relevant megatrends are, therefore, identified to strengthen the dynamic baseline through foresight-based analysis. First, associations play an important role in prospects and anticipation when it comes to “Changing nature of work” 121 . In this regard, associations, as social economy actors, offer participatory business and management models which increase employees’ wellbeing and improve employability for those with a distance to the labour market, thereby contributing to sustainable working environments. Also, associations will continue to play an important role by upskilling and reskilling people with a distance to the labour market and in jobs transition. Associations active in the area of “Climate change and environmental degradation” 122  will continue to play a crucial role in the development of political agendas at the local level (e.g., nature preservation, biodiversity) or EU and global level (e.g. climate and environmental protection action, wildlife protection); and they can act as innovators when it comes to raising awareness, designing new circular and ecological products, services and business models. In doing so, associations active in the environmental sphere are also contributors when coping with resources and environmental challenges related to the “Growing consumption” 123 . For example, agrifood related associations may bring alternative solutions through innovative methods applicable in agriculture and in support of a sustainable food supply. The experience of many associations in the circular economy is also expected to bring valuable contributions in terms of recycling, upcycling, eco-design, shared and collaborative economy. Other megatrends where associations are expected to offer a major contribution in the future are the “Shifting health challenges” 124  as many associations are operating in health, care and social service provision where they drive innovation and bring new organisation methods, techniques and services. Finally, associations are expected to continue playing a major role in the anticipation towards the “Increasing demographic imbalances” 125 : for example, by offering a major contribution to aid and development programmes for most vulnerable countries and regions in the world.

5.1.2Costs of operating cross border (baseline)

Estimates in the IA study show that, without policy intervention, up to 75 000 new jobs (i.e. additional FTEs working cross-border) and an additional contribution to the EU GDP of EUR 4.2 billion would not be generated, as up to 185 000 new associations would not be created. This reflects the “opportunity cost” of no action, in line with the maximum theoretical potential. Given the risk of overestimation, a second scenario was developed (see Section 2). This scenario shows that without policy intervention, up to 63 000 jobs, 3.5 billion GDP of EUR and 155 000 new associations would not be created.

Based on desk research, interviews and stakeholder surveys conducted in this IA, the most relevant costs related to identified barriers are categorised in two main cost types and several costs subtypes:

1)Associations operating across borders that are bound to allocate resources to unnecessary or excessive compliance activities and administrative burden. They experience costs grouped in three subtypes: (i) information cost (internal), (ii) compliance cost (internal), (iii) direct cost/external advisory cost (external running cost).

2)Associations that want to operate and cooperate in the single market but are hindered in doing so due to high (perceived) cost of expansion. They experience: (i) internal staff costs, including the time spent to familiarise with national legislation (e.g. labour and tax laws) applicable in the Member State where the association wish to expand its operations and the time spent to prepare such expansion, (ii) registration costs/ administrative fees, (iii) external advisory services (e.g. legal and/ or tax advisory, accounting services etc.)

The above cost categories are mainly related to the three problem drivers described in Section 2.3 informing the problem definition (i.e. cross-border aspects for associations are either unregulated or regulated in varying ways across Member States; lack of mutual recognition of legal personality of an association when operating cross-border; and excessive administrative practices and processes when operating cross-border).

Operating costs

It is important to note that associations face costs of operating cross-border that consist of (i) fixed costs that cannot be reduced by policy intervention, (ii) excess cost 126 that exist (or potentially exist) and can potentially be avoided, due to policy intervention. When looking at the cost for the launch of operation in another Member State, the excess cost also represents a barrier to entry in the single market. Therefore, cost reductions do not necessarily equal ‘cost savings’ as these costs block off an entry rather than being reduced.

When it comes to (recurrent) cost of operating cross-border, factors linked to country specificities and the size and types of activity of the associations are determining and may vary greatly. While some contextual factors may improve the situation (e.g. digitalisation, more cooperation between certain Member States), others may worsen costs and administrative burden. Moreover, the factor whether an association is active in two or more Member States plays a role. Typical costs reported consist of staff dealing with cross-border complexity and external services, including legal, accounting and tax advisory services faced by associations to run operations in another Member States. In addition, there are also annual legal, accounting, tax or other advisory services that associations require. As the targeted survey and in-depth interviews of the IA study show, a clear improvement of the situation cannot be expected without policy intervention.

Bearing these considerations in mind, under an assessed timeframe of 15 years, no action is expected to lead to the excess cost for associations operating cross-border, as outlined in the Table 6 below: 

Table 7: Excess cost for associations operating cross-border (recurrent). 127

Launch costs

The current legal and policy framework requires familiarisation with the national requirements, the set-up of a correct legal form and registration in the Member State where the association wishes to expand. Registration costs (and obligations) vary across Member States, ranging from 0 (free of charge) to EUR 300 – EUR 350. 128 Most associations also need to rely on external legal or tax advisory support for their establishment in a new jurisdiction, while it is estimated that associations’ own staff spends between 9-20% of FTE to organise the establishment of operations in another Member State (per launch). 129  

The elements above determine the estimation of current average (one-off) cost 130  for setting up cross-border operations (per launch). This baseline is calculated at EUR 5 650 capturing an excess cost 131 of EUR 2 150. 132  This means that an association willing to expand cross-border could save up to a maximum estimated EUR 2 150, in case of policy intervention, compared to the current situation, which brings excessive (unnecessary) cost due to the unresolved problem. 133 It should be noted that the costs for launching cross-border operations are not expected to significantly change in the absence of policy intervention. While some cost linked to the establishment of operations or even the necessity of establishing for certain activities may be reduced over time due to increasing digitalisation, other factors such as further stringent rules in certain Member States may increase the complexity of the situation and the launch of new activities in certain Member States.

