Transcript Tax incentives for patronage (Law 49/2002)

Susana Bokobo. UAM
Marcos Pascual. U.OVIEDO
DER2011-26725
The income tax status of
investment and business activities
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Introduction
Special Tax Regime
Subjective scope of application of the special tax regime
Objective scope of application of the special tax regime
Types of grants, donations and gifts
Tax incentives
Study case: Spanish business collaboration agreements
concerning activities which are of special interest to the State
and expenditures in activities which are of special interest to
the State
 Conclusion
Introduction
o The aim of this presentation is to answer the
question: why does the State establish a
special tax regime?
o Special tax regime for NP Entities and NP Activities
that consists of certain tax incentives
Special tax regime
 Special Law: Spain, Portugal, Hungary, Turkey,
Russia
 General Tax Law: Germany, Greece, France,
Finland, Russia.
Subjective scope of application of the incentives
Patronage beneficiary entities:
 Distinction between Foundations and Associations (Italy)
 Distinction between domestic and foreign entities: Greece; Denmark
(foundations established in low-tax countries); Switzerland (only
domestic foundations); Belgium (until December 2009).
 Legal entities with a special status (Switzerland, Spain, Sweden)
 Special entities: Turkish Crescent Association, Instituto Cervantes
(Spain), religious entities (Germany, Spain) universities (Austria,
Belgium, Sweden, France)
 The State, Autonomous Communities and Local Entities (Spain).
 Museums, Trusts (UK).
 Hospitals, rest homes for the elderly (Turkey)
Objective scope of application of incentives
Activities:
 Charitable, public benefit, religious.
 Trade union, sports, higher education and research
activities (France)
 Cultural, environmental, educational.
 Promotion of citizenship, human rights, women rights
(Spain, Portugal)
 Special events (Olympic Games)
Types of grants, donations and gifts
• Cash donations: Norway (only cash)
• In kind i.e. donations of historical heritage
assets or
donations of cultural assets, movable and immovable
property, capital assets and industrial property:
Switzerland, Turkey, Portugal, Spain.
• Association
Switzerland
membership fees: Spain, Russia, not in
Tax incentives (corporate/income tax)
For entities:
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Exemption from income tax: Germany (with exceptions), Italy,
Belgium, Greece (list of income sources), UK and Denmark
(under special conditions), Turkey
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Special tax rates: Greece, UK, Spain
For donors:
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Exemption from taxation: Russia, Poland, Spain
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Deductions from the tax liability with limits: Spain, Sweden, Italy,
Poland
Deductions from the tax base with limits: Finland, Austria, UK
(individuals), Portugal, Norway, Belgium
Study Case: Spanish business collaboration agreements
concerning activities which are of special interest to the
State
 Definition:
The beneficiary party agrees to collaborate in the
dissemination of the sponsor’s participation in exchange for
financial aid to carry out its activity of a sporting, charitable, cultural,
scientific, promotional or other nature.
 Tax treatment:
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These amounts are deductible expenditures in Corporate Tax,
Personal Income Tax and Non-Resident Income Tax
 The dissemination of participation is not a service; therefore there is
no VAT
 Business collaboration agreements vs. Sponsorship contracts:
The main difference is the advertising nature of the sponsorship
contract
Study Case: Spanish regime of expenditures in activities
which are of special interest to the State
 Definition: Expenditures in activities which are of special interest to the State are
deductible in Corporate Tax, Income Tax and Non-Resident Income Tax (art. 3.1º de la
Ley 49/2002):
“defence of human rights, defence of victims of terrorism or violent acts, social
assistance and social inclusion, civic, educational, cultural, scientific, sport,
health and labour activities, institutional strengthening, cooperation for
development, promotion of volunteering, promotion of social action, protection
of the environment, promotion and attention for persons in danger of exclusion
for physical, economic or cultural reasons, promotion of constitutional values,
promotion of tolerance, promotion of the social economy and the information
society, scientific research and technological development”.
 Incompatibility with other tax incentives
Conclusion: why does the State establish
a special tax regime?
States encourage the private sector to support NPEs
or certain activities because we all know, as a
community, that the welfare state cannot be
sustained by the public sector alone.
We all know that the State cannot be everywhere
and with everyone.
Tax incentives are useful for this purpose.