The income tax status of investment and business activities supporting non-profit entities or nonprofit-activities: Tax incentives for patronage (Law 49/2002) Susana Bokobo. UAM Marcos Pascual. U. OVIEDO DER 2011 -26725
The income tax status of investment and business activities q Introduction: subjective scope of application of the law q Grants, donations and gifts q Business collaborations agreements concerning activities which are of special interest to the State q Expenditures in activities which are of special interest to the State
Introduction: subjective scope of application of the law Patronage beneficiary entities: (art. 16 and Adicinal Provisions): Non profit entities (foundations, public benefit asociations, foreing foundations and sports federations. The State, Autonomus Communities and Local Entities. Public universities and students´ residences “Instituto Cervantes”, “Institut Ramón Llull. “Reales Academias” Other entities: Spanish Red Cross, ONCE, religious entities, “House of Amercia”, “House of Asia”, “Institut Europeu de la Mediterrània”, “Museo Nacional de Arte de Cataluña” and “Museo Nacional del Prado”.
Grants, donations and gifts (I) Kinds of grants, donations and gifts: • Cash donations • Assets and rights: no services • Association membership fees • Constitution of an usufruct without consideration. • Donations of Historical heritage assets • Donations of cultural assets of guaranteed quality (museums, etc. )
Grants, donations and gifts (II) q Corporate Tax: • Grants, donations or gifts are non deductibles expenditures for the entity that makes them. • These grants, donations or gifts can be deducted from the tax liability : § In the case of non-priority patronage activities: ü 35% of the amount donated. ü Deducted threshold : 10% of the tax base of corporate tax. § ü In the case of priority patronage activities: General State Budget. 40% of the amount donated. Deducted threshold: 15% of the tax base Priority patronage activities are set out in the General State Budget Law each year. For example: renewable energies, programs to fight against gender violence, programs to pursue training, do teaching work or do a spell of voluntary service ü
Grants, donations and gifts (III) Personal Income Tax and Non-Resident Income Tax: 25% of these grants, donations or gifts can be deducted from the tax liability q Justification of the grant, donation or gift Art. 24 Law 49/2002 y 6 RD 1270/2003. A certificate from the beneficiary entity is required with: • • Identity of both entities • • Destination of the donation Beneficiary entity status (art. 16 de la Law 49/2002) Date and amount of the grant, donation or gift If the donation is not in cash, document proving the supply of assets. Express mention of the irrevocable character of the donation
Business collaborations agreements concerning activities which are of special interest to the State q Definition: The beneficiary party agrees to collaborate in the patronage's dissemination of participation in exchange for economic aid in carrying out its activity of a sporting, charitable, cultural, scientific, promotional or other nature. q Tax treatment: • These amounts are deductibles expenditures in Corporate Tax, Personal Income Tax and Non-Resident Income Tax q The dissemination of participation is not a service, therefore there is no VAT q Business colaboration agreements vs. Sponsoring contracts: The main different is the advertising character of the sponsoring contract
Expenditures in activities which are of special interest to the State q Definition: The expenditures in activities which are of special interest to the State are deductibles in Corporate Tax, Income Tax and Non-Resident Income Tax (art. 3. 1º de la Ley 49/2002): “defense of human rights, defense of victims of terrorism or violent acts, social assistance and social inclusion, civic, educative, cultural, scientific, sport, sanitary, labour, institutional enforcement, cooperation for development, , promotion of the volunteering, promotion of social action, defense of the environment, promotion an attention for persons in danger exclusion due to physical, economical or cultural reasons, promotion of constitutional values, promotion of tolerance, development of social economy and the Society of the information, scientific research and technical development”. q Incompatibility with other tax incentives q In practice it is very difficult to apply
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