5.1.3EU level action

When it comes to legislation at EU level, there is no harmonisation or approximation of the national laws regarding the cross-border dimension of associations, whether related to activities mobility or movement of capital. 134  The status quo would likely continue without EU action of binding nature. 

At the same time, a number of ongoing and forthcoming initiatives at EU level are relevant and potentially conducive to a more dynamic baseline. First, the Single Digital Gateway facilitates online access to information, administrative procedures, and assistance services that EU citizens and businesses (also possibly capturing associations engaged in economic activities to an extent) need when trading, establishing themselves or expanding their business across borders. By the end of 2023, online access to the most important administrative procedures in 21 areas will be ensured in all EU Member States including certain registering procedures. This has the potential to somewhat help associations, among other actors, depending on its implementation and the relevance of these administrative procedures to associations. Second, the European Media Freedom Act, 135  which aims at alleviating the fragmentation of national rules undermining the efficiency of the European internal media market, sets out, among others, the framework for a structured dialogue with stakeholders and explicitly civil society (including associations). Freedoms of expression and information will continue to be strengthened in this framework and will, therefore, contribute to an enabling environment for associations operating cross-border in the single market. 136  Third, the non-binding measures that the Social Economy Action Plan envisages (as indicated in the Introduction and in Annex 9), will complement this initiative by providing non-binding recommendations to Member States to better design and implement enabling policies for the social economy, including associations, (Council Recommendation) and provide a clearer understanding of the rules for cross-border taxation of non-profit organisations like foundations and associations (two Staff Working Documents). Furthermore, regarding VAT, associations engaging in economic activities that qualify as SMEs can benefit from simplified rules which will help reduce VAT compliance costs as of 2025 (as explained in Section 2.2).  

Depending on the exact content, the measures mentioned above could facilitate the potential of associations to operate cross-border in the single market. However, their positive impact is likely to be limited in relevance to the objectives of this initiative, as these measures neither target cross-border aspects directly nor are all of them legally binding.

5.1.4International level

The Council of Europe initiatives mentioned in the Introduction (1.3 Legal Context) did not have much uptake by EU Member States (8 have thus far ratified the Council of Europe Convention introduced in 1986). 137  A recent report of civil society’s perception of their implementation shows that Council of Europe Member States have largely not taken these instruments into account in their policymaking, though it does not specify the reasons. 138 This situation is not expected to change, given the non-binding nature of these initiatives. 

5.2Description of the policy options

The following alternative policy options have been constructed from a list of policy measures, based on the findings of the IA study. These measures were screened 139 to identify policy options that should be retained for further analysis. The screening process resulted in a list of three self-standing policy options retained for impact assessment (see Figure 6 below as a part of the intervention logic).

Figure 6: Intervention logic.

All retained options address the general objective and the specific objectives, as further described under each option below.

5.2.1Option 1: Establish an EU-level legal form of association 

Sub-option 1a: An EU level legal form: ‘The European Association”

This sub-option of policy option 1 (hereinafter “PO1a”) fully prescribes an EU level legal form, i.e. “The European Association”. Under this sub-option, the initiative would introduce a European legal form of association (the “European Association”), which would regulate all aspects relevant to the functioning of an association, including rules on the formation, registration, constitution, functioning, financing, dissolution, liquidation and insolvency, and would co-exist with legal forms of associations at Member State-level while not replacing them (details in Annex 9). It would also ensure non-discrimination and equal treatment, when it comes to European Associations as service providers, in line with the Services Directive. 140

Regarding formation, interested natural and legal persons could set up a European Association and existing associations may form one by conversion. The main criterion to form a European Association would be to have a link to at least two Member States. This can be one of the following: citizenship or residence of members, employees, or volunteers; the location of its activities or the registered location of established branches; formation through merger of existing associations domiciled in at least two separate Member States.

The European Association would enjoy automatic recognition of its legal personality across the Union. While it would be regulated by EU law, with regard to rights, it would enjoy at minimum, equal treatment with national associations in the Member States where it would be domiciled and/or engage in activities (i.e. provision of services or goods). Furthermore, it would have rules on cross-border mobility (mergers, divisions and conversions in cross-border contexts). European Associations would enjoy non-discrimination as receivers of capital transfers, such as donations, including the non-discrimination of their donors. 141

Regarding implementation, Member States would designate a competent authority, with defined powers. Competent authorities would be required to cooperate and exchange information with each other.

Registration of the new legal form would be done at Member State level, in line with the ‘digital by default’ principle: setting up the European Association would be possible in a fully digital manner, using standardised on-line procedures and entailing standardised information required for the registration of the new legal form. Member States will be required to establish a digital register (or adapt an existing register) and make publicly available essential information about the associations registered under this legal form. To facilitate access to information about registered European Associations, Member State registries would be interoperable with or connect to an EU level platform/portal either to be established or building on existing initiatives (i.e. the Single Digital Gateway).

The European Association would be well suited for those associations interested in being active in many Member States. Given the relevant cost and administrative effort of setting it up, it would be less beneficial for small associations or those with only occasional activities across borders.

