Situation: A company ABC SRL, payer of income tax on micro-enterprises, purchased, in the fourth quarter of 2020, computers with reverse charge, worth 100,000 lei. Also in the fourth quarter, the company grants these computers as sponsorship to a non-VAT association.
We specify that the micro income tax calculated for the fourth quarter is 20,000 lei, and the turnover at the level of 2020 was 3,500,000 lei (turnover in the fourth quarter = 1,000,000 lei).
What is the tax treatment from the point of view of deducting the sponsorship from the micro tax?
Solution:
According to art. 1 paragraph (5) of Law no. 32/1994 on sponsorship, with subsequent amendments and completions, in case of sponsorship or patronage consisting of material goods, they will be assessed, by the legal act concluded, at their real value from the moment of delivery to the beneficiary.
According to the application instructions of Law 32/1994 on sponsorship, the sponsorship is made only on the basis of a contract concluded between the sponsor and the beneficiary, in which the amount of the sponsorship will be recorded, as well as its duration.
It is specified that the material goods that are the object of the sponsorship are evaluated through the sponsorship contract as follows:
- the sponsor’s selling price, excluding VAT, if the goods are produced by him;
- at the purchase price on the market, excluding VAT, in case the goods are purchased for the purpose of sponsorship, fact proved on the basis of the invoice or the fiscal receipt of purchase;
- at the customs value for the material goods received from abroad as sponsorship, established according to the legal provisions.
The sponsorship in money and / or in material goods will be recorded in the accounting records of the sponsor and the beneficiary of the sponsorship, if by law they have the obligation to organize and manage their own accounting, based on documents certifying payment or delivery, respectively receipt of material goods.
According to art.56 of the Fiscal Code, the microenterprise that performs a sponsorship, under the conditions of Law 32/1994 for the support of a non-profit entity / cult unit registered in the Register of cult entities / units for which fiscal deductions are granted according to art.25 par. 4 ^ 1) Fiscal code, decreases the related amount from the micro-enterprise tax to the value level representing 20% of the income tax due for the quarter in which it registered the sponsorship expense.
The amount that is not deducted from the tax on the income of the micro-enterprise due is carried forward in the following quarters, for a period of 7 consecutive years.
The decrease of the amount from the income tax of the micro-enterprise due, during the 28 consecutive quarters, is carried out under the same conditions, at each term of payment of the income tax of the micro-enterprise.
In the situation described above, tax calculated quarter IV.2020 = 20,000 lei
The amount of sponsorship that can be deducted from the income tax of the micro-enterprise in the fourth quarter of 2020:
20.000 lei x 20% = 4000 lei
Tax due quarter IV 2020 = 16.000 lei.
Registration of the tax on the income of the micro-enterprise in the fourth quarter of 2020 due by the micro-enterprise:
698 = 4418 16.000 lei
Sponsorship to be carried over starting with quarter I 2021:
100.000 lei = sponsorship granted
4000 lei = deducted sponsorship
196.000 lei = ponsorship remaining to be carried forward in the first quarter of 2021.
Regarding VAT, value added tax payers have the right, within the sponsorship actions, to deduct the value added tax related to the purchased goods and services and which are, according to art. 1 of law 32/1994, the object of sponsorship contracts, with compliance with the level and destinations provided by law.
If the goods are purchased by the company for the purpose of sponsorship, the valuation is made at the purchase price on the market excluding VAT.
We mention that in the situation where the sponsorship is made in goods, the notice accompanying the goods is drawn up with the mention: “Sponsorship according to contract no. from…. “/” Not billed ”.
According to the provisions of the Fiscal Code, the term self-delivery is presented in art.266 The meaning of some terms and expressions, point 18 as follows: self-delivery has the meaning provided in art. 270 para. (4):
(4) The following operations are assimilated to the deliveries of goods made with payment:
- a) the taking over by a taxable person of the movable goods acquired or produced by him for use for purposes not related to the economic activity carried out, if the tax related to the respective goods or their component parts has been deducted totally or partially;
- b) the taking over by a taxable person of the movable goods acquired or produced by him in order to be made available to other persons free of charge, if the tax related to the respective goods or their component parts has been deducted totally or partially;
Regarding the VAT for exceeding the sponsorship, the provisions of art. 270, para. (8) of the Fiscal Code and point 7 of its Implementing Norms:
It does not constitute the delivery of goods, within the meaning of paragraph (1), the granting of low value goods, free of charge, within the actions of sponsorship, patronage, protocol / representation, under the conditions established by the methodological norms..
According to the NM, point 7, (12), within the meaning of art.270 paragraph (8) letter c) of the Fiscal Code, the goods granted free of charge within the sponsorship or patronage actions are not considered deliveries of goods if the total value during of a calendar year falls within the limit of 3 per thousand of the turnover constituted by taxable operations, exempted with or without right of deduction, as well as by operations for which the place of delivery/provision is considered to be abroad according to the provisions of art. 275 and 278 of the Fiscal Code. The classification in the limit is determined based on the data reported by the tax returns submitted for a calendar year.
The sponsorships and patronage actions, granted in cash, nor the goods for which the tax has not been deducted are not taken into account for the inclusion in these limits. Exceeding the limits constitutes the delivery of goods with payment, respectively the tax is collected. The tax collected related to the overrun is included in the statement prepared for the last fiscal period of the respective year.
Thus, in the exposed situation, considering that the turnover (CA) reported by the VAT return, is 3,500,000 lei, 3 per thousand represents 10,500 lei, so the overrun is
100,000 – 10,500 = 89,500 lei, and the related VAT is 17,005 lei.
The VAT collection is entered in an auto-invoice and the following is registered:
635 = 4427 or 6584 = 4427.
At point 92 para. (3) – (5) of the Methodological Norms, stipulates that the self-invoice for deliveries of goods or services must be issued only if the operations in question are taxable and only for tax purposes, being mandatory to mention the following information:
- the invoice number, which is a sequential number granted based on one or more series, which uniquely identifies an invoice;
- date of issue;
- the name, address, and registration code for VAT purposes of the taxable person, under the heading Supplier;
- under the heading Buyer, the name, address, and registration code for VAT purposes of the taxable person or, as the case may be, of the beneficiary;
- the name and description of the goods delivered or of the services provided;
- the value of goods or services, excluding tax;
- applicable tax rate;
The information from the invoice issued by self-invoicing is registered in the sales journals and is taken over accordingly in the tax return provided in art. 323 of the Fiscal Code, as the collected tax. According to paragraph (5), in case of exceeding the limits established at point 7 par. (12) for the operations provided in art. 270 para. (8) lit. c) of the Fiscal Code, the taxable persons registered for VAT purposes according to art. 316 of the Fiscal Code have the obligation to draw up the self-invoice according to the provisions of paragraph (2) only for VAT purposes. The self-invoice will include in the Buyer section the information from paragraph (3) letter c), and in the case of the goods granted free of charge within the protocol, sponsorship, patronage actions, instead of the name and description of the delivered goods, it can be mentioned, as the case may be: exceeding the protocol, sponsorship or patronage limit. ”
The collection of VAT when the sponsorship expenses are exceeded will not give the right to deduct a part of the VAT deducted at the acquisition, by reverse charge. We remind you that the reverse charge provided in the Fiscal Code is a way to simplify the payment of the tax.
Through this, no VAT payment is made between the supplier and the beneficiary, the latter owing, for the operations performed, the tax related to the entries, and having the possibility to deduct the respective tax. In other words, the collection of VAT at the level of the deductible tax is assimilated with the payment of the tax to the supplier/provider.