TAX DEDUCTIONS ON DONATIONS

Tax deductions on donations by individuals & corporations based in Romania

The deductibility of contributions (whether individual or corporate) to not-for-profits (NPO) are regulated by the Law on Sponsorship, which lists the types of "sponsorship" that qualify as deductible (Law 32/1994), and the Fiscal Code, which imposes limits on the amount that a donor can deduct.

"Sponsorship," under Romanian law, occurs where two parties agree on the transfer of ownership of goods or financial means to support the not-for-profit activities of the beneficiary. Under Law no. 204/2001, published in the Official Journal in July 2001 (approving Governmental Ordinance 36/1998), the following entities are eligible to be beneficiaries of sponsorship:

• any not-for-profit organization that, in Romania, undertakes activities intended to promote sports; religion; culture; art; the environment; scientific research; charity; human rights protection; economic, health, social services and social assistance; social and community development; professional interest representation; and maintenance, renovation, preservation, and valorising of historical monuments;

• any public authorities or institutions that engage in the activities listed above;

• radio or TV broadcasts or books or other publications relating to the activities listed above; and

• any individual living in Romania who develops activity in the areas listed above, provided that this activity is recognized by a not-for-profit organization or by a public institution engaged in the domain for which sponsorship is sought. [See Law 32/1994 § 4 as modified by Governmental Ordinance 36/1998 and by Law no. 204/2001]

Under the Sponsorship Law, a sponsor can be a business company or a natural person.

The Fiscal Code establishes the rates governing deductions. A business company that grants sponsorships under the Sponsor Law (or the Library Law) can deduct up to 0.3% of its turnover or 20% of the profit tax due, whichever is less.

Individuals can designate that 2% of their annual income tax will provide sponsorship to NPOs legally operating under Governmental Ordinance 26/2000 regarding associations and foundations. [See Fiscal Code § 84(2) as modified by Governmental Ordinance 138/2004] An individual receiving commercial income from a free profession or from intellectual property rights qualifies for a sponsorship deduction of up to 5% of the taxable base, in addition to the 2% of annual income tax that he or she can designate for sponsorship of a particular NPO. [See Fiscal Code § 48(5) as modified by Governmental Ordinance 138/2004]. You can download the appropriate form here.