Although this sub-option shares with the Commission proposal of 1992 (and its revision in 1993) the general objective to regulate all aspects for associations by creating a European statute for associations, it differs in its policy focus, and in particular in the following elements:

-As regards key provisions on mobility, the former proposal did not mention the possibility for the European Association to merge. On the contrary, PO1a would provide for rules in order for associations established in the new legal form to merge with other associations, both domestically and cross-border, without such merger resulting in the involuntary termination, prohibition or dissolution, or suspension of the activities of the organisation. 

-As regards online registration and the digitalisation of the registries. PO1a, as stated above and given the digitisation of the society, would ease the access to information on associations for the public. The former proposal did not provide for online registration or for rules concerning an EU level platform. 

-Regarding the rules governing the financing of the European Association, while the past proposal allowed the European Association to avail itself of all forms of financing under the most favourable conditions applying to associations in the Member State in which it has its registered office (Article 41 of the Commission proposal of 1992), sub-option PO1a is more specific and goes deeper. It would oblige Member States to allow a European Association established, registered or operating in their territory to solicit and receive capital transfers, such as donations. In terms of procedure, PO 1a would be based on Article 352 TFEU, 142 requiring unanimity; while the former Commission proposal was based on Article 100a of the Treaty establishing the European Economic Community (current Article 114 TFEU), which links with the ordinary legislative procedure of qualified majority.

Sub-option 1b: An EU level legal form: “The European cross-border Association”

This sub-option of policy option 1 (hereinafter “PO1b”) establishes an EU level legal form covering only cross-border aspects: “The European cross-border Association”.

Under this sub-option, the initiative would introduce a European legal form of association at EU level, as under sub-option 1a, but instead of a fully prescribed legal form, this sub-option would exhaustively prescribe at EU level only cross-border aspects 143 and, to the extent needed for coherence, main features of the new legal form, 144 while otherwise referring to existing Member State law, as it regulates comparable entities. The new legal form would co-exist with legal forms of associations at Member State-level and would not replace them. Member States would enact the necessary provisions for the effective application of the new legal form where relevant matters that the Regulation refers to are not sufficiently regulated.

The European cross-border Association would enjoy automatic recognition of its legal personality across the Union.

Key elements of the new legal form to be prescribed at EU level would under this sub-option include, in particular, the following:

·specific rules concerning the formation of the new legal form; for instance, the main criterion to form a “European cross-border association” may be to have a link to at least two Member States. This can be one of the following: citizenship or residence of members, employees, or volunteers; or based on the registered location of established branches; formation through a merger of associations domiciled in at least two separate Member States.

·specific rules allowing for cross-border membership and governance roles (nationality and residence).

·non-discrimination and equal treatment, when it comes to European associations as service providers, in line with the Services Directive 145 .

·non-discrimination of the new legal form, as receiver of capital transfers (excluding taxation), such as donations, in cross-border contexts, including the non-discrimination of donors based on nationality or place of residence.

·cross-border conversions without undergoing a dissolution and liquidation procedure, by providing relevant safeguards. 

·rules and safeguards on the process of mergers and divisions of the new legal form. 

Regarding implementation, Member States would designate a competent authority with defined powers. Competent authorities would be required to cooperate and exchange information with each other.

Registration would be at Member State level as for PO1a, in line with the ‘digital by default’ principle: setting up the European cross-border Association would be possible in a fully digital manner, using standardised on-line procedures and entailing standardised information required for the registration of the new legal form.  Member States will be required to establish a digital register (or adapt an existing register) and make publicly available essential information about the associations registered under this legal form. To facilitate access to information about registered European cross-border Associations, Member State registries would be interoperable with or connect to an EU level platform/portal either to be established or building on existing initiatives, such as the Single Digital Gateway.

The European cross-border Association, similarly to sub-option PO1a, would be well suited for those associations interested in being active in many Member States. As such, it would solve current obstacles concerning the right of establishment and free provision of goods and services across the EU. It would also partially solve issues related to the cross-border receipt of capital to the extent those issues concern seeking approvals and reporting in some Member States with regard to donations.

As in PO1a, this sub-option would be based on Article 352 TFEU, and would take the form of a regulation, as this option would not approximate national rules as required for Article 114 TFEU. The fact that this policy option would exhaustively prescribe at EU level the cross-border aspects and the core features of the new legal form further justifies the choice of this legal basis.

The Commission proposal of 1992 (and its revision in 1993) and this sub-option differ in their scope and procedure in ways already described concerning PO1a. In addition, in terms of policy focus, a key additional difference concerns a more limited scope on elements relevant for cross-border contexts.

5.2.2Option 2: Harmonise common minimum standards for cross-border activities of associations 

Under this option (hereinafter “PO2”), the initiative would harmonise common minimum standards for the cross-border activities and mobility of associations across Member States. It would contribute to reducing the differences between national association laws. PO2 would imply in practice removing or amending existing provisions or introducing new provisions in Member State law, in particular for the purpose of facilitating cross-border mobility of associations, the provision of services and goods and the free movement of capital (i.e. donations), but also rules on membership and governance roles to allow for cross-border dimension.

In detail, the initiative would harmonise national association laws to the extent needed to facilitate the cross-border aspects mentioned above. The key provisions to be required mirror those mentioned under PO1b, mutatis mutandis.

