NGOs rush to take advantage of the sponsorship law at Christmas season

The sponsorship law is 19 years old without having been sufficiently promoted, while this facilitates NGOs to obtain more money for developing their projects and programs. The sponsorship law, together with the Fiscal Code, allows the companies to offer sponsorships, for example, to the charity organizations and to benefit from the fiscal facilities within certain facilities. However, few companies know these provisions and even fewer choose to use this law to support humanitarian causes for sustaining the communities where they operate.

The sponsorship expenses is not deductible but can generate a fiscal credit, which reduces the income tax payment with the whole amount of the sponsorship, if the amount is lower than 0.3% of the turnover and 20% of the tax, informs Hospice Casa Sperantei NGO in a press release.

According to the data collected by the National Agency for Fiscal Administration (ANAF), only 12% of the profitable companies in 2011 chose to direct 20% of their income tax payment to the non-governmental organizations.

The NGO’s received RON 463.7 million (EUR 103.59 million in 2011, according to ANAF. Nevertheless, the non-governmental entities could have received EUR 440 million, if the companies in Romania, which had gross earnings of RON 58.1 billion (EUR 12.98 billion) in 2011, would have decided to grant them 20% of the income tax, according to the news website altreileasector.ro.

In order to facilitate the understanding of the legal procedures, EY has compiled a simplified example: a company has EUR 100.000 profit by the end of 2013 and a turnover of EUR 1.5 million. The income tax is 16.000 (with its final payment by the end of 2013). If the company has EUR 3.200 sponsorship costs (which have no impact on the tax paying profit of the company) the income tax could be reduced to EUR 12.800. Hence, the company sponsors up to EUR 3.200 during the year without affecting the cash flow or other costs.