Main tax implication for donors
Prepared by P. Salvatore, J. Shehata, R. Rossi, M. Esposito e C. Cioffi
Donations in favor of non-profit organizations such as non-profit organization of social utility (ONLUS), volunteer organizations (OdV) and associations for social promotion (APS) as well as those in favor of hospitals and research institutions constitute a way of widespread participation to the emergency situation for individuals and enterprises.
Italian tax law – as integrated by the provisions of the Decree “Cura Italia” -promotes donations by providing for specific tax benefits with respect to income taxes, whose complete definition will be reached upon future entry into force of the comprehensive reform of the Italian non-profit sector, started with the adoption of DLgs. 117/2017.
Main legal aspects of donations
Article 769 of the Italian Civil Code qualifies a donation as the contract by means of which, out of mere generosity, one party enriches the other.
For their validity, article 782 of the Italian Civil Code prescribes that donations are to be executed in the form of a notarial deed in the presence of two witnesses, and that acceptance by the beneficiary is required. Acceptance must be made in the same notarial deed or in a subsequent notarial deed: in this last case the contract won’t be effective until acceptance has been notified; until then the donation may be revoked at any time by the donating party.
However, pursuant to article 783 of the Italian Civil Code, donations having as their object low-value movable assets are valid even if not executed in the form of a notarial deed, insofar as the assets have been delivered from the donating party to the beneficiary.
In principle, the donation of money falls under the concept of low-value donation, thus it might be validly perfumed with the simple transfer of money from the donating party to the beneficiary. This, obviously, also in relation to the «economic conditions of the donating party».
It is also worth noticing that Italian law allows for the donation to be revoked (with the consequence that the beneficiary party shall be ordered to return the assets object of the donation, upon request of the donating party or of its heirs) in the hypothesis of: (i) ingratitude of the beneficiary party or (ii) (in case of donation made by physical persons) the subsequent occurrence of children (art. 803, Italian Civil Code).
Donations made by individuals (not acting in the course of a business activity)
(i) full deduction from the taxable income of the donor for donations (in cash) made in favor of universities, university foundations, hospitals, public and supervised research institution, including the Istituto Superiore di Sanità (article 10(1)(l-quarter), DPR 917/1986);
(ii) full deduction from the taxable income of the donor up to 10% of his/her taxable income for donations (in cash or in-kind) in favor of ONLUS, non-profit organizations and APS that are duly registered and that do not perform a commercial activity (art. 83(2), DLgs 117/2017). Any non-deducted amount can be carried forward for four years following the one in which the donation has been made.
As an alternative to (ii) above, the donor can deduct from the income tax due an amount equal to 30% for donations (in cash or in-kind) up to an annual amount of € 30,000. The threshold is increased to 35% for donations made in favor of OdV (art. 83(1), DLgs 117/2017).
Donations made by companies and commercial entities
(i) deduction the taxable income of donor up to 2% of its gross taxable income for donations (in cash or in-kind) in favor of entities pursuing exclusively education, health and social assistance or scientific research, including in general university hospitals (art. 100(2)(a), DPR 917/1986). Such provision applies also to the individuals carrying out a business activity;
(ii) deduction from the taxable income of the donor for donations in favor of universities, public university foundations and research entities, including the Istituto Superiore di Sanità (art. 1(353), L. 266/2005);
(iii) deduction from the taxable income of the donor up to of 10% of its taxable income for donations (in cash or in-kind) in favor of ONLUS, non-profit organizations e APS that are duly registered and do not perform a commercial activity (article 83, par. 2, Legislative Decree no. 117 of 2017). Any non-deducted amount can be carried forward for four years following the one in which the donation has been made. Such provision applies also to the individuals carrying out a business activity.
The latest Decree “Cura Italia” and the extension of the favorable tax measures
In order to foster donations aimed at facing the emergency situation of the latest weeks, the Italian Government has introduced through the Decreed “Cura Italia” (art. 66, DL 17 March 2020, published in the Italian Official Gazette 17 March 2020 n. 70) the extension of the favorable tax measures.
In particular, it is provided that the deduction from the tax due by individual donors of 30% of the donations (up to € 30.000 per year) is available also in case of donations in favor of the Italian State, Regions, local authorities, public bodies, foundation and associations legally registered with social purposes, made with the specific purposes of facing the emergency situation.
For companies and commercial entities subject to the Decree introduces the full deduction (for Italian Corporate Income tax and Regional Tax purposes) of donations made with the specific purposes of facing the emergency (in line with the provision of art. 27, L. 133/1999).
Main points to be considered
- the favorable tax provisions are mutually alternative, and the option is in the hands of the donor. Accordingly, the tax provisions cannot be cumulated, neither among them nor with other similar tax benefits for the same donations;
- donations in cash shall to be made through means that allow the tracking of funds, such as a bank or postal transfer, and from which is possible to exactly identify the beneficiary of the donation;
- donations in-kind can be eligible for the favorable provisions upon verification of the relevant category of goods and the related tax valorization (e.g. DM 28.11.2019);
- in case of donations in kind made by companies and in general taxpayers carrying out a business activity, VAT implications should be duly considered;
- the whole framework of the tax benefits shall be reviewed following the entry into force of the comprehensive reform of the Italian non-profit sector, started with the adoption of DLgs. 117/2017.
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