Existing registration requirements related to e.g. establishment and provision of goods and services, would not be prohibited as such, but they would be required to serve justified purposes and be non-discriminatory and proportionate, and in line with existing EU legislation, such as the Services Directive. 146  

Moreover, the possibility for a fully online registration and the existence of digital registers and standardised on-line procedures should be encouraged under this option, in line with the ‘digital by default’ principle and bearing in mind proportionality and subsidiarity, for the purpose of facilitating the registration of cross-border associations, as well as exchange of information among Member States and at EU level. This could possibly be facilitated by the Internal Market Information System. 147  Compatibility of the said registers with the Single Digital Gateway would be explored. Overall, digital procedures and tools would also facilitate administrative formalities linked with registration, cross-border merger, cross-border conversion, or cross-border donations.

Associations could automatically benefit from these harmonisation measures. Depending on the scope of harmonisation, all associations may be affected by the new rules, as the respective rules governing them would partially change. Under this option, partial harmonisation of national laws would lead to a regulatory simplification for associations in cross-border contexts, thanks to an approximation of relevant rules and given that sufficient rights and safeguards would be provided for their cross-border mobility and activities regulated at EU level. It would be relatively straightforward even for smaller associations or those with only occasional engagement across borders.

The legal instrument would likely be a directive. Implementation of this Directive would require Member States to transpose its provisions into their national law thereby reducing regulatory fragmentation for associations operating across Member States. The likely legal base of this option would be either Article 114 or 50 TFEU, or a combination thereof, taking into account the material scope of the initiative 148 , as this option would approximate national laws by laying down minimum standards. 

5.2.3Option 3: Create at Member State level an additional legal form of association designed for cross-border purposes (“the cross-border association”) and recognised by Member States 

This option (hereinafter “PO3”) combines elements from PO1 (creation of legal form) and PO2 (partial harmonisation of national laws). It would require Member States to introduce in their national legal systems a new legal form of association for cross-border purposes (‘the cross-border association’). Member States would transpose common provisions set by EU law into their national law (with relative flexibility to adapt them to the national setting), thereby approximating rules and administrative procedures for associations operating across Member States and improving legal certainty and the level-playing field in the single market.

The new legal form would be specifically designed for cross-border membership, governance, activities and would also allow for cross-border mobility. 149  It would encompass only requirements and safeguards necessary for facilitating the said cross-border purposes, and it would co-exist alongside existing legal forms for associations in national law and would not replace them. 150  Those interested could form a ‘cross-border association’ in several ways, including by setting up a new one,  converting from an existing association, or by a merger of several existing associations.

Key elements of the new legal form to be prescribed by EU law would be the same as descibed under PO1b (in Section 5.2.1 above).

Once established and registered in the Member State of domicile, ‘cross-border associations’ would not need to establish in each Member State separately, as their legal personality would be recognised either automatically, with limited discretion for justified exceptions for Member States or, alternatively through a simplified procedure (mutual recognition).

The principle of equal treatment of ‘cross-border associations’ vis-à-vis existing legal forms of associations in the Member States, as well as safeguards concerning procedures for recognition of legal personality, would be established. For instance, PO3 would set a maximum duration by which the recognition procedure for ‘cross-border associations’ must be completed and safeguards to lead to a duly substantiated decision by the competent authority in the host Member State (e.g. within three months after the date on which the applicant's complete file was submitted).

Registration would be done at Member State level, in line with the ‘digital by default’ principle: setting up the “cross-border association” would be possible in a fully digital manner, using standardised on-line procedures and entailing standardised information required for the registration of the new legal form, to facilitate the registration of the “cross-border associations”, as well as sharing information between Member States and to the EU level. In order to further facilitate the recognition of the legal personality and the registration of cross-border associations, as well as exchange of information among Member States and at EU level, Member States would be required to establish a digital register (or adapt an existing register) and make publicly available essential information about the “cross-border associations” registered. Compatibility with the Single Digital Gateway would be considered as well as  potential use of the Internal Market Information System, for the same purposes as explained for PO1 above (see Section 5.2.1). 151  

Regarding implementation, Member States would designate a competent authority, with defined powers. Competent authorities would be required to cooperate and exchange information with each other.

Existing registration requirements related to e.g. establishment and provision of goods and services, would not be prohibited concerning this new legal form, but they would be required to serve justified purposes and be non-discriminatory and proportionate, and in line with existing EU legislation, such as the Services Directive. 152   

In light of its scope and approach and depending on the exact content of the proposal, the likely legal base of this option would be either Article 114 or 50 TFEU, or a combination thereof, due to the purpose of approximating certain aspects of national laws,. 153  With regard to PO1b, PO3 would prescribe cross-border aspects at EU level on a very targeted manner. It would only encompass those requirements and safeguards needed to approximate national laws by introducing the cross-border aspects necessary for this new legal form to operate. To be noted that legislative proposals based on Article 50 TFEU are limited to directives. 

5.3Options discarded at an early stage

In the course of this IA, some of the originally conceived options, as identified in the IA study, were not retained for a full assessment as they were not considered feasible or realistic in light of their advantages, but also crucial disadvantages. The said discarded options are:

-Non-legally binding options (i.e. Council recommendations, information campaigns, and guidelines);

-European legal status for public-benefit associations;

-Harmonisation of common standards for associations.

In particular, the non-binding options were discarded due to their lack in effectiveness, whereas the creation of a European legal status for public-benefit associations was considered not feasible in light of the limited competence of the EU in the area of taxation. Finally, the harmonisation of common standards for associations was considered unlikely to be accepted by Member States given the strong cultural roots embedded in the national association law and the scope of the envisaged harmonisation under this option. For more details see Annex 13.

6What are the impacts of the policy options?

Box 9: Treatment of qualitative and quantitative analysis regarding the impact of the policy options.

