The tax system
The personal income tax reduction scheme has been unified and improved by the law of 1 August 2003 on patronage, associations and foundations and its successive advances. It covers all donations made to charities and organizations of general interest. The definition of beneficiary sectors whose culture is very broad.
The general scheme
The principle
For individuals, the tax reduction is equal to 66% of payments, retained in the annual limit of 20% of taxable income (CGI Article 200).
Exemple
For 2022, Mr. X has a taxable income of €50,000. In November 2022, he paid €200 to a general interest association active in the cultural field. For 2022, he will benefit from a 66% tax reduction, €132. The actual cost of his donation will be €68.
The exception
The reduction rate was increased to 75% for payments made by individuals for the benefit of non-profit organizations providing free meals to people in difficulty, which contribute to promoting their housing or which provide free care (CGI Article 200-1b).
These payments are withheld within the flat-rate and revisable limit of €1,000 until 31 December 2023 (this limit was €554 before 2020). This shall not be taken into account for the application of the above mentioned annual limit of 20 %.
If the ceiling of 20% of income is exceeded, the benefit of the reduction can be carried over the next 5 years.
Exemple
Ms. Y, a business leader, has a taxable income of €150,000 for a year N. Along with other friends, she wants to help form a foundation for music or the visual arts.
- In October of the year N, it pays €40,000 to constitute the Foundation’s initial endowment. For year N, it benefits from a 66% tax reduction up to a limit of €30,000 (20% threshold of taxable income), or €19,800.
- It will carry forward the €10,000 surplus to N+1, which will give it an advantage at the same rate, €6,600.
Over two years, the cumulative reduction will be €26,400, which ultimately corresponds to a tax benefit equal to 66% of the donation. The actual cost of the capital endowment to the Foundation will be €13,600 (for €40,000 actually paid).
It should be noted that donations can be amounts of money, but also gifts in kind (for example, works of art) including "the express abandonment of income and products".
Did you know that?
Les employees of companies are now entitled to benefit from the tax advantages for all donations made to the foundation of their company, or the foundation of their group (Article 200-1 a) CGI)
The tax receipt
In order to benefit from the tax reduction, the donor must be able to submit, at the request of the tax authority, supporting documents in a format determined by the administration attesting to the amount and date of the payments, as well as the identity of the beneficiaries (article 200-5 CGIA new tax receipt template published in March 2023 requires specifying the SIREN number or RNA number of the organization receiving the donations:
The counterparties
Counterparties shall constitute a additional benefit to the donor tax reduction. They are authorized under the conditions described in §90 of tax instruction BOI-IR-RICI-250-20-20120912.
The value of these counterparties must remain in a ratio of 1 to 4 with the amount of the donation meaning is:
- the value of the consideration must not exceed 25% the amount of the gift;
- the value of the counterparties must not exceed the flat-rate limit of 73 € since 1 January 2021 (this threshold is fixed in Articles 23 N and 28-00 A of Appendix 4 IMC).
Exemple
An individual who donates €100 will be able to benefit from €25 in compensation, corresponding to the delivery of “good menus” (catalogues, pins, greeting cards, etc.). On the other hand, the consideration of an individual who makes a donation of €1,000 will not exceed €73.