What is the fiscal difference between a donation, a sponsorship and patronage?
The three words are used interchangeably in conversations with funders, yet their fiscal effects are completely different. The difference decides whether the company supporting you recovers the money from its tax or not.
Short answer
- Sponsorship and patronage give a profit-tax-paying company a tax credit, while a donation does not.
- The sponsorship expense is non-deductible, but it is subtracted directly from the profit tax due.
- A plain donation is not deductible and generates no tax credit when the profit tax is computed.
- Sponsorship and patronage are governed by Law no. 32/1994, while donations are governed by the Civil Code.
- In practice an NGO receives sponsorships, because the beneficiary of patronage is an individual person.
What the law says
- Sponsorship is governed by Law no. 32/1994; for libraries Law no. 334/2002 also applies.
- Sponsorship and patronage grant a tax credit: the expense is non-deductible, but it is subtracted from the profit tax.
- Fiscal Code art. 25 para. (4) letter i): the deduction is the lower of 0.75% of turnover and 20% of the profit tax due.
- The beneficiary must be listed in the Register of entities/religious units on the date the sponsorship contract is signed.
- The distinction between sponsorship and donation is confirmed in the Ministry of Finance journal, RFPC no. 2/2024.
- The Civil Code (Law 287/2009) art. 1011: a donation is concluded by notarial deed, otherwise it is absolutely void.
- The exception is the manual gift, valid for tangible movable goods up to 25,000 lei, through mutual consent plus handover of the asset.
- For an NGO, both donations and money or goods received through sponsorship are non-taxable income, under Fiscal Code art. 15 para. (2).
Side-by-side comparison
Donation, sponsorship and patronage, from an NGO point of view
| Criterion | Donation | Sponsorship | Patronage |
|---|---|---|---|
| Legal basis | Civil Code, art. 1011 | Law no. 32/1994 | Law no. 32/1994 |
| Tax credit for the company | No | Yes | Yes |
| Beneficiary | Individual or legal entity | Including an NGO | An individual person |
| Condition for the fiscal benefit | There is no benefit | Beneficiary in the Register on the contract date | Beneficiary in the Register on the contract date |
Worked examples
- A company with a turnover of 1,200,000 lei and 40,000 lei of profit tax: 0.75% of turnover = 9,000 lei, 20% of the tax = 8,000 lei, so 8,000 lei is deducted.
- The same company, if it gives those 8,000 lei as a donation instead of a sponsorship, deducts nothing from its tax: the cost stays 8,000 lei in full.
- A company with a turnover of 400,000 lei and 30,000 lei of profit tax: 0.75% = 3,000 lei, 20% = 6,000 lei, so the ceiling is 3,000 lei.
Common mistakes
- A transfer the company intended as a sponsorship is labelled a donation, and the tax credit is lost for good.
- The word patronage is used for a transfer to the organisation, although the beneficiary of patronage is an individual person.
- The company computes only 20% of the tax and ignores the 0.75%-of-turnover ceiling, which can be lower.
- The unused amount is expected to be carried forward over the next 7 years, although the carry-forward was repealed; recovery goes through form 177.
- A donation of movable goods above 25,000 lei is accepted without a notarial deed, and the donation is void.
How 4ong helps
- Separates donations from sponsorships in your records, so you know exactly which supporting document each amount needs.
- Keeps sponsorship contracts with their signing date, the proof you were in the Register at that moment.
- Stores the valuation document for in-kind donations, linked to that donation.
- Links each sponsorship to the project and budget line it funds, ready for the funder report.