Foundations must apply VAT to volunteering and sponsorship services

The nature of the activities carried out by a foundation is the determining factor in establishing whether these operations are subject to Value Added Tax (IVA). A recent resolution from the Directorate General of Taxes (DGT) analyzes the distinction between pure donations, collaboration agreements, and services of a commercial or social nature.

What the DGT has resolved

The administration has delimited the tax treatment of various common operations in the non-profit sector:

• Collaboration agreements: The mere dissemination of a collaborator's participation in these agreements does not constitute a service subject to IVA.
• Sponsorship programs: These can involve two independent benefits. On one hand, the dissemination of the brand and, on the other, access to events or galas. Access to a gala could be exempt if it is considered a cultural service and the entity acts as a private cultural establishment of a social nature.
• Corporate volunteering: Services for organizing volunteering activities for companies are not considered direct social assistance; therefore, they are subject to the general rate of 21% IVA.
• Donations: Contributions made without any consideration (known as row zero) are not subject to the tax.

What it means for you

For companies collaborating with non-profit entities, it is fundamental to distinguish between a donation and a contracted service. If the company receives consideration, such as the organization of volunteering days for its employees, it must receive an invoice with the corresponding IVA. In the case of sponsorship, it is necessary to break down whether payment is being made for advertising or for access to an event, as the tax treatment may vary depending on the nature of each component.

What should be done

It is necessary to analyze the structure of the collaboration and sponsorship agreements signed with foundations. The correct differentiation between dissemination benefits and event access benefits is key to avoiding errors in the application of tax rates. It is recommended to evaluate the nature of each service to determine whether it fits within the exemptions provided by Law 37/1992 or if it must be taxed at the general rate.