Tax Benefits from donations
The Law 49/2002, 23 December, which regulates the tax status of non profit organisations and the fiscal incentives for patronage, allows companies a tax deduction of 35% in corporation tax with a maximum of 10% on the taxable base, and of 25% on personal income tax in the case of individuals.
Law on Patronage
The Law 49/2002, of 23 December, which regulates the tax status of non profit organisations and the tax incentives for patronage (B.O.E. 307/2002), establishes all the incentives applicable to the activity of patronage undertaken by individuals in Non Government Organisations (NGO) and other non profit bodies such as foundations. This Law, promulgated under Article 149.1.14 of the Spanish constitution without prejudice to the foral tax regimes, is primarily aimed at providing incentives for private collaboration in accomplishing objectives of general interest, as a response to growing recognition of the presence of the private sector in the task of protecting and promoting actions which are characterised by the absence of profit-seeking, and whose sole aim is of a general and public purpose. In addition, development carried out under the regulation for the implementation of the tax system for non profit organisations and tax incentives for patronage (Decree 1270 of 10/10/03 by the Ministry of Finance) allows the implementation of these incentives with the promptness required by law. It is interesting to highlight the novelty represented by the award of fiscal incentives for the granting of rights and for the constitution, without compensation, of the usufruct real rights on property, rights and values. In all cases, as predisposed by the goals of these incentives, the capital gains and positive income occurring as a result of these donations or contributions shall be exempt from the donor’s personal tax. As a result of the implementation of both legislative texts, gifts, donations and contributions made in favour of the beneficiary bodies of the patronage activity will give the right to apply a deduction in the donor’s or contributor’s personal income tax amount. This deduction will be 25 per 100 of the amount of the gifts, donations and contributions in the personal income tax and in the income tax for non-residents for taxpayers without a permanent establishment in Spain, and 35 per 100 in the corporate income tax and in the non-resident income tax for contributors permanently established in Spain. In order to guarantee the implementation of this tax incentive for non-resident legal persons and entities operating in Spain through a permanent establishment, it is permitted that deductions which are not applied may be applied over the tax periods which finish in the immediately following 10 years.
The deduction percentages and limits can be increased to a maximum of five percentage points if the patronage activity carried out by the beneficiary entities is included in the list of priority patronage activities established by the General State Budget Law.
According to the tax rate:
I.R.P.F.[personal income tax] 25%. The deduction base will be up to the limit as established in Article 56.1 of the Law 40/1998.
I.S.[corporate tax] 35%. The deduction base cannot exceed 10% of the tax liability. Any amounts not deducted or which exceed the limit can be offset in the following ten years. In relation to tax benefits applicable to other patronage actions which are different from giving gifts, donations and contributions:
the costs arising from collaboration agreements in general interest activities concluded with the LABoral Centro de Arte y Creación Industrial Foundation are considered as tax-deductible expenditure for establishing the taxable base of the corporation tax (I.S.) and non-resident income tax (I.R.N.R.) and the net yield of economic activities in the personal income tax direct estimate regime. There are no limits on the tax deductibility of expenses in general interest activities incurred by the companies.
