It's not uncommon for individuals to make donations to various associations, thereby benefiting from tax reductions. What about companies? What advantages could they enjoy? And which donations are eligible? Here are some answers.
What is corporate philanthropy?
This is material support offered by a company to an organization carrying out activities in the public interest, without any consideration being given in return. The law of August 1, 2003, known as the Aillagon law, on sponsorship, amended the law of July 23, 1987. The aim is to develop patronage even more widely, with a series of incentives aimed at both individuals and companies.
In the eyes of the authorities, various forms of donation are valid:
- cash donations: the most common cash donation
- in-kind donations: stock of goods, furniture, tools, equipment, etc.
- skills donations: making employees available for manual or intellectual work. In this case, the value of the donation is calculated in relation to the cost of the employee during the period in which he or she is made available.
Patronage should not be confused with sponsorship. Sponsorship can also be material support given by a company to an organization, a person or a product during an event, with the aim of making a profit. In other words, it's more of a calculated commercial approach. Sponsorship operations are designed to promote a company. Expenses incurred are expensed and deductible from taxable income.
The French Ministry of Culture is responsible for ensuring that these schemes are properly applied. 18% of corporate philanthropy in France is allocated to culture and heritage. A cultural sponsorship charter has been created to serve as a reference tool for donors and beneficiaries alike, setting out the principles of the legislation and best practices in the field.
The advantages of making a corporate donation
Any company subject to income tax or corporation tax can benefit from a reduction in this tax when it makes a donation to a non-profit organization.
General principle
The tax reduction is equal to 60% of the amount of the donation, whether in cash, skills or kind, up to a maximum of two million euros of donations per year.
Above two million euros, the reduction is 40%. It is deducted from the amount of tax payable by the company in the year of payment. The tax reduction ceiling is set at €20,000 or 5 per thousand of annual sales excluding tax.
Special cases
The rate of tax reduction may vary according to the type of donation and the company's tax regime. Companies subject to corporation tax which make a donation for the public purchase of cultural property of major interest to the national heritage benefit from a rate of 90% of the amount of the donation, up to a limit of 50% of the tax due.
Companies (subject to income tax or corporation tax) that purchase cultural goods catalogued as "national treasures" benefit from a rate of 40% of the purchase price.
If donations are made to associations providing free meals or care to people in difficulty, or to housing organizations, the reduction rate is 60%, regardless of the amount.
In addition to the tax benefits, corporate philanthropy enhances the company's image and reputation, making it an integral part of a global communications strategy.
Who to donate to
A company can donate to any public or private organization of general interest. It is essential that these organizations, whether associations or foundations, operate on a disinterested basis. Donations to artists or other individuals are not eligible for deduction.
A wide range of fields are involved: humanitarian aid, sport, health, culture, education, social issues, the environment, science...
Please note that the recipient of the donation is not entitled to offer any consideration if this is deemed to be of equivalent value to the donation. Similarly, if it is clearly demonstrated that the company is involved in an advertising operation, this will be treated as sponsorship.
To qualify as sponsorship, a company must give to :
- and local authorities
- an endowment fund
- a charitable foundation or association
- a live performance organization
- an organization that safeguards cultural property in the event of armed conflict
- an approved organization providing aid to SMEs
- a company organizing contemporary art exhibitions
- an accredited higher education institution.
Of course, organizations must be based in France or the European Economic Area.