The tax reduction for donations made by companies
Donations affected by the tax reduction ¶
All companies subject to income tax or corporation tax can benefit from the tax reduction for donations in favor of certain works and organizations.
Eligible organizations ¶
The organizations receiving the donation and eligible for the reduction are defined in article 238 bis of the CGI. These include:
Donations made to organizations established in France but also in the rest of the European Economic Area (European Union, Iceland, Norway and Liechtenstein) are eligible.
Form of donation ¶
Donations made by companies can be in cash or in kind, on a one-off or repeated basis. The payment of a donation is not subject to VAT.
For cash donations, the amount paid directly by donor is retained. Revenue foregone also falls within the scope of the tax reduction. Thus, the payment of the company to the organization can be directly made directly by its creditor at its request.
Extract BOFiP, BOI-BIC-RICI-20-30-10-20, §20
Donations in kind correspond to the contribution without consideration of goods, provision of services, contribution of staff or skills. In this case, the donation is valued at the cost that the loss of this good or this service represents for the company. No loss of margin can be taken into account. On the other hand, any deductible VAT adjustments can be included in the donation database. The donating company is responsible for evaluating the donation, not the recipient.
The case of food donations ¶
The tax administration has specified in its documentation, the methods for assessing products intended for human consumption. Changes took place in 2016.
On August 3, 2016, the tax authorities specified the methods for assessing donations of products intended for human consumption:
Article 19 of the 2017 finance law abolished these evaluation methods for foodstuffs. The parliamentarians feared a reduction in donations of this type to associations. Donations in kind, including food, must now be valued at their cost price for the determination of the tax reduction.
The tax administration has just modified its doctrine accordingly to comply with the law. These new provisions apply to income tax due for 2016 and corporate tax due for financial years ending on or after December 31, 2016.
Extract BOFiP, BOI-BIC-RICI-20-30-10-20, §40
Extra-accounting reintegration of the company's donation ¶
According to article 238 bis of the CGI, donations in cash or in kind are not deductible from taxable income for income tax or read. The company must therefore carry out an extra-accounting reintegration.
For in-kind donations of fixed assets, the disposal of the fixed asset must be subject to a capital gain or loss calculation. The sale price is then assessed according to the valuation retained for the donation.
The determination of the tax reduction ¶
A reduction subject to a ceiling ¶
Payments for donations made are taken into account for the calculation of the reduction tax within the limit of 5 per thousand of turnover excluding tax.
Article 149 of the 2019 finance law modified the methods for capping the basis for calculating the tax reduction in favor of corporate sponsorship. From the financial years ending on December 31, 2019, this tax reduction amounts to 60% of donations made within the limit of €10,000 or 5 per thousand of turnover when the latter limit is higher.
For the turnover, we retain that achieved by the company for the financial year during which the payments are made. For holding companies, dividends and financial income are also included.
If the limit of 5 per thousand is exceeded during a financial year, the excess is carried over to the next 5 financial years. The cap also takes into account the expenses incurred under article 238 bis AB of the CGI relating to the tax deduction for the acquisition of works of art.
The changes made by the finance law for 2020 ¶
For financial years ending on or after December 31, 2020, the ceiling of €10,000 is raised to €20,000.
The finance law for 2020 also provides for the reduction of the rate of the tax reduction to 40% for the share of payments exceeding €2 million (except for donations to organizations helping people in difficulty). This last provision usually only concerns ETIs and large companies.
Example ¶
The company achieved a turnover of €2,000,000 in 2018.
In 2018, she made a donation of €15,000 to an organization of general interest.
Extra-accounting reinstatement = €15,000
Tax reduction base = 2,000,000 x 5/1000 = 10,000 (the remaining €5,000 can be used for the next 5 years).
Tax reduction 2018 = 10,000 x 60% = €6,000
Tax reduction 2019 (in the absence of new donations in 2019) = 5,000 x 60% = €3,000
In 2020, she again made a donation of €15,000 for a turnover excluding tax of €1.8 million
1st limit: Base tax reduction = 1,800,000 x 5/1000 = €9,000
2nd limit: Base tax reduction = €20,000
The highest limit (€20,000) is retained, therefore tax reduction = 15,000 x 60% = €9,000.
¶
Declarative obligations ¶
Justification of the donation ¶
Unlike donations made by individuals, the benefit of the reduction of tax is not conditional on the production of a receipt by the beneficiary.
It is up to the donating company, in the event of an audit, to prove the reality of the donation (amount of the payment, identity of the beneficiary, nature and date of the payment, physical description in the event of a donation in kind). As proof, the recipient of the donation can issue the donor a tax receipt according to model Cerfa n°11580*03.
The tax authorities also specify the specific information that must appear on the certificate in the event of a donation of foodstuffs.
Excerpt from BOFiP (BOI-BIC-RICI-20-30-10-20, §90, January 3, 2018)
Declaration for donations over €10,000 ¶
Article 149 of the 2019 finance law also introduced a new reporting obligation for companies that make during a financial year more than €10,000 in donations qualifying for the tax reduction. The following information must therefore be declared to the tax authorities:
Decree 2019-531 of May 27, 2019 clarified the terms of this declaration. It is mandatory for financial years beginning on or after 1st January 2019. Failure to do so is punishable by a fine of €1,500.
Organizations that issue certificates allowing a taxpayer to unduly obtain this tax reduction are liable to a fine, the rate of which has just been modified by article 203 of the finance law for 2019.
Excerpt, BOFiP news of August 7, 2019
Declaration of results ¶
The donating company wishing to benefit from the tax reduction for donations made must sign form no. 2069-RCI-SD attached to the tele- statement of results. Since April 2015, this form can be uploaded via the TDFC procedure or from the subscriber area.
This deposit then constitutes an exemption from subscription to form no. 2069-M-SD. The latter can nevertheless be used as a calculation model.
Excerpt from BOFiP, BOI-BIC-RICI-20-30-20, § 90
A tax reduction also exists in the event of payment in favor of the public purchase of cultural goods presenting the character of national treasures (article 238 bis-0-AB of the CGI).
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