The Impact of Global minimum tax philanthropy

The global minimum tax under OECD’s Pillar Two (15%) impacts how NRIs and OCIs structure charitable giving. Traditional low-tax philanthropic vehicles may now trigger top-up taxes in high-tax countries like the USA. UHNWIs must reassess their donation structures to stay compliant, tax-efficient, and effective.

Understanding theGlobal minimum tax philanthropy and its Reach

The global minimum tax is a landmark reform arising from the OECD’s Base Erosion and Profit Shifting (BEPS) Pillar Two initiative. Its primary goal is to ensure large multinational enterprises pay a minimum tax rate of 15% on their profits in every jurisdiction where they operate. While it seems focused on large corporations, its rules indirectly influence the cross border wealth and philanthropic planning of UHNWIs.

1. Impact on International Charity Tax Structures for UHNIs

The new global tax regime presents several key challenges and opportunities for existing philanthropic structures.

Reduced Tax Arbitrage: Low-tax structures may lose their advantage, as profits taxed below 15% now face top-up taxes regardless of charitable intent.
Double Tax Exposure: Donations routed through foreign entities may inadvertently trigger taxation both in the offshore jurisdiction and in your country of residence, creating an inefficient giving model.

The new tax landscape calls for robust planning. Reviewing treaties like the US-India DTAA is key to avoiding double taxation. Domestically compliant structures like 501(c)(3)s in the USA or registered Indian trusts are now more critical than ever.

2. Philanthropic Restructuring: The Essential Steps for NRIs & OCIs

Given the new global tax framework, a strategic philanthropic restructuring is no longer optional; it is a necessity to preserve your giving’s tax efficiency and legal integrity.

Re evaluating Offshore Structures

Your first step must be a legal audit of any existing offshore philanthropic entities.

Determine Exposure: Assess whether your entity is part of a multinational group that falls under the global minimum tax rules, and if it could trigger a top up tax.
Assess Exclusions: Check if your philanthropic entity qualifies as an “Excluded Entity” or “Qualifying Exempt Organisation” under the OECD rules. This status can provide a shield from the new regulations.
GILTI and Reporting: For UHNWIs in the USA, you must review your exposure to GILTI rules and ensure all foreign entities are correctly reported to the IRS, regardless of their tax exempt status.

Ensuring Indian Legal Compliance

Your donations to India must always be compliant with local tax efficiency laws.

FCRA Registration: As an NRI or OCI, your donations to Indian entities are considered foreign contributions. The recipient organisation must have a valid FCRA registration to legally receive your funds. The 2020 FCRA amendments have tightened these rules, increasing scrutiny and restricting sub granting, making your compliance even more critical.
Section 80G and 12A: To claim tax deductions in India, you must donate to a charity registered under Section 80G of the Income Tax Act, 1961. The charity must also register under Section 12A to qualify for tax exemption itself.
ITR Filing: Your donations to Indian charities may require additional disclosures in your Indian Income Tax Return (ITR) to maintain transparency and compliance.

Optimising Cross Border Giving Strategies

A successful strategy for international charity tax planning must balance the laws of India and your resident country.

Donor Advised Funds (DAFs): For UHNWIs in the USA and Canada, DAFs are an excellent tool for tax efficient giving. You can claim an immediate tax deduction on your contribution, and the DAF can then channel funds to FCRA compliant charities in India. This provides flexibility and simplifies your tax obligations.
Hybrid Structures: Consider creating a hybrid structure, such as a dual compliant charitable trust recognised by both the IRS and the Indian tax authorities. This provides the best of both worlds: tax benefits in your resident country and seamless, compliant giving to India.
Direct Donations: You can still donate directly to Indian charities, but you must confirm their Section 80G and FCRA status. Be aware that this may not always be tax deductible in your country of residence.

Case Study: Restructuring a UHNWI’s Philanthropic Plan

A New York–based UHNWI with OCI status faced tax and legal issues routing donations via a Mauritius foundation. The structure lacked U.S. deductibility, triggered FCRA concerns in India, and risked GILTI exposure under global tax rules. We restructured it as a dual-registered entity, ensuring IRS and Indian compliance, preserving tax benefits, and safeguarding long-term impact.

Outlook: Global minimum tax philanthropy and Future Philanthropy

The global minimum tax regime is fundamentally reshaping not only corporate tax strategies but also how wealth is given away. For NRIs and OCIs, particularly UHNWIs, this marks a definitive shift towards transparency and compliance centric giving. The traditional use of low tax havens for philanthropic capital accumulation is becoming obsolete. Future proof philanthropic structures must therefore be transparent, have clear substance, and be fully aligned with both global tax efficiency laws and cross border regulatory frameworks.

FAQs on Global Minimum Tax Philanthropy for NRIs and OCIs

Q1. How does the global minimum tax specifically impact my personal donations?

It does not directly tax your personal donations. However, if you channel your donations through a family controlled business or a private foundation, the tax can affect the financial health and tax efficiency of that entity, indirectly reducing the funds available for your charitable giving.

Q2. Can I still get tax deductions for donating to Indian charities from the USA?

Yes, but it requires strategic planning. You can get a tax deduction in the USA if the donation is routed through a registered US 501(c)(3) intermediary that has a specific purpose for Indian charities. Direct donations to Indian charities are not always tax deductible in the USA.

Q3. What is the best jurisdiction to set up a charitable trust as an OCI in the USA?

The most effective approach is to set up a dual compliant structure. This could be a 501(c)(3) entity in the USA or a registered trust in India. Your choice will depend on your residency, the location of your assets and the beneficiaries, but a hybrid structure often provides the best tax efficiency.

Q4. What is the role of the Foreign Contribution Regulation Act (FCRA) in my giving?

The FCRA is a critical Indian law that regulates foreign donations. Any Indian charitable organisation receiving funds from you as an NRI or OCI must have a valid FCRA registration. If they do not, the donation may be deemed illegal, leading to penalties for both the donor and the recipient.

Q5. How can I ensure that my tax planning impact is not negatively affected by the new laws?

You must conduct a comprehensive legal and tax audit of all your philanthropic entities. Engage experts who specialise in cross border tax and charitable giving to evaluate your structures, ensure compliance and recommend a philanthropic restructuring that aligns with both Indian and global regulations.

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How the Global Minimum Tax Impacts International Philanthropy for UHNIs: A Strategic Legal Guide for NRIs and OCIs