This Section assesses the impacts of each retained policy option in relation to the identified barriers and the drivers leading to the identified problem in Section 2. The Section analyses the potential economic and social impacts on relevant target groups per policy option (associations, Member States, citizens). Environmental and climate change impacts are only present in an indirect manner and, therefore, are briefly addressed for all policy options. Additionally, the Section assesses per policy option the impacts on Member States (e.g. in terms of adaptation of legislation and compliance, administration and monitoring).

The Section is structured as follows: the first part summarises the main similarities or non-significant impacts of all policy options together, taking into account the objectives and scope of the initiative; the second part presents specific or significant impacts per policy option. As section 5 outlined, Policy Option 1 (PO1) has 2 sub-options: PO1a and PO1b. The sub-options will only be referred to separately when there is a difference in terms of impact. Consequently, references to ‘PO1’ are made for those impacts valid for both sub-options.

Taking into account the objectives and scope of the initiative, the main similarities or non-significant impacts for all policy options are presented below:

a.Economic impacts on associations

Based on a combination of stakeholder surveys, expert interviews and literature, the IA study concludes that excess cost reductions for associations are present for all POs and will result in reduction of time allocated by their staff for the management of the cross border-related administrative procedures, as well as in related reduced direct costs. However, when it comes to total excess cost reduction estimates over 15 years, one needs to consider the caveats in available data (mentioned in section 2 and section 5) and the consequent uncertainties resulting in a possible overestimation. The direct economic impacts (excess cost reductions) for associations per policy option are detailed in the second part of this Section.

Considering indirect economic impacts, all POs present an improvement for associations operating or with the ambition to operate across borders in terms of:

·less burdensome access to new cross-border markets and cross-border provision of goods and services, 

·more financial and human resources that can be allocated to core activities and purpose. 

·improved safeguards for the freedom of establishment and security of operations. Besides economic value, the impact of promoting civil rights and democracy, environmental policy, equality, the European civil society, etc. will be leveraged, especially for those associations active in these sectors.

For associations engaged in economic activities specifically, all POs (be it in different degrees, as described in Section 5) would have a positive effect on the level playing field in the single market in sectors where associations compete with for-profit companies. More precisely, cost reduction and improved access to the single market for associations may lead to:

·increased offer of services and products in certain economic sectors (e.g. health, care, social services), leading to considerable positive effects in terms of quality and price, and enlarged geographic scope of the offer (e.g. new markets are reached), as well as convergence of quality service delivery across the Union in sectors in which non-profit associations are an active operator;

·increased specific know-how in certain sectors (e.g. healthcare, social services) and Research and Development (e.g. international research and technology associations, work integration), as well as economies of scale and business opportunities in various sectors;

·increased pool of potential employees, volunteers and members engaging in the association.

For PO1 and PO3, the scale of impacts depends mainly on the uptake of the new legal forms (the scenarios for the uptake are detailed per option in the second part of the section).

Having this in mind, all POs are expected to have a positive effect on the completion and functioning of the single market, as they bring considerable harmonising effects to enhance cross-border activities for associations, though to a different extent. Harmonisation effects are broadest for PO1 as it implies automatic recognition of an additional European legal form, prescribed fully (PO1a) or partially (PO1b) at European level and through a legal instrument more impactful in terms of implementation and level-playing field (regulation). PO2 would imply partial harmonisation of laws on associations in the Member States regarding specific cross-border aspects, impacting domestic and cross-border associations. PO3 would imply an additional legal form for cross-border purposes at Member State level, thereby not affecting the functioning of domestic associations not interested in cross-border activities, but rather creating an option for those associations operating or wishing to operate in more than one Member States, who could take on the new legal form which will be recognised in other Member States. Possible risk of fragmentation and divergent interpretation linked with the choice of the legal instrument in PO2 and PO3 may be overcome through setting safeguards and achieving the right balance between rules prescribed by EU law and by Member State law.

b.Impacts on Member States  

Changes in the legal framework may cause costs of adjustment and costs of compliance/administrative burden for competent authorities depending on the magnitude of these changes. In the case of this initiative, these impacts largely depend on (i) the extent of adaptation of existing procedures for the recognition of legal personality and for registration, (ii) the number of future registrations for cross-border associations and (iii) information costs, when comparing the baseline with the policy options and specific changes brought by each policy option.

Associations operating across-borders generally need to re-establish/register in the Member States in which they expand, depending on the scope of their activities. Policy options (PO1 and PO3) that reduce this necessity will consequently reduce the burden on public authorities in the long run. In the short term, policy options changing the requirements completely by introducing a separate legal form (i.e. PO1 and PO3) will require competent authorities to familiarise themselves with the new framework.

Considering one-off costs for adapting registration procedures and registers, costs depend on the need for adaptation of current registers or for setting up a new register. This is mostly relevant for PO1 and PO3, while PO2 will also have similar impacts (existing registration procedures might need to be adapted), but to a lesser extent as it does not imply the creation of a new additional legal form.

To note that, for none of the policy options an EU level registration will be foreseen, mainly for reasons of proportionality and subsidiarity. Consequently, Member States will be responsible for the registration of a new legal form (PO1 and PO3), as well as for the adaptation of registration procedures in PO2. The intention is to leave Member States the flexibility whether to adapt existing registers or establish new ones, while requiring Member States to offer the option of online registration in case of a newly created legal form.

