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Preferential tax treatment of donations

Corporation tax

Gifts, donations, and contributions made by legal entities liable for corporation tax to not-for-profit organisations governed by the special tax regime of Law 49/2002 will not be considered a tax-deductible expense when calculating the basis for the calculation of corporation tax payable by the donor.

However, irrevocable pure and simple gifts, donations, and contributions made to these organisations will give the right to a tax credit (minus allowances, deductions for double taxation, and deductions to encourage certain activities) equal to 35% of the deductible base, up to a limit of 10% of the taxable base for the tax period.

Deductions not made due to the fact that they exceed the amount of tax liability may be carried forward and used in the 10 years thereafter.

Income tax

Gifts and donations made by individuals liable for income tax to not-for-profit organisations governed by the special tax regime of Law 49/2002 may deduct 25% of the deductible base from the total tax due. Said gifts and donations give the right to a tax credit equal to 10% of amounts donated to legally recognised foundations that submit reports to the relevant governing body, as well as associations declared to be of public benefit, that do not fall within the scope of Law 49/2002.

In general terms, the basis of deductions for gifts, donations, and contributions described above may not exceed 10% of the tax base for the year. For the purposes of corporation tax and income tax, it should be pointed out that in the case of cash gifts the deduction is based on the amount of the gift. In the case of gifts in the form of assets or rights, the deduction is based on the book value of the assets or rights at the time of the transfer of ownership, or, if not, their value as determined in accordance with governing capital gains tax regulations.

Finally, deductions resulting from tax-deductive gifts, donations, and contributions under the deductions regime established in Law 49/2002 must demonstrate the following in a certificate from the beneficiary that, in addition to the tax identification number and personal details of the donor and the entity receiving the donation, contains the following information:

1. A statement expressly stating that the entity receiving the donation is among those regulated in said law. 
2. Date and amount of the donation (in the case of a cash donation).
3. A public document or other authentic document confirming the delivery of the asset donated, in the case of non-cash donations.
4. The purpose for which the entity receiving the donation will use the donation in accordance with its specific objective. 
5. Express reference to the irrevocable nature of the donation, without prejudice to the provisions of imperative civil legislation that regulates the revocation of donations.

The entity in receipt of the donation must also provide the Tax Office with the list of gifts received that resulted in the issue of certificates confirming the appropriate deduction.