As of January 1, 2024, tax deductions will apply to individuals and companies that donate to NGOs and other non profit organizations in fields such as culture, sports, science, or related areas. An agreement with political groups aimed at treasury reform has given rise to a new patronage regime that is expected to take shape in the Congress of Deputies this Thursday. A presentation from the Prensa Ibérica group, alongside parliamentary sources and government input, indicates that EL PERIÓDICO has approved the reform of the tax regime for non profit entities as the bill advances. The bill, initially submitted by PDECat, has been in Congress since May 2021 after stalling at the end of 2020, yet it appears to be moving forward and could pass next week to be sent to the Senate for further consideration.
donations from individuals
Currently, natural persons can claim tax deductions. The income tax return allows an 80% deduction for donations up to 150 Euros and 35% for amounts above that threshold. Under the reform expected to be announced on Thursday, the limit for the 80% slot will rise to 250 Euros. The deduction that currently applies to the first 150 Euros will be extended, and the 80% credit could begin on January 1 of the next year, rising from 35% to 40% for amounts within the first tier. A 40% deduction will also apply to recurring donations to the same NGO in successive years, increasing to 45% from the third year onward. Overall, bonuses cannot exceed 10% of the taxpayer’s base tax. For example, if a person donates 300 Euros to a cancer research group, the current deduction would be 172.50 Euros; the reform would raise that to 220 Euros, representing a 47 Euro increase.
company donations
EL PERIÓDICO reports that the new law will raise the corporate tax deduction from 35% to 40% for donations to non profits across cultural, sports, social, or scientific organizations. The limit on the deduction will grow from 10% to 15% of the tax base, effective January 1. As with individuals, companies with recurring contributions will benefit from an enhanced deduction: they can apply 40% from the third year onward. A practical example: a company donating one million euros in art to a museum would see the deduction rise from 350,000 to 400,000 euros.
Another notable change is the patronage credit for corporate services provided to nonprofit organizations. If an architect carries out a project for a beneficiary such as a Liceo, the equivalent value can be deducted from the tax after an agreement with the recipient organization is signed, according to a parliamentary source familiar with the deal and confirmed by the Treasury.
It will be possible to receive compensation
The reform also contemplates some form of compensation for donations, capped at 15% of the donated amount and never exceeding 25,000 Euros. A parliamentary source notes that if a company or individual donates to the Prado Museum, they could receive, for example, a free ticket up to 15% of the donation or a maximum of 25,000 Euros.
‘Crowdfunding’ is not the focus
While these improvements to the patronage tax regime fall short of the most ambitious proposals in the PDECat bill, they still represent progress over the current model. There is also mention that what has been called the first text and the crowdfunding recognition—where digital platforms offer 100% deductions for contributions—remain an area of debate.
Fast parliamentary action
Reforming the protection law is a priority for Culture Minister Michael Iceta during this legislative term. If the political groups do not change their votes, as they indicated at the Congress plenary in March 2021, the reform could advance next week in the finance committee, with full legislative power, and then move to the Senate with votes from the PSOE, Unidas Podemos, Vox, ERC, Ciudadanos, the Mixed Group, and the Plural Group. In May 2021, the PP opposed the PDECat proposal, while the PNV and Bildu abstained. Once in the Senate, the process could be slowed by regional and local elections scheduled for May 28, which often pause parliamentary activity. The reform is set to take effect in 2024, applying to donations made from January 1 onward.