As detailed in the IA study and Annex 10, 24 EU Member States already have dedicated registers 154 in place (except for Ireland, Denmark, and Sweden). Member States without a dedicated register (Sweden, Denmark, and Ireland), may decide to set-up a dedicated register for cross-border associations or adapt existing registers used for associations. For instance, in Denmark, associations must register with the Danish Business Authority to obtain a unique ‘CVR-number’ if they conduct commercial activities or wish to obtain public subsidies. Similarly, the same practice takes place in Sweden for non-profit associations. This means that also in countries where no association-specific register is established, mechanisms exist already to allow associations to register. Consequently, also for these Member States, the obligation to register the new legal forms (in case of PO1 and PO3) is likely to have non-significant costs.

To conclude that legislative changes would lead to the adjustment of existing, rather than the creation of a completely new 155 system. The IA study substantiates that policy options creating a need to adapt registers (PO1 and PO3, and PO2 to a lesser extent) implies minor adjustments, including adding a separate section or entry to the existing registers. Consequently, this is not deemed to be particularly burdensome, since once this adjustment is implemented, the public authority is expected to return to its business as usual. Hence, no significant additional annual running costs can be expected.

In cases where registers need to be established (Ireland, Denmark and Sweden), converted or a new “registration line” should be created in an existing register, it is anyhow recommendable to promote digital registers, as a 2017 study shows that "e-procedures” could reduce costs by yearly EUR 19 million for cross-border businesses and EUR 810 million for domestic businesses. Moreover, research has shown that digital registration processes are less subject to fraud because of harmonised safeguards on electronic identification. As shown by the Danish conversion towards digital business registers: between 2011-2015 the average time for case handling decreased by 69% and the average ramp-up time for a new employee decreased by 90%. 156

To make an estimation of costs of online registration (assuming a register already exists), an indication can be offered by the assessed costs for setting up an online registration possibility for limited liability companies. 157 For Member States the set-up costs for such an online registration tool varied from EUR 42 000 in Ireland to EUR 100 000 in Poland, or around EUR 120 000 in Latvia. 158  For those policy options (PO1 and PO3) that concern setting up a new legal form, the provision of the option of online registration would become compulsory, while for harmonising minimum standards (PO2), it could be encouraged. In the short to medium term, competent authorities may be required to invest in acquisition of such tools and adjust processes including training of staff. Considering annual maintenance for digital registries in Member States are found to be non-significant. 159

Consequently, the European Commission may encourage or mandate interoperability of national registers with an EU level platform/portal either to be established or building on existing initiatives, such as the Single Digital Gateway to allow for automated data access and exchange, and/or the use of agreed (minimum) standards to ensure comparability of data.

Besides the elements above, other (in)direct economic impacts for Member States can be expected for all policy options:

·Increased service and product offer in the national markets as well as cooperation and competition in critical sectors of high public relevance (e.g. healthcare and social services, social work, work integration, training and education services, employment services and research and development). This includes increased presence of service providers in public markets as well as influx of specific know-how improving quality and capacity.

·Indirect Revenues: the reduced need for full establishment in all Member States where the association is active, certainly for PO1 and PO3, is likely to have a negative impact on direct revenues of authorities as overall less registrations will be needed (with corresponding loss of fee income). 160  However, such impacts are expected to have a low magnitude (e.g. fees are largely used to compensate the administrative procedure and are not considered as a revenue) and are likely to be offset by the increased indirect revenues by new market players. While individual associations might be inclined to move their seat for these reasons, interviews and the very nature of associations suggest that they are often-times deeply rooted in their regional or national contexts.

Impacts on individual Member States are hard to predict as many factors play in the decisions of individual associations where to establish (favourable local environment, cultural links, and roots, ambitions of scale and roll out of operations). For ‘pan-European’ or international associations, it might be argued that Member States hosting many International or inter-governmental Institutions (e.g. France, Germany, Netherlands, Luxemburg, and Belgium) will be more likely to become the main location for associations following the rules proposed in the context of this initiative. Additional pull- and push factors might influence the decisions of associations to optimise their basis of operations. Amongst others, these could be economic (e.g. tax optimisation, market demands), legal, or political (e.g. to safeguard activities against political pressure). The factors that might affect the decisions of associations to maintain or move their seat are manifold and complex, which could lead to different results. Therefore, it is not possible to judge the direction of these decisions and identify clear-cut patterns or trends for different groups of Member States. 161 Other elements are related to neighbouring countries and border regions that might have more cross-border activity amongst associations, for example those Member States that share the same language, host minority populations of a neighbouring country or have traditionally strong cross-border civil society ties.

To conclude, and considering the elements mentioned above, in the short-term 162 non-significant adaptation costs may occur for competent authorities. However, all POs are expected to reduce in the long run recurrent costs for competent authorities related to compliance and monitoring of cross-border activities and mobility of associations (such as for the creation of legal personality, registration, merger, monitoring, informing associations and establishment procedure costs). Significant extra costs are not expected for competent authorities, as the volume of operations will be either similar to the already existing procedures or even lighter as more simplified (and digitalised) procedures will be in place for cross-border associations and overall, less registrations will be needed. As argued, predicting differences between Member States is highly speculative, as many different direct and indirect factors are at stake as well as very contextual elements in relation to cross-border relationships of associations in neighbouring regions.

