Sponsorship by profit tax payers and microenterprises: Law no. 322/2021 for completing the Fiscal Code

The takeaway

Law no. 322/2021 completes the provisions of the Fiscal Code applicable to taxpayers which grant sponsorship, patronage or private scholarships.

In detail

Current Fiscal Code provisions

According to the Fiscal Code, profit tax payers which grant sponsorship, acts of patronage or private scholarships under the law can deduct the related amounts from the profit tax due up to: i) 0.75% of turnover and ii) 20% of the profit tax due.

Microenterprises which sponsor non-profit entities and religious organisations registered in the Register of entities/units of worship or which provide scholarships for students enrolled in dual-education programmes can deduct the related amounts to up to 20% of the microenterprise tax due for the quarter to which the expenditure relates.

Provisions of Law no. 322/2021

For profit tax payers, if the minimum amount established according to the above provisions, minus sponsorship amounts carried forward from previous periods, has not been used in full, they can redirect that unused value for sponsorships, patronage and private scholarships within six months as of  the date of submission of the annual income tax return.

For corporate tax group members, only the responsible legal entity can order such redirection.

For microenterprises, if the minimum amount established according to the provisions of the Fiscal Code, minus sponsorship amounts carried forward from previous periods, has not been used in full, they may redirect that unused value for the entire fiscal year for sponsorship/scholarship activities within six months as of  the date of filing the tax return for the fourth quarter.

The redirection of profit or microenterprise tax for the sponsorship of non-profit legal entities, including religious organisations, can be performed only if the beneficiary of the sponsorship is registered, as at the date of payment of that amount, in the Register of entities/units for the tax authority for which tax deductions are granted.

The procedure, model and content of the redirection form are to be adopted by order of the ANAF President.

As of 1 January 2022, or as of the start date of the tax year 2022–2023 in for legal entities with a financial year other than the calendar year, taxpayers can dispose of the value established under the Fiscal Code only if the amount carried forward is positive.

Amounts not deducted from profit or microenterprise tax can be carried forward only for sponsorship, patronage and private scholarships provided/registered before the deadlines set out in the above paragraph, according to the regulations in force at the time, until 2028.

[Source: Law no. 322/2021 for the completion of Law no. 227/2015 on the Fiscal Code, published in the Official Gazette no. 1245 dated 30 December 2021]