The sponsorship law is 19 years old without having been sufficiently promoted. This, together with the Fiscal Code, allows the companies to offer sponsorships, for example, to the charity organizations and to benefit from the fiscal facilities within certain facilities. However, few companies know these provisions and even fewer choose to use this law to support humanitarian causes for sustaining the communities where they operate.
The sponsorship expenses is not deductible but can generate a fiscal credit, which reduces the income tax payment with the whole amount of the sponsorship, if the amount is lower than 0.3% of the turnover and 20% of the tax.
According to the data collected by the National Agency for Fiscal Administration (ANAF), only 12% of the profitable companies in 2011 chose to direct 20% of their income tax payment to the non-governmental organizations.
The NGO’s received 463.7 million lei’s (103.59 mil euros) in 2011, according to ANAF. Nevertheless, the non-governmental entities could have received 440 million euros, if the companies in Romania, which had gross earnings of 58.1 billion lei (12.98 billion euros) in 2011, would have decided to grant them 20% of the income tax, according to a calculation made by the news website altreileasector.ro.
Aware of this practical matter, HOSPICE Casa Speran_ei Foundation, the largest medical NGO in Romania which offers free palliative services to incurably ill persons, launched together with EY, well-known audit and consultancy company in the Romanian market, an informative campaign, regarding this provision, amongst companies in Romania.
The campaign uses various communication channels, from print to TV spots, and was designed and implemented by WoPA, advertising agency, and benefited from the pro bono participation of Nicolae Cosniceru, the photographer of VAFA Production and Aleea Media, media agency.
Mrs. Miruna Enache, Tax Partner at EY Romania stated the following: “The fiscal facility granted through the fiscal credit mechanism allows the sponsor to actually pay the amount not in the income profit account, but to a non-profit organization, such as HOSPICE.
In order to be included in the calculation of the income tax for the respective year, the sponsorship contract must be concluded before the end of the year and the payment must also be accomplished by the end of the year.”
A really important project which directly benefited from this law is the new HOSPICE centre in Bucharest. The centre is under construction and still needs 900 000 euros to become operational (the amount covers the construction, finishing and equipment costs, but also functioning costs, theoretical preparation and remuneration for the first 9 months).
The new HOSPICE centre will have 30 beds that will allow 700 patients a year. Moreover, the centre will ensure 8000 free consults, 11 000 home consults and 5000 entrances in the day centre, annually, for the incurably ill patients.
For this project, HOSPICE Casa Sperantei Foundation still needs funds, money which can come from the companies based in the local communities making use of the sponsorship law.
In order to facilitate the understanding of the legal procedures, EY has compiled a simplified example:
A company has a 100.000 euros profit by the end of 2013 and a turnover of 1.5 million euros. The income tax is 16.000 (with its final payment by the end of 2013). If the company has 3.200 euros sponsorship costs (which have no impact on the tax paying profit of the company) the income tax could be reduced to 12.800 euros. Hence, the company sponsors up to 3.200 euros during the year without affecting the cash flow or other costs.
HOSPICE Casa Speran_ei (www.hospice.ro) is the largest non-profit medical organization in Romania which offers free palliative services to incurably ill children and adults in Bucharest, Brasov, Fagaras and Zarnesti.
Palliative care is intended to ameliorate the patients and their families’ life quality, when they face problems associated with life threatening diseases, by preventing and reducing suffering, early identifying, evaluation and treatment of pain and other physic, social, psych-emotional and spiritual matters. (According to the World Health Organization, 2002)
HOSPICE has ensured, for 21 years, free palliative medical care for incurably ill children and adults and has been awarded a centre of excellence for South-East Europe.