c.Potential economic benefits

To estimate to what extent each policy option can be expected to unlock the maximum potential of 185 000 163 associations, 75 000 jobs and 4.2 billion GDP 164 contribution, an “unlocking percentage” is estimated for each policy option, corresponding to the anticipated uptake of the policy option over a 15-year time frame. This percentage is based on surveys, expert interviews and legal analysis. 165  Despite this approach, a potential overestimation cannot be excluded, given the uncertainties of these unlocking percentages. To mitigate this risk, a 10 p.p. lower scenario was introduced (resulting in an A and B scenario of potential cross -border associations, see also Section 2). A second element to anticipate uncertainty is the use of a range with an upper and lower bound for each potential benefit (- 5p.p and + 5 p.p. to the central estimate per policy option, resulting in ranges of potential benefits. 166

SCENARIO A

Table 8: Estimated economic benefits regarding the unlocking potential of cross-border activity of associations 167

A second scenario is added mitigating a possible overestimation of the maximum potential explained above. This is based on 155 000 associations as maximum unlocked potential by policy intervention (10 p.p. lower scenario 168 as regards scenario A see also Section 2) and gives the following range of potential benefits.

SCENARIO B

Table 9: Estimated economic benefits regarding the unlocking potential of cross-border activity of associations.

d.Environmental-, climate- and social impacts and fundamental rights 

In the context of this IA, the difficulty generally emerged to determine a causal relationship between an EU intervention aiming at simplifying regulatory and administrative rules on cross-border operations of associations, on the one hand, and the potential environmental, fundamental rights and social impacts, on the other hand. It can, anyway, be assumed that an EU intervention under the three policy options will trigger indirect and non-measurable positive effects. 169

Environmental and climate impact

In principle, the nature and objectives of the initiative are not expected to generate measurable direct environmental and or climate impacts.

When looking at the potential indirect benefits, all policy options are expected to generate a positive impact by improving the position and presence of cross-border associations active in the environmental and climate change sphere 170 , such as promotion of biodiversity, nature preservation and the fight against climate change.

Social impact

Similar potential benefits will occur for all POs in terms of social impacts. More precisely by improving the access for citizens in sectors offering social services across Member States (e.g. health, care and -services, community service social work, education and training, employment services, etc.). Consequently, this impact will foster convergence between the different models and offers in the Member States, including mainstreaming of innovation, leading to an overall enhanced quality and offer of such services in the EU. Given the strong presence of associations in areas described above, PO2 is expected to foster positively the access to those services offered by smaller organisations which, for instance, could be offered without the need for establishment. Finally, all POs are expected to foster participatory and citizen oriented civic space (e.g. participation in civil society, sports, arts and culture) potentially being interlinked across borders.

Looking at different options, PO1 (and to certain extent PO3) would be likely to benefit associations with an explicit social impact mission and organised at EU level with action in all (or multiple) Member States (e.g. social enterprises, social service providers, health, care and household service, social protection and rights). In this sense, PO1 and PO3 would strengthen the right to freedom of assembly and association in a non-discriminatory manner, as associations using the new legal forms would be treated in an equal manner with associations that already exist under national laws, albeit by automatic recognition under PO1 as opposed to mutual recognition in PO3. Still, at Member State level, limitations to the type of activities performed by the associations may occur when the association is not established. For example, in case such activities may be subject to specific national legislation (e.g. labour law, social security, taxation rules, etc.) implicitly requiring establishment.

Fundamental rights

Although this initiative is centred on the functioning of the single market for non-profit associations, all POs would have an indirect positive effect on the protection and promotion of fundamental rights. For instance, by improving the conditions for associations to operate in the single market, they will strengthen the enjoyment of the right to freedom of expression and information (Article 11 of the Charter) and right to freedom of peaceful assembly and to association (Article 12 of the Charter) in the EU.

From this viewpoint, all POs would indirectly strengthen the civil society and mitigate the overall shrinking civic space trends observed in Europe, 171 by facilitating cross-border activities and mobility of associations and enabling them to mobilise members, volunteers and interest groups across different Member States. The options would ultimately have an indirect positive impact on the EU democratic space. 172  

When it comes to fundamental rights impacts of the different policy options, it has to be noted that creating a new legal form at EU level (i.e. PO1 sub-options), according to desk research and Public Consultation results 173 , is considered as a strong contribution to the Europeanisation of the civic space. 174  The effects of PO2 are not expected to be as pronounced as those of PO1 and PO3, as it would only harmonise certain national rules (listed in Section 5). Similarly to PO1, PO3 would be expected to have a strong positive - although indirect - impact in terms of safeguarding the fundamental right to freedom of assembly and association and right to freedom of expression and information of associations and their members. It will in fact allow associations with cross-border ambitions to effectively expand and conduct their activities in other Member States, thereby also contributing to the exercise of fundamental rights that they advance through their activities, by benefitting from a uniform and sufficiently complete legal framework which, differently from PO1 sub-options, would not neglect the national specificities. The new rules would however not be applicable to pre-existing associations, unless they convert to the new form, which would create minor negative effects from the perspective of equality among associations.    

PO2 and PO3 might not as directly favour a “European brand” through a “European legal form” (in comparison with PO1), however they would still simplify procedures in the single market by reducing administrative burden and costs for cross-border associations, indirectly benefitting those associations active in the area of fundamental rights at pan European scale.

Taking into account the objectives and scope of the initiative, the specific and significant impacts per policy option are described as follows:

6.1PO1a and PO1b: Establish an EU-level legal form of association: ‘the European Association’ (PO1a)” or ‘The European cross-border Association’ (PO1b)

Overall, PO1 would introduce a supranational legal form of association facilitating operations across borders that would co-exist with other legal forms in the Member States. Once a European Association would be established and registered, it would be automatically recognised in all Member States, and it should be treated the same as associations incorporated under their national laws (principle of non-discrimination). Associations not using the new legal form remain unaffected.

