The general tax system
When a company subject to tax in France makes a donation to a public interest organization, it benefits from a reduction in corporate tax or income tax. It may also benefit from certain communications and public relations counterparties.
The diet ggeneral
The principle
For companies, the tax cut is equal to:
- to 60% of the amount of the gift made in cash, competence or in kind up to €2 million in annual donations
- to 40% of the amount of the gift made in cash, competence or in kind more than €2 million in annual donations (with exception)
The annual donation limit qualifying for the tax benefit is €20,000 or 0.5% of turnover (excluding taxes), when the latter amount is higher. If this limit is exceeded, it is possible to carry forward the tax reduction surplus for the following five fiscal yearsts.
For more information on tax reduction options: BOI-BIC-RICI-20-30-20
The exception
However, by exception, regardless of the amount of annual donations, the rate of corporate tax reduction remains at 60% for all the dbusinesses that benefit non-profit organizations that provide meals to people in need free of charge, that help promote their housing or that provide meals to people in difficulty, primarily, to the free supply to persons in difficulty of care or of basic necessities. These basic necessities are strictly listed inArticle 238 bis of the General Tax Code.
Example :
Company X makes donations for a year n as follows:
- EUR 1 million for associations providing meals to people in difficulty
- EUR 2.5 million to organisations eligible for sponsorship for different causes including culture
Company X will receive a tax reduction of:
- 60% of 1 million euros
- 60% of 2 million euros
- 40% of 500,000 euros
The counterparties
The counterparties constitute a benefit offered by the recipient to the donor in addition to the tax reduction. The value of these counterparties must remain in a “marked disproportion” with the donation amount. A ratio of 1 to 4 is allowed between the amounts of the counterparties and that of the donation, that is to say that the value of the counterparties granted to the sponsoring company must not exceed 25% of the donation amount.
The valuation of counterparties
All counterparties, material or intangible (presence of the sponsor’s logo on the communication media of the supported project), received by the company must be the subject of a valuation carried out by the beneficiary organization. In accordance with the reporting obligations, the paying undertaking shall declare the value of direct counterparties granted by the recipient of the grants and, where applicable, indirect counterparties granted by another body (§80 et seq. of BOI-BIC-RICI-20-30-40)
There is different situations :
- If a sponsorship agreement provides for the existence of counterparties, the value of the goods and services to be reported by the transferor company shall be the same as that mentioned in that agreement.
- In the absence of a conventionwhere the good or service received in consideration is the subject of a commercial offer on the part of the beneficiary organisation, the valuation of the consideration thus granted free of charge which must be declared is the selling price of that good or service.
- In the absence of a convention and where the good or service received in consideration does not not the subject of a commercial offer on the part of the recipient organization, it must be valued at its cost. The cost of a good or service includes all the costs incurred by the organization to acquire or produce that good or service.
All counterparties received by the transferor must be declared, whether or not they have been used. If counterparties, the principle of which was agreed between the recipient organization and the donating company at the time of the donation, are received later, they must be reported in the year in which the donation was made.
Immaterial counterpartieslles
The tax authorities have clarified the valuation rules for these counterparties in the BOI-BIC-RICI-20-30-40 of 8 June 2022 (§90 et s.) :
- Corporate sponsorship for projects/regional institutions : development to the extent of 5% maximum
- Corporate philanthropy for projects/projectsinstitutions of national or international scope : development to the extent of 10% maximum
Example
A company supports the purchase of a work of art in a museum in France with a €100,000 financial sponsorship. It can therefore benefit from €25,000 in counterparties.
The material counterparties granted by the museum are valued according to the tariff schedule in force in the institution: provision of a reception area for an evening, valued at €10,000, 500 tickets for the museum, valued at €10 per unit, 5,000 euros, 100 books on the history of the museum, valued at 50 euros per unit, or 5,000 euros. The total value of the physical counterparties is therefore equal to €15,000.
In addition, the name and logo of the company are included on all the museum’s communication materials relating to the presentation of the newly acquired artwork. The valuation of this type of intangible counterparty may not exceed 10% of the amount of the company’s donation, within the framework of a project of national or international scope* or €10,000 of communication counterparties.
*If the project is regional in scope, intangible counterparties cannot exceed 5%
The reporting obligation
Companies are subject to a reporting obligation from €10,000 of donations and payments, during a fiscal year, eligible for the tax reduction. For each donation, companies must report to the tax authorities, via theSchedule to Form 2069 RCI-SD :
- The amount of the donation
- The date of the donation
- Identity of the recipient of the gift
- Consideration: the value of goods and services received, directly or indirectly, in return for the gift
The declaration must be submitted in electronic form within the same time limit as that laid down for the submission of the declaration of results, that is to say in the three months following the end of the financial year. In the absence of a declaration, the undertaking incurs a fine of €1,500. In case of omission or inaccuracy, €15 per inaccuracy or omission.
Intermediary body
When the donations and disbursements are realized for the benefit of an intermediary body :
- if the intermediate organism acts as a simple collector of funds, the company paying declares the identity of the final beneficiary.
- if the intermediary is eligible for sponsorship and repays the donations and payments to an eligible organization(s) corporate philanthropy, the generous declares the identity of the intermediary body.
Counterparties granted
The value of the goods and services to be declared by the recipient undertaking shall be the same as that mentioned in the sponsorship agreement. These are the granted counterparties and not the consumed counterparties. By exception, counterparties that are returned to organizations eligible for sponsorship are not to be reported by the sponsoring company.
Within the framework of multi annual sponsorship agreements, the sponsoring companies must declare each year an equal share of the total value of the counterparties granted as defined in the sponsorship agreement (e.g. one third each year in the case of a triennial agreement).
Calculation help sheets
In addition, a calculation aid sheet is available to facilitate the determination of the amount of the corporate sponsorship tax reduction that the company receives. This calculation help sheet #2060-M-FC-SD does not need to be filed with the tax administration.
The sponsorship agreement
If the sponsorship agreement is not not mandatory (in theory, a simple verbal agreement between the patron and the recipient of the gift may suffice), the Ministry of Culture, through the Charter of Cultural Patronage recommend establish a written agreement because the absence of a written agreement leads to uncertainty as to the nature and extent of the obligations borne by the partners. It makes it possible to formalise the respective commitments. It will be useful to prevent any disputes, particularly in the case of loan of equipment or provision of space (insurance, etc.), as well as at the tax level.
Of new models of sponsorship agreements have been drawn up.