The tax changes issued at the end of last year by the Executive have brought changes on several levels, one of them being the tax facilities for sponsorships to NGOs – made by both companies and individuals. Today we are talking about the effects of these innovations and the existing solutions with Cristina Săulescu from Cabot Transfer Pricing.

GEO 115/2023 changed, from 2024, the paradigm, familiar until now, of fiscal facilities for sponsorships to NGOs. Essentially, micro tax payers are left without the ability to deduct sponsorships and fewer individuals can make income tax diversions.

We are trying to clarify what effects these limitations bring, both for sponsors and for beneficiaries, together with Cristina Săulescu, Partner at Cabot Transfer Pricing, who has over 20 years of experience in the public and private sectors.

1. What are the main changes brought by GEO 115/2023 regarding sponsorships made by companies?

Cristina Săulescu: “Micro-enterprises will no longer have tax advantages in the case of sponsoring or patronage acts, the last fiscal year in which the amounts representing sponsorship are deducted from the income tax of micro-enterprises is 2023. As for the profit tax payers, they will still be able to order the redirection of the tax for sponsoring only until the deadline for submitting the annual profit tax return (the 25th of the sixth month after the end of the year).”

2. How might NGOs be affected by the new restrictions on redirects by companies and individuals?

Cristina Săulescu: “It is expected that, in the first stage, NGOs will be negatively affected by the changes brought by the ordinance. However, all the changes, especially the tightening of conditions for micro-enterprises, will generate the migration of many such entities into the area of ​​corporate tax payers. Thus, they will be able to direct larger amounts to NGOs. In contrast, the removal of sponsorship facilities for individuals and PFAs is not offset.”

3. What alternative solutions do NGOs have to compensate for the loss of potential income from companies and individuals?

Cristina Săulescu: “One solution would be to access non-reimbursable European funds. At the European level, a series of projects related to non-reimbursable funds are launched, in various fields of activity, with a social profile, which can be accessed by NGOs.”

4. What strategies can companies adopt to continue supporting NGOs in light of the new limitations?

Cristina Săulescu: “An example of such a possible strategy is the partnerships between NGOs and companies. Thus, they can pool their financial resources and expertise to have a strategic impact on people’s quality of life.”

5. What are the consequences of limiting the benefits from the profit tax for the granting of private scholarships?

Cristina Săulescu: “Starting with the year 2024, private scholarships will be able to be deducted within certain limits, i.e. a maximum of 5% of the amount of staff salary expenses and a maximum of 1,500 lei for each scholarship awarded. The changes that entered into force in 2024 with regard to private scholarships I do not believe that they will have a major impact, given the fact that the possibility of granting them was not completely eliminated, but only the criteria for granting them were “tightened”. I really believe that this way, more people will be able to benefit from such scholarships, given the limitation of the amount that can be awarded individually. It’s just that their individual value will obviously be lower. However, we have to take into account the fact that the awarding of private scholarships is not such a widespread practice in Romania.”

6. What new measures could the Government take in the future to encourage taxpayers to support NGOs?

Cristina Săulescu: “If in terms of the individuals the lack of fiscal facilities does not generate a 100% change in attitude towards NGOs, in terms of the companies we must take into account the fact that they, by their very status, are unable to support NGOs if this support is not regulated by law. A commercial company does not have the right to perform acts of gratuity except under the conditions of the law. And the law says that the amounts used to give freebies are not deductible. Consequently, there is no incentive for companies to carry out such acts, on the contrary. Thus, taxpayers may be encouraged to support NGOs only by receiving tax or other incentives, such as, for example, easier access to grant funds.”

Interview published in Avocatnet.ro