The legal instrument for both PO1a and PO1b would be a regulation. It is the only legal instrument available for creating a new legal form at EU level, as confirmed by the CJEU. The benefit of this instrument is legal clarity resulting from its direct applicability and uniformity in content across the Union. However, creating a new legal form in this way may generate unwanted effects, not be entirely proportionate to the scale and nature of the identified problems, , given that Member States would not able to adapt the requirements to their national settings and tradition. At the outset, the said unfamiliarity could involve adjustment costs and may raise the threshold to take up this form.

The consequence (and downside) is that PO1 requires from already established associations wishing to benefit to take the new legal entity, with all related administrative implications and cost. The creation of a new legal form has, therefore, uncertainty of uptake and might create potential confusion for stakeholders as more legal forms will exist in parallel. Furthermore, it can create ‘competition’ between existing legal forms for associations in the Member States and the new legal form prescribed and regulated by EU law.

6.1.1Economic impacts on associations

The overall impact on the costs of cross-border operations is expected to be significant, allowing associations active cross-border to substantially reduce their cost of compliance and administrative burden. Moreover, it is expected that the reduced barriers to entry will unlock a significant share of associations interested in operating cross-border. In particular:

1.Associations already active cross-border: when transforming to the new legal form, substantial simplification in terms of compliance cost and administrative burden can be expected in terms of running cost of operating cross-border; 

2.Associations interested in launching cross-border operations, but hesitating due to existing barriers: in addition to the significantly reduced cost of operating cross-border also the need for establishment and the activities to be undertaken to act cross-border for those making use of the new legal form will be significantly reduced; 

3.Associations not interested in launching cross-border operations: this policy option does not affect such associations as they are not obliged to transform. 

This would be particularly beneficial for associations whose scope extends over the territory of several or all Member States. The voluntary nature of using the EU legal forms (PO1a and PO1b) means that it would not impose any additional compliance costs on associations that do not want to obtain them.

Costs of operating cross-border (recurring) for associations active cross borders (310 000): PO1 has the potential to significantly reduce costs for associations using the EU legal form and thus simplifying gathering information, less internal staff working on compliance and less needs for regular external advisory support. The extent to which such benefits materialise depends, however, on the extent of uptake of the new legal forms (PO1a or PO1b). As a potential cost reduction, the IA study estimates an order of magnitude leading to up to EUR 770 million per year (for the assessed timeframe of 15 years), see Annex 4 for calculations). 175  

Table 10: Excess cost reduction per year (for the assessed timeframe of 15 years).

As additional impacts, for future cross-border operations of associations (associations not yet active cross-border but potentially interested to do so, if barriers are removed), the launch cost is estimated at EUR 3 500, which is a cost reduction of EUR 2 150 per launch 176 , compared to the baseline of EUR 5 650 (for detailed overview see Annex 4).  177  Within the assessed 15-year time frame, this excess cost reduction could potentially range between EUR 278 million and EUR 318 million, in case of scenario A, and between EUR 233 million and EUR 267 million, in case of scenario B 178 (for detailed information about the two scenarios see introduction section 6).

6.1.2Indirect economic effects

Given the fact that both legal forms under PO1 are expected to significantly lower the barrier for cross-border associations active in multiple Member States, it is expected that particularly large associations will make use of the European legal forms. The extent to which it trickles down to smaller associations will depend on the complexity of transforming a national legal form into one of the two legal forms under PO1 prescribed fully or partially by EU law.

As described in tables 7 and 8, for this PO1 estimated benefits range as follows: number of additional cross-border associations between 130 000 – 149 000 for scenario A and 108 000 – 124 000 for scenario B; additional GDP  between EUR 2.9 billion - EUR 3.4 billion for scenario A and EUR 2.4 - EUR 2.8 billion for scenario B; and additional employment GDP  between 53 000 – 60 000 for scenario A and 44 000 – 50 000 for scenario B. 179   In terms of the speed of uptake, an exponential growth rate can be expected with some associations being ‘early birds’ and others hesitating and waiting to see the ‘proof of concept’. Another element which will play a role in the uptake depends greatly on what type of activities will be deployed. For example, in case local staff would be hired or in case non-tax exempt services are offered (of an otherwise need for a local presence), the need for registration or establishment in some form will at least partially remain. 180  A counter example is, when services are offered in a digital context, it is likely that registration in each Member State will not be needed and this PO1 could have a very positive effect. 

6.1.3Impacts on Member States 

As explained in the first past of this Section, the magnitude of the cost for all policy options is not expected to constitute a significant cost for competent authorities at Member State level. This Section will, however, provide a short overview of different costs and benefits for PO1.

Information costs: the EU and/or competent authorities will likely need to set up awareness-raising activities to make the new legal form better known among associations.

Adjustment costs (monitoring and supervision): the creation of an additional form at EU level can increase the complexity for authorities’ monitoring and supervision, as different regimes will exist next to each other. However, as assessed in the introduction of Section 6, it is expected that this should be a low one-off investment. In the medium and long term, depending on the uptake of the legal form, PO1 will require minimal additional costs related to mainly legal and administrative monitoring and supervision of the newly established associations under the EU legal form (e.g. the registration and establishment procedures, fiscal declarations). Differences might occur between Member States, e.g. those Member States (mainly Belgium, France, Luxembourg, Netherlands, and Germany) 181  with many international institutions might have a better uptake compared to others.