Sponsorship potential is only used at 41% of capacity by companies that can do so. The 20% keep children in school, repair hospital wards, support culture, protect the environment and help us live in healthy communities.

Text by Sînziana Wolff

In 2020, only 49,550 companies out of the 606,995 currently eligible in Romania recorded sponsorship expenses and directed up to 20% of the tax to eligible entities, including NGOs. The total targeted value in 2020 was 335.9 million euros, up 12% from the previous year. 

These are a part of the data emerged from the research project conducted by the Association for Community Relations (ARC) together with EY Romania, which aims to raise awareness about the tax credit of 20%. Within this project, a series of data obtained from ANAF were analyzed, regarding the sponsorship potential through the 20% tax facility.

The Law on Sponsorship and the Fiscal Code allow companies paying profit tax to offer sponsorships to non-profit entities / public authorities / individuals for their activities carried out in certain fields (for example, culture, education, humanitarian, social) and to benefit from tax incentives, under certain conditions provided by law.

The sponsorship expense offered is not a tax-deductible expense, but it can represent a tax credit, i.e. it can reduce the income tax payable by the full amount of sponsorship offered. The Fiscal Code provides the following limits (minimum of): 20% of the profit tax due or 0.75% of the turnover. Moreover, companies that are taxable on the incomes of micro-enterprises and that make sponsorships, according to the Sponsorship Law, to support non-profit entities and places of worship, deduct the related amounts from the tax on the incomes of micro-enterprises up to the level of the amount representing 20% of the tax due for the quarter in which they recorded the respective expenses. 

Starting with January 1, 2022 (or with the date of the start of the fiscal year 2022 – 2023 in the case of legal entities that have opted for a financial year different from the calendar year), if the sponsorships made do not exceed the ceiling mentioned above, thus remaining an unused positive difference, for this positive difference, the taxpayer may have the "redirection of the corporate tax" for making sponsorships within a maximum of 6 months from the date of sponsorships within a maximum of 6 months from the date of submission of the annual corporate tax return / related tax return. If by 2021 for sponsorship-related expenses that exceeded in the reference year the limits allowed for tax credit, the eligible amounts were reported for 7 years in the case of corporate tax payers, respectively for a period of 28 consecutive quarters in the case of micro-enterprise income tax payers, this is no longer possible for the amounts registered starting with 2022. However, the amounts carried over from the past (for the years 2015-2021) will be able to be used until 2028. The recovery of these amounts for tax credit purposes shall be made in the order of their registration, under the same conditions, at each deadline for payment of the tax. – Press release EY and ARC