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Taxation of Patronage

Despite the latest legislative reforms affecting the tax treatment of patronage, Fundación Impuestos y Competitividad considers this to be the appropriate time to reflect on the status of the special scheme for non-profit entities, including the provisions on sponsorship and patronage.

The Foundation, after forming an “internal” work group, has invited a number of experts from varied backgrounds to take part in an open debate on matters pending in the scheme’s regulations and application, and its position from a comparative law perspective.

The aim was to arrive at an informed, experienced, comparative and debated view of the special scheme and its strengths and weaknesses, so as to allow the non-profit sector to prepare improvement proposals and initiatives.

Project development, coordinated by PwC Tax and Legal Services, included three lines of work: an assessment of the scheme and a comparative analysis, which are self-explanatory, plus a third line relating to the so-called banking foundations created following the financial system’s crisis as a formula for transforming savings banks. The relevance of their activity and the peculiarities of their tax regime, outside the special scheme provided by Law 49/2002, made an assessment of their status and prospects advisable.

This determines the structure of the work (the final document having recently been published under the title “Tax Treatment of Patronage”, carried out by three work groups, reflecting the project’s development approach. Individual papers were pooled and debated with all the project participants, by reference to the following documentation:

  • “HIGHLIGHTS OF THE TAX SCHEME FOR PATRONAGE”, which includes a total of nine papers on matters relating to beneficiary entities, the donation concept, collaboration arrangements, tax benefits for patronage and formal obligations of non-profit entities.
  • “COMPARATIVE LAW”, including four papers on the most outstanding features of the laws of France, United Kingdom, United States and Germany.
  • “APPEARANCE OF THE BANKING FOUNDATION PATRONAGE MODEL”, which analyses the appearance of these entities and the difficulties that their tax scheme will pose in the future for the survival of the former savings banks’ community projects.
  • The document ends with a “LIST OF IMPROVEMENT PROPOSALS”, grouping together the proposals set out in the papers so as to provide a simple final list of proposals and facilitate an overview of the work findings. Some of the proposals relate to the possible amendment of current legal texts, while others aspire to an administrative interpretation that resolves or minimises certain practical difficulties in applying the current scheme.

The project development model is also worth a mention. Together with the general coordination work carried out by Miguel Cruz Amoros representing PwC Tax and Legal Services, general coordinators were designated for each work group: Isidoro Martín Degano (UNED), Alejandro Blazquez Lidoy (Univ. Rey Juan Carlos) and Antonio López Poza (a retired lawyer and tax advisor with relevant experience at CECA and Caja Madrid). A long list of authors of the various papers and members of debate groups also took part, representing all Fundación Impuestos y Competitividad’s trustees, various entities and institutions from the foundations sector, academia and the central tax administration. This favoured an open discussion which, in the opinion of the Foundation’s Board of Trustees, is ideal to achieve the social and institutional convergence necessary for any legislative changes to be considered in relation to the non-profit sector and related tax treatment.