The Sponsorship as a key closing year interest topic

Companies’ interest in social responsibility objectives, which has been increasing lately, is supported by fiscal provisions that can be used to make larger contributions by sponsoring social causes.

Unlike previous years, now companies can sponsor not only directly to the beneficiaries, but also by redirecting a part of the profit tax or the income of micro-enterprises by applying to ANAF.

The main advantages of redirection are the follows:

• Does not affect the company’s financial indicators (EBITDA, Gross Profit)
• They can be made after the close of the financial year when the amounts are already known, unlike direct payments to the beneficiaries, which must be made during the financial year when the figures can only be estimated and there is a risk that the deductibility limits will be exceeded if the estimates based on which the sponsorship was carried out turn out to be erroneous

The annual thresholds provided by the fiscal legislation for granting sponsorships, either directly or through redirection, are the follows:

• The minimum of 0.75% of the turnover or 20% of the profit tax due
• 20% of the income tax of micro-enterprises

The redirection can only be done within the above limits, from which the direct sponsorships granted in the current year and those carried over from previous years are subtracted.

By implementing the redirection mechanism, the possibility of carrying over the direct sponsorships carried out, if they exceed the above-mentioned limits, was eliminated. Only the sponsorships granted until 2021 and unused can be carried over until 2028.

Documentation of the sponsorship by signing a contract according to Law 32/1994 remains mandatory, both for the amounts granted directly and through the redirections.

The redirection procedure is the one provided by Order 1679/2022, namely by submitting form D177 within 6 months after the submitting deadline of the annual declaration 101 for profit taxpayers, respectively 6 months after the deadline for submitting the tax declaration on the income related to the micro-enterprises for the 4^th quarter. The treasury transfers the amounts within 45 days after submitting the D177 form.