Since this is the holiday season the closing of the financial year gives companies the chance to do a good deed without recording additional costs.

Thus, in accordance with Article 21, paragraph 4), letter p), of the Tax Code taxpayers who perform sponsorships and/or acts of patronage, according to Law no. 32/1994 regarding sponsorship, as subsequently amended and supplemented, and the Library Law no. 334/2002, as republished, as subsequently amended and supplemented, as well as those granting private scholarships under the law deduct from the payable corporate tax any related amounts to the lower of the amounts specified below:

  • 3 per thousand of the turnover
  • 20% of the corporate tax due

The aforementioned amounts that cannot be deducted from the corporate tax in the related year shall be carried forward over the next 7 consecutive years.

The implementing regulations for the aforementioned article present the following calculation example:

  • A taxpayer paying corporate tax enters into a sponsorship agreement under the law on sponsorship, as the sponsor, which covers the payment of a sum of 15,000 RON. The sponsorship agreement ends on 2 November 2014 and during the same month the payment of the sum of RON 15,000 is made. In calculating the taxable profit for 2014, the taxpayer presents the following financial data:
    1. Total turnover   = RON 1,002,000
    2. Total operating expenses = RON 860,000
  • The calculation of the taxable profit of 2014:
    • Taxable profit = 1,002,000 – 860,000 + 15,000 = RON 157,000.
    • The corporate tax before deducting the sponsorship expenses: 157,000 x 16% = RON 25,120.
    • Legal limits of deductibility of the sponsorship expenses:
      • 3 per thousand of the turnover = RON 3,006;
      • 20% of the corporate tax before deducting the sponsorship expenses = RON 5,024.
    • The amount to be deducted from the corporate tax is RON 3,006.

For 2014 the corporate tax due is: 25,120 – 3,006 = RON 22,114.

The sum of RON 11,994, which has not been deducted from the corporate tax, shall be carried forward over the next 7 consecutive years. The recovery of this sum shall be made on the same terms on each corporate tax payment deadline.

1. How associations help the sponsorship law

P.OIn Romania, associations need private funding. This sponsorship law allows companies to donate part of their income tax to the associations of their choice, which is a great opportunity for companies to support social welfare actions without this costing them.

While large companies in general use sponsorship and know how to calculate the annual amount they may donate, Small and Medium-sized Enterprises use this mechanism insufficiently due to a lack of information and time or estimating that the amount they may redirect this way would be insignificant. However, these small accumulated sums are an important source of income for associations and projects which cannot be implemented or beneficiaries that cannot be supported.

Take, for example, the scope of intervention of Ateliere Fără Frontiere: the integration through economic activity or ensuring that persons considered unemployable find jobs and become actors and contributors to the society in which they live. If this approach is known in most EU Member States and supported by public policies in Romania the State does not intervene or intervenes too little.

2. Which are the companies that win or lose?

P.O. : Nowadays in Romania there are companies that can lead to change and can build on existing tax benefits to make up for the shortcomings of a society that does not find its social model. The first benefit for the company is fully exercising its responsibility towards society and sustainable development, as an employer, as a taxpayer, as a consumer or as a supplier....

The second benefit is, of course, the cohesion within the company. There are countless testimonies from the companies depicting the motivational impact of the actions of employee solidarity or mobilization around a cause, a common goal, without any financial interest, but with a strong social impact. These actions are also an opportunity to add the financial support of the employees through other legal means of support for existing NGOs in Romania as the law allows individuals to redirect 2% of their income tax to their association of choice.

Finally, sponsorship contracts include a dimension of external communication and give a positive image to customers and business partners. The more consistent the project is with the Company business, environment and values, the more effective this positive communication will be.

For further details you can contact your usual FINEXPERT consultant or Patrick Ouriaghli, Director Ateliere Fara Frontiere -

Testimonial Patrick Ouriaghli, Ateliere fara Frontiere's Director

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