Al treilea sector

20% of the tax on profit – €100 million for NGOs

Few companies active on the local market choose to redirect 20% of the tax on profit to associations or foundations.  The main reasons behind this: the lack of credibility surrounding the non-governmental sector and the insufficient understanding of the legislation in force.  

Only 12% of the firms that obtained profit in 2011 chose to redirect 20% of the tax on profit to NGOs, according to data gathered by the National Agency of Fiscal Administration (ANAF).  

“Companies that decide to redirect 20% of the tax on profit towards an NGO do this mostly for a personal reason or because one of the company’s representatives is involved in that NGO” said Lumința Ristea, managing partner at CRG Nexia, a company specialized in audit, accounting, fiscal consultancy and business consultancy.  

12% of the companies that made profit in 2011 chose to redirect 20% of the tax on profit

In 2011, NGOs received RON463.7 million by this redirecting of tax

Sponsorship expenses or donations are deducted from the tax companies have to pay to the state

NGOs received RON436.7 million (€103.59 million) in 2011, according to ANAF. However, NGOs could have absorbed around €440 million the same year, if all Romanian companies with gross income of RON58.1 billion (€12.98 billion) had decided to direct 20% of the tax on profit to them.  

“The difference between the whole amount available to be allocated to NGOs and the money which was actually redirected comes from the fact that this fiscal policy is not well-known, especially within SMEs. On many occasions, the accountants in these firms are not vigilant enough to explain this facility to the managers or the board of directors”, told Gabriel Biriș, fiscal consultant and founding partner of the law firm Biriș Goran.

NGOs usually manage to get this money from companies only after discussing the issue with the decision-makers in those companies.

“Companies are open to money redistribution as long as their CEO goes along with this idea. If you can talk to somebody from the top management, persuade them to redirect the money to you, and come up with a very good project too, then there’s a pretty good chance you’ll get the financing. However, associations also have an image problem”, said Carmen Uscatu, co-founder of the Dăruiește Viață Association. The association was founded in 2012 by Carmen Uscatu, Oana Gheorghiu and Bianca Voinescu, those who up to last year coordinated and implemented the projects run by the association Salvează Vieți.

The Media can be helpful

Shortly after it was founded, the Salvează Vieți association managed to determine some of the profitable companies in Romania to redistribute 20% of the tax on profit to it.   

“How did we do it? By means of a very powerful media campaign,” according to Carmen Uscatu. Just one month after the campaign was launched, the association raised €100,000. In 2010, the amount rose to €400,000 as was the case in 2012, while in 2011 the sum had reached an impressive €800,000.

“In 2012 we only managed to raise half the amount we got in 2011. It may have been due to the economic downturn or the electoral campaign”, added Uscatu.

One of the companies that decided to redirect 20% of the tax on profit revenues to Salvează Vieți was CDD Relocation, specialized in local and international relocations, relocation of personal goods and furniture, for individuals as well as for legal entities.

“Over the last years we have given 20% of the tax on profit to Salvează Vieți. This way, the money will be used the way we wished for, for palpable results, for the future, that is, for the children! Even if the amount is not very significant- around RON60,000 – we consider that we’ve have also contributed to the completion of the projects run by Salvează Vieți. We intend to do this every year”, declared Dana Dascălu, managing director at CDD Relocation.

The most important part of the money collected by Salvează Vieți came from SMEs.  The NGO made its calculations: in 2011, the average amount coming from firm sponsorships to the association was approximately €1.000.

“Big companies do not usually redirect any money either because they won’t take the trouble or because they don’t have enough trust in NGOs that ask for money”, pointed out the lawyer George Biriș.

There are cases when big companies with revenues of tens of millions of euros choose to invest in their own foundations, so they can be direct sponsors of the projects run by other NGOs.

Promoting current legislation versus absorbing European funds

Sponsorship expenses and donations are always to be deducted from the tax on profit due to be paid by companies, according to the current legislation. However, two conditions need to be met cumulatively: the expenses must be within the boundaries of 3% of the turnover and must not exceed 20% of the tax on profit.

“The legislation on the subject is there and it suffices. Some companies may find it more engaging if the percentage was higher”, said Luminiţa Ristea from CRG Nexia. Ristea added that the true reason why NGOs don’t get the money does not lie with the law, but with the lack of will on the part of companies, on the one hand, and the feeble promotion campaigns of the current legislation from foundations and association, on the other hand.

NGOs may have been less vocal about their right to receive the equivalent of 20% of the tax on profit which companies must pay anyway, because they concentrated too much on absorbing European funds.

According to information solicited by altreileasector.ro from the Ministry of European Funds,  between 2007 and 2013, NGOs got the financing approval for 434 projects. The amount was as high as RON2.15 billion (€500 million). Of the 434 projects, 409 got the money through the Operational Program for the Development of Human Resources (POSDRU), while the rest were financed through The Operational Program for the Development of Administrative Capacity (PODCA).

Translation in English by Alexandra Calu.

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