CARF Foundation

2 March, 23

Blog

How are the different types of donations tax deductible?

Donations made to foundations or entities under the Patronage Law carry tax deductions for donors. The amount actually donated is much less than the amount received by the foundation. For example, if you donate €150 to the CARF Foundation, you will get €120 back on your income tax return. Find out how to deduct donations.

Taxation of donations to non-profit organizations such as the CARF Foundation

Donations made by companies or individuals to a foundation have tax benefits in the form of deductions from the tax liability of both the company and the foundation. corporate income tax as in the personal income tax (IRPF).

The donations that benefit from these deductions are those made to associations or institutions such as the CARF Foundation, declared of public utility and to non-governmental organizations, which meet the requirements set forth in Law 49/2002 on the tax regime for non-profit entities and tax incentives for patronage.

Which donations are eligible for deduction?

If we refer to Article 17 of Law 49/2002 on Patronage Incentives, which refers to deductible donations, donations and contributions, irrevocable donations and contributions, pure and simple, made in favor of entities covered by the Patronage Law, whether in cash, goods or rights, or through membership fees, provided that they do not entitle them to receive a present or future service, will be eligible for the deductions provided for. The different types of donations to non-profit entities may be:

  • One-time donations: to address a specific situation or a campaign for a specific fundraising determined. For example Donate Sacred Vessels600 euros guarantees that a seminarian about to be ordained will receive a backpack of sacred vessels to administer the sacraments wherever he may be.
  • Periodic donations: a commitment to collaborate with the foundation by donating a certain amount of money at a certain frequency. In our online donation form you can select the contribution you want to make and how often you want it to be made.

Tax benefits for tax deductible donations in kind

Are donations in kind tax deductible? Donations in kind are those in which, instead of contributing money, the benefactor makes a contribution in goods. Most of the time these are valuable goods that the donor already counts that he will not use or enjoy, and considers that they will be more useful if they support a noble cause.

Currently, the donations in kind, in favor of entities covered by Law 49/2002, such as foundations, appear in a law of varied content, Law 7/2022, of April 8, 2002, on waste and contaminated soils for a circular economy. This type of donation includes goods such as watches, jewelry, paintings and works of art. The CARF Foundation guarantees a secure and professional procedure for the treatment of all donated goods: official appraisal and public auction.

The current Patronage Law, in order to encourage private efforts, helps to encourage in-kind donations at no cost to contribute to a foundation. The law states that the tax base of a property, which still has value, is zero, if the donation is for a foundation that will use it for its purposes. In addition, a 0 % VAT is applied. to deliveries of goods made as donations in kind.

The goods received by the CARF Foundation undergo a professional appraisal and will subsequently be auctioned. At the same time that an official appraisal of the Monte de Piedad CaixaBank is available, the corresponding certificate of the donation of these goods in kind can be issued. The CARF Foundation will try to improve the appraisal price through a public auction.

What about joint and several wills and legacies?

A solidarity bequest is a testamentary disposition in favor of a non-profit institution. A legacy is considered to be a specific asset (vehicles, shares, life insurance, real estate...), whereas an inheritance is a succession in which the estates of both the heir and the deceased are merged.

To make a bequest or joint and several will in favor of the CARF Foundation you only need to go to a notary and express your will to testament or bequeath all or part of the assets you own.

In the liquidation of the will, non-profit entities shall are not subject to inheritance and gift tax, and therefore solidarity bequests are tax free for the beneficiaries. The entire value of the donation will be destined to the work of the foundation.

Patronage Law 49/2002

The Patronage Law of December 23, on the tax regime for non-profit organizations and tax incentives for patronage includes the:

  • Article 19. Deduction of the income tax liability of individuals.
  • Article 20. Deduction of the amount of income tax due companies. Tax benefits for companies (IS).

You can calculate the tax deductibility of your donation with our donation calculator.

Tax benefits for donations made by individuals

Thanks to the new Patronage Law, donations of up to 150 € have an income tax deduction of 80 %. That is to say, by donating €12.50/month or €150/year, the tax office will refund you €120 on your income tax return. Donations of larger amounts are tax deductible at 35 %.

Tax benefits for recurring donations

A deduction of 40 % may be applied to donations, instead of the general 35 %, provided that donations of the same or greater amount have been made to the same foundation in the two immediately preceding tax periods, thus rewarding the committed donor. The deduction has a limit of 15 % of the net taxable income.

Tax deduction for donations made by companies and partnerships

In the case of donations made by legal entities, such as corporations, the amount donated has a corporate income tax deduction of 35 % and 40 % in the case of recurring donations. In this case there is no mention of two donation brackets.

In addition, it is important to note that the basis of this deduction may not exceed 10 % of the taxable income for the tax period. Amounts in excess of this limit may be applied in tax periods ending in the ten years immediately following and thereafter.

How to deduct donations made to the CARF Foundation?

When you file your income tax return, or your corporate tax return if you are a company, do not forget to apply the deduction for donations made by crediting your donations. To do so, it is necessary to present the donation certificate issued by the CARF Foundation to all its donors, which in turn informs the Tax Agency so that it can include these amounts in the tax information of each person or company and in its draft tax return.

Anonymous donations cannot be deducted because the tax authorities do not know to whom the deduction should be applied. That is why it is important to make sure that you give complete information, always filling out the forms provided on the website. In this way, the foundation will be able to issue you a donation certificate acknowledging the donation made.

Bibliography

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