The corporate sponsorship scheme
France has one of the most favourable regimes in the world. Created in 2003, this scheme allows companies to benefit from a tax reduction equal to 60% of the payment. This payment is withheld up to a limit of 5 per thousand of the company’s turnover but is not deductible when determining their taxable profit.
Regarding the tax reduction that has not been deducted, it can be carried forward for 5 years. Within the framework of tax consolidation, a tax receivable arising from the non-assignment of the tax reduction cannot be transferred to the parent company if the receivable arose prior to joining the tax consolidation.
A favourable point of this system is that the organizations receiving the donation are those “of a philanthropic, educational, scientific, social or family, cultural nature or contributing to the enhancement of artistic heritage, the defence of the natural environment or the dissemination of French culture, language and scientific knowledge”.
Another positive point is that organizations receiving donations do not require prior authorization. However, an administrative rescript procedure allows them to secure their tax situation and to issue tax receipts to their donors without the risk of later contestation.
Since the 2019 finance law, an alternative ceiling of 10,000 euros has been introduced for companies with a turnover of less than 2 million euros.
Nevertheless, the legislator has reduced the advantage since the 2020 finance law. Thus, the amount of the reduction will be reduced from 60% to 40% for payments of more than two million euros for fiscal years ending on or after December 31, 2020.
For companies making more than 10,000 euros in donations per year, new reporting obligations have been introduced as of January 1, 2019.
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