Royal Decree-Law 6/2023, issued on December 19 and published in the BOE on December 20, 2023, addresses urgent measures to implement the Recovery, Transformation, and Resilience Plan, focusing on aspects such as the public service of justice, the civil service, local government, and patronage.
With particular emphasis on fiscal matters, its fourth book introduces modifications to Law 49/2002 to enhance fiscal incentives for patronage. The decree will come into general effect on December 21, 2023, while the fourth book specifically will take effect on January 1, 2024.
Significant Improvements in Fiscal Patronage for Individuals and Companies
In this regard, fiscal incentives for patronage are enhanced:
For individuals (deduction in Personal Income Tax – IRPF):
- The general deduction percentage is increased from 35% to 40%.
- The amount of micro-patronage is extended from 150 to 250 euros, encouraging essential donations to patronage-receiving entities and applying an 80% deduction to a greater number of donations.
- The period for making donations to the same entity, equal to or greater than the previous year, to obtain a 5% increase in the deduction percentage (reaching 45%) is reduced from four to three years.
For companies (deduction in Corporate Income Tax – Impuesto sobre Sociedades):
- The deduction percentage is raised from 35% to 40%.
- The period in which the donor must make donations to the same entity, equal to or greater than the immediate previous year, to apply a 10% increase in the deduction percentage (reaching 50%) is reduced from four to three years. This aims to incentivize continuous donations, both in terms of time and monetary contributions, benefiting a specific patronage entity, providing greater financial stability to these organizations, and ensuring private sector involvement in activities of general interest.
- The limit on the taxable base period for determining the deduction base is increased from 10% to 15%, an improvement also applicable to Non-Resident Income Tax (IRNR) contributors operating in Spain without a permanent establishment.
The recent decree introduces significant tax updates for non-profit entities, highlighting the inclusion of new eligible activities for exemption in Corporate Income Tax (IS). In addition to incorporating areas such as socio-labor integration and education for high-ability individuals, the exemption is expanded to include research, development, and innovation (R&D) activities, and innovation activities as defined by Article 35 of the IS Law.
The novel inclusion of the free transfer of assets as a specific form of donation is emphasized, subject to the valuation of deductible expenses for the donor during the transfer.
Donations retain their irrevocable nature, although the amount received is limited to 15% of the donation’s value, with a maximum of 25,000 euros. The forms of collaboration are expanded, incorporating service provisions and in-kind assistance, both exempt from the personal taxation of the collaborator.
Normative clarifications are included to ensure the proper functioning of entities, such as the exclusion of the concept of remuneration for liability insurance of patrons and members of governing bodies. In summary, these measures aim to strengthen the fiscal framework and promote collaboration with non-profit entities.
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