What is patronage?
Patronage is defined as "material support, without direct compensation from the beneficiary, to a work or person engaged in activities of general interest."
While the central concepts of this definition - support, absence of counterparties and general interest - retain their full value, the development of patronage in France owes much to the incentives provided by the law of 1 August 2003 on patronage, associations and foundations, and its successive advances.
It results in the donation (in cash, in kind or in competence) to an organization to support a work of general interest. If the recipient is eligible for deductible sponsorship, the donation entitles donors (businesses and individuals) to certain tax benefits.
Patronage must therefore be clearly distinguished from sponsorship, an English-like term "sponsoring".
Who can benefit from this?
Before embarking on a search for patronage, it is necessary to verify that the organization is eligible for patronage which entitles the donor to a tax benefit.
1. The recipient must be a public interest organization
This condition is met if:
- Thenonprofit activity and uncompetitive. It is important to note that subjecting one’s activity to VAT and other commercial taxes a priori excludes an organization from the scope of eligibility for patronage. However, the activity of an organisation can be "sectorized". In this case, activities not subject to VAT may be compatible with sponsorship actions. Finally, it should be emphasized that are not eligible for patronage organizations such as SA, SCOOP, SARL, etc... which are for-profit organizations (in the fiscal sense of the term);
- The management is disinterested ;
On the criteria for assessing the non-profit character and disinterested management of a non-profit organization (in particular an association law 1901) and on the sectorisation of activities, reference will be made to the official bulletin of Public Finance (BOI-IS-CHAMP-10-50-10-20).
- The activity does not benefit not a small circle of people (BOI-IR-RICI-250-10-10,§130 et s.)
2. The work must be of general interest
This condition shall be fulfilled if the work is of a philanthropic, educational, scientific, social, humanitarian, sporting, family, cultural character or contributes to the enhancement of the artistic heritage, the defence of the natural environment or the dissemination of culture, French language or scientific knowledge.
3. How can you verify that an organization can benefit from deductible patronage?
In principle, these are the organizations receiving donations that appreciate whether or not they meet the conditions for receiving donations from individuals. The system is purely declarative.
The issuance of "receipts for donations to works" is therefore their sole responsibility. Only in the context of a tax audit will the tax authorities determine whether the receipt was properly issued.
If an organization wrongly issues a receipt, it incurs a fine equal to the amount of the unduly obtained tax reduction (article 1740 A CGI). On the other hand, the taxpayer in good faith does not see his tax reduction challenged.
Under the law of 1 August 2003, however, an organisation may ask, if it so wishes, the Tax Services Department of the department where its head office is established, whether it falls into the categories benefiting from sponsorship. This request for “tax rescript” must be in writing, providing all relevant information to assess the activity of the body.
The purpose of this provision is to ensure greater legal certainty for public interest organisations and donors. The procedures are defined in the official Public Finance bulletin (BOI-SJ-RES-10-20-20-70).
4. The case of natural persons
It should be noted that natural persons (artists, for example) cannot benefit from patronage direct governance of companies or private sponsorship. Nevertheless, they may receive grants from corporate foundations or from recognized foundations of public utility.
What are the main eligible cultural organisations?
Subject to case-by-case verification, these are:
- The State, local authorities and their establishments (see Article 28 of Tax Instruction 4-C 5 04 of July 2004),
- Organizations of general interest (in particular associations law 1901 whose management is disinterested and the non-profit and non-competitive activity, and whose activity does not benefit a small circle of people),
- Recognized foundations and associations of public utility, and sheltered foundations,
- Company foundations (donations from employees of the founding company and employees of the group)
- Endowment funds
- Museums of France (within the meaning of the Law 2002-5 of 4 January 2002 on museums of France)
- Most of the private historical monuments (for their restoration work on the protected parts, or their accessibility works for the disabled),
- Organizations whose management is disinterested and whose main activity is the dissemination of live performances or the organization of contemporary art exhibitions (excluding incorporated bodies, excluding limited companies with wholly public capital),
- Certain approved public or private research or educational institutions of general interest.
The duty of transparency of recipient organizations
Organizations receiving donations from natural or legal persons must ensure, under conditions determined by decree in the Council of State, the advertising by any means and certifying their annual accounts above a donation amount of 153,000 euros per year. This provision extends an accounting obligation not only for all associations and foundations, but also for any public body.
The Court of Auditors is now in charge of the exercise of controls.
In case of doubt regarding the possibility for an organization to receive donations eligible for tax reductions and to issue tax receipts, it is possible to verify this possibility with the tax authorities.
The possibility of transnational donations in Europe
The Finance Act Amendment for 2009, Article 35, amends Articles 200, 238 bis and 885-0 V bis-A of the General Tax Code to extend, under certain conditions, the benefit of patronage to approved bodies whose head office is situated in a Member State of the European Community or in a State party to the European Economic Area having concluded with France a tax convention containing an administrative assistance clause with a view to fight tax fraud or evasion.