General framework
The Romanian Civil Code regulates the general regime of gifts, namely the legal regime of the donation. In addition, Law no. 32/1994 on sponsorship regulates the legal framework for certain types of gifts, namely sponsorship. Although donation and sponsorship have the same effects, ie the transfer of ownership of a good / sums of money to a person / entity, certain elements differentiate their regime.
For example, at the sponsor / donor level, the gifts made during the last 2 years prior to the opening of the insolvency procedure are presumed to be abusive, and there is a risk that they may be considered null and void.
The sponsorship regime
Law no. 32/1994 governs the regime of the sponsorship contract. Sponsorship is the legal act by which two persons agree on the transfer of property rights over some material assets or financial means to support non-profit activities carried out by one of the parties, called the sponsorship beneficiary. The sponsorship contract is concluded in written form, specifying the purpose, value and duration of the sponsorship, as well as the rights and obligations of the parties.
Sponsorships may be granted under certain conditions provided by law and certain categories of express beneficiaries provided by law.
Sponsor is considered any natural or legal person in Romania or abroad who is sponsoring under the law.
Categories of beneficiaries of sponsorship under the law:
- any non-profit legal person who carries on business in Romania or is to pursue an activity in the fields of: cultural, artistic, educational, educational, scientific – fundamental and applied research, humanitarian, religious, philanthropic, sporting, human rights protection, health care, social assistance and services, environmental, social and community protection, representation of professional associations, as well as maintenance, restoration, preservation and valorisation of historical monuments;
- public institutions and authorities, including specialized bodies of public administration, for the above activities;
- broadcasting or programs of television or radio broadcasting organizations, as well as books or publications in the above fields;
- Any natural person, resident of Romania, whose activity in one of the above fields is recognized by a non-profit legal person or by a public institution that activates in the field for which he is sponsoring.
Tax treatment of sponsorship for the beneficiary
Amounts received from sponsorship or patron of arts are exempt from income tax. The same provision applies to material goods received through sponsorship or patron of arts, according to Law 32/1994.
Tax treatment of sponsorship for the sponsor
Expenditures on sponsorship are expressly provided by the Tax Code as non-deductible expenses for the sponsor. However, profit-making corporation offering sponsorships may reduce tax on a limited basis. Tax Code by Law no. 156/2019, modifies this limitation to encourage sponsorship actions. The limit for deducting these costs is determined by which of the two below is lower:
- the value calculated by applying 0.75% to the turnover;
- the amount representing 20% of the profit tax.
Amounts that are not deducted from profit tax are carried forward over the next seven consecutive years, according to the Tax Code. Recovery of these amounts will be made in the order of their registration, under the same conditions, at each payout period of the profit tax.
The donation regime
Donations are regulated by the Civil Code. Donation is the contract whereby, with the intention of gratifying, a party, called a donor, irrevocably disposes of a good in favor of the other party, called a donee. The donation ends in genuine authentication, under the sanction of absolute nullity.
The movable property that constitutes the object of the donation must be listed and evaluated in a document, even under private signature, under the sanction of the absolute nullity of the donation.
Movable tangible property with a value of up to 25,000 lei may be the subject of a manual gift, except in the cases provided by the law. The manual gift ends with the consent of the parties, accompanied by the tradition of the good.
Tax treatment of donations for the beneficiary
Donations are not considered taxable income for beneficiaries who are non-profit entities that operate and are organized according to the applicable legal provisions, if granted according to the law.
Tax Treatment of donations for the donor
In Romania, there are no tax incentives to encourage donations. The donor cannot deduct the donation costs and will have the obligation to self – collect the appropriate VAT for the donated goods.
Particular aspects in case of insolvency
Law no. 85/2014 on insolvency, stipulates that in the case of the insolvency of a debtor, documents with free title (except for humanitarian sponsorship) performed during the „gray” period (ie 2 years before the insolvency procedure is opened) can be canceled by the bankruptcy judge at the request of the court administrator or the liquidator without the need for proof of fraud – there being a presumption that these transfers are abusive to the detriment of the creditors.
All donations, sponsorship that are not made for humanitarian purposes, etc. can be considered as gifts in the sense of the law.