During the 2022 Income campaign, there are many taxpayers who have submitted their declaration through the online platform, by phone or by going personally to the Treasury offices. Doubts about the tax benefits that can be carried out from donations to reduce the payment of taxes in the income statement are frequent.
Generosity is not only reflected in the human spirit, but can also have a significant impact in reducing an individual’s tax burden. How is this possible? Through the tax advantages of donations, an often overlooked but greatly enhanced benefit in terms of reduced income tax. Know well the tax advantages derived from donations in Spain and how they can help alleviate the tax burden.
Donations and tax benefits for the reduction of the Income Statement
Donations, understood as free and voluntary transfers of goods or rights in favor of third parties without receiving anything in return, are regulated by the Donation Tax Law.
In the Income Statement, certain donations to non-profit organizations, foundations and general interest entities may be deductible, as long as certain requirements are met.
How do donation deductions work?
In Spain, donations made to non-profit entities can be deducted from the full income tax rate. Depending on the donation model and the receiving entity, between 30% and 75% of the amount donated can be deducted. It is essential to remember that these deductions have a limit, and cannot exceed 10% of the taxpayer’s tax base.
The first donations made to an entity obtained a deduction of 75% for the first 150 euros, and 30% for the rest. But if it has been donated to the same entity for three consecutive years with an equal or higher amount, the deduction for the excess over the first 150 euros increases to 35%.
Tax benefits for companies
Businesses can also increase these deductions. Similarly, donations to non-profit entities can be deducted in Corporate Tax, with a limit of 10% of the tax base. In this case, the basic deduction is 35%, but it can increase to 40% if donations have been made to the same entity for at least three consecutive years.
Documentation and transparency
To make use of these deductions, it is essential to have a donation certificate issued by the receiving entity. This must contain the data of the donor, the entity, a description of the donation and the amount.
In addition, the entities that receive donations must comply with certain transparency and accountability requirements, thus guaranteeing that the donations are used for the intended purpose.
The social impact of donations
Aside from the tax advantages, donations have a profound social impact. They help finance projects of general interest that often focus on areas such as education, health, social inclusion, the environment, among others.
Donations can not only help the people and causes that need it most, but can also have significant tax benefits. Before making a donation, it is important to obtain tax advice to ensure that all necessary requirements are met. A correct planning of donations can become an effective strategy for reducing taxes in the Income Statement.
