Patronage in kind or competence
One of the possibilities offered to a corporate sponsor is to provide not funding in cash but means (products or services) to the cause it intends to support. This is “in-kind or skill sponsorship”. The eligibility criteria for this form of patronage are exactly the same as those for a cash contribution.
Assessment principles
The texts stipulate that the company’s contribution must be valued at the cost price, or at the net book value for the items recorded in the company’s assets.
How can a service be valued under a competence sponsorship?
- In the case of a contribution from a company by a “labour loan”: this is the case of a consultancy company, a service provider etc… It is necessary to consider all the labour costs (salaries + expenses) of the staff who worked under the patronage of competence (§50 of BOI 4 C-5-04, no. 112 of 13 July 2004). The Finance Act for 2020 (Act No. 2019 – 1479 of 28 December 2019) specifies that the cost to be deducted in the basis for calculating the tax reduction corresponds, for each employee made available, to the sum of the employee’s remuneration and related social charges up to three times the amount of the above mentioned ceiling to theArticle L.241-3 of the Social Security Code.
- In order to allow for a control of this contribution, it is advisable to ensure that the patron and the beneficiary structure of the sponsorship consult each other on a clear and controllable procedure. To this end, it is recommended that the parties agree on a list of persons, a nominal detail of the days worked by the persons serving the sponsorship project. These lists of names and the validation of the presence of these persons shall be carried out jointly by the two parties to the Convention.
- For the delivered products, the valuation corresponds (reference 4 C 711 and BOI 4 C-5-04, no. 112 of 13 July 2004 §E p 9 and 10 ):
- At the value of the property in stock (that is to say, taking into account any provisions for depreciation) if the merchandise comes from the stock of the company (reference: art. 38 of Annex III to the CGI),
- At the cost price of the service if it is a purchased service
- At the recorded short-term loss, if it is an asset for a property entered in the capital account. If the property is fully depreciated, the donor company will not be able to claim to use the gift under the Article 238a tax reductions (the value of the property being accounting and tax neutral).
Precaution to be observed for both parties involved in the sponsorship agreement (sponsor and “sponsor”)
- First of all, it is necessary to agree on the «competence» contribution and to define with the maximum precision the technical characteristics of the activity of competence patronage. Depending on the projects covered by the convention, and their degree of complexity. A specification, as complete as possible, will be annexed to the agreement in order to detail the technical characteristics of the products or services delivered,
- To stipulate a schedule for the delivery of goods or services,
- To value the contribution of the sponsoring company, at cost, to the net book value (for inventory items) or asset value,
- Finally, pay attention to any contractual or regulatory guarantees (for example 10-year guarantees) that must be recalled in the contract document. Special attention must also be paid to valuing the contribution of the enterprise. The texts of the tax procedure state (Art L 80C) that it is recommended to carry out a tax rescission with the competent tax authorities. This procedure must be considered when there is doubt as to the valuation of goods or services delivered under a competence sponsorship (see BOI 13 L-5-04, no. 164 of 19 October 2004 ).