Non-investment fund

What it means

A non-investment fund is a non-profit legal entity that pools money for a public-benefit purpose such as protecting and promoting health, education, sport, culture, helping people in need or environmental protection. It is set up by a deed of foundation and comes into existence on entry in the register.

It differs from a foundation mainly in needing no minimum endowment and in its money not being tied to preserving capital permanently. It is therefore a practical form for smaller projects, fundraising or supporting a particular community or individual.

The fund may not run a business for profit, and its money may go only to the purpose stated in its founding deed and reasonable administrative costs. It can accept gifts, contributions and, subject to conditions, the assignation of paid tax from individuals and companies.

How it works in practice

At the set-up stage we help choose between a fund, a foundation, a civic association and a non-profit organisation according to what the money is for, who should decide and which sources are expected. Each form has different obligations.

A non-investment fund keeps books under the rules for non-profit entities, often in single-entry bookkeeping if it meets the conditions. Each year it prepares an annual report with an overview of income and how it was used, and publishes it.

To receive the assignation of paid tax, the fund must enter itself in the list of recipients by the statutory deadline. Money from this source is tracked separately and its use published, because donors and the public take an interest in it.

What to watch out for

The most common mistake is spending the fund’s money on a purpose other than the one in its founding deed, or on excessive administrative costs. At an inspection this can lead to repayment or dissolution, and donors’ trust is lost quickly.

The second risk is forgotten reporting. Even a small fund receiving a few gifts a year must file a tax return if it has taxable income, publish an annual report and keep books. Failures are fined just as for companies.