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Tax Benefits of Donations

Posted in: News Articles
Author: Myra Cecilia Azzopardi
Tags: ,

Royaldecree 49/2002 of 23 December on the taxation of non-profit entities and tax incentives for patronage allows companies a deduction of 35% corporate income tax with a maximum of 10% of the base assessment and in the case of individuals from 25% in Income Tax for Individuals

Patronage Law

The Law 49/2002 of 23 December on Fiscal Regime of No-Profit Entities and Tax Incentives for Patronage (BOE 307/2002) establishes the set of incentives that are applicable to the activities performed by private patronage on Non-Governmental Organizations (NGOs) and other non-profit entities such as foundations. This law, enacted under Article 149.1.14 of the Spanish Constitution and without prejudice to the regional tax regimes and are primarily intended for the particular incentive cooperation in achieving objectives of general interest, attention and growing recognition the presence of the private sector in the task of protecting and promoting performances characterized by the absence of profit whose sole purpose is general and public nature.

Moreover, the development carried out by the Regulation for the Implementation of Taxation of Nonprofit Institutions and Fiscal Incentives for Patronage (10/10/03 Decree 1270 of the Ministry of Finance), allows the application of these incentives with the promptness required by law

It is interesting to note the novelty of the grant tax donation rights and the constitution, without consideration, of usufruct rights over real property, rights and values ​​incentives. In any case, not surprisingly considering the purpose of these incentives, capital gains and positive rents that are revealed during these donations or contributions shall be exempt in the personal tax of the donor.

Due to the application of both legal texts, gifts, donations or contributions made ​​on behalf of the beneficiary institutions of patronage activity give the right to a deduction in fee personal income tax of the donor or contributor. This deduction will be 25 per 100 of the amount of donations, grants and contributions made ​​in the Income Tax of Individuals, and the income tax for nonresident taxpayers without a permanent establishment in Spain, and 35 100 in income tax and the income tax for nonresident taxpayers with a permanent establishment in Spain.

To ensure the implementation of this tax incentive for legal entities and non-resident entities operating in Spain through a permanent establishment, allowed deductions can be applied not practiced in the tax periods ending in the 10 years immediately succeeding.

Deduction percentages and limits may be increased by up to five percentage points if the activity developed by patronage beneficiary entities is included in the list of priority activities of patronage established by the Law of the State Budget.

According tax rate:
25% income tax. The basis of deduction will be limited to the provisions of Article 56.1 of Law 40/1998
IS 35%. The basis of deduction shall not exceed 10% of the tax base. The amounts deducted or not exceeding the limit, be compensated in 10 successive years.

Regarding tax benefits applicable to actions of different patronage of conducting donations, donations and contributions:
The costs of cooperation agreements in general activities concluded with the Labour Foundation Center for Art and Industrial Creation, will be considered a deductible expense for purposes of determining the tax basis of the taxation of corporations and the non-resident income and net business performance economic under direct estimate of income tax.

No limit to the deductibility of expenditures for general interest incurred by companies.

Thank you to the laboral centro de arte y creacíon industrial.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.

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