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Civil non-profit companies ; taxation and issue of record, tax treatment of donations

Iason Skouzos - TaxLaw > Practice Areas  > Tax Law  > Civil non-profit companies ; taxation and issue of record, tax treatment of donations

Civil non-profit companies ; taxation and issue of record, tax treatment of donations

Civil for-profit or non-profit companies, by virtue of Article 2(1) of Presidential Decree 134/96 were added to Article 2(1) of the Code of Books and Records (CBR) and have all the obligations which persons engaged in trade or business have, i.e. they are treated as persons engaged in trade or business, even if they are non-profit.

Non-profit entities keep books only for deliveries of goods or provision of services subject to VAT or income tax and issue the records expressly specified by the CBR. For all other income, the books that are kept and the records issued are not for tax purposes. Even when their operations are not subject to VAT, they are under the obligation of issuing records, e.g. when they sell either tradable goods or fixed assets, and when they provide services, they must issue invoices.

They are exempt from VAT for revenues from occasional events organised for their economic support, provided there are no more than two (2) such events a year. Moreover, the provision of cultural or educational services is also tax-exempt, as well as the delivery of goods closely related to such services by legal entities or other organisations or foundations of a non-profit nature, which operate legally and have cultural or educational purposes.

For the above exempt actions these entities are not under the obligation of keeping books and issuing records (Article 2(3) CBR) and are not subject to income tax, provided they take place in the context of the purpose of the associations, societies, etc.
Gross income of non-profit companies is the income originating from purely commercial operations or the exercise of a liberal profession. On the contrary, subscriptions and registrations of members, as well as sponsorships or donations to them, do not fall under the meaning of gross income in order to be taxed.

Monetary donations by these companies are recognised as deductible from their taxable income when they are given as donations to welfare institutions, non-profit associations providing education services and grants, churches, Holy Mountain monasteries, the Constantinople Ecumenical Patriarchate, Alexandria and Jerusalem Patriarchates, the Mt Sinai Holy Monastery, the Albanian Orthodox Church, domestic legal entities governed by public law, domestic legal entities governed by private law legally established or being established, which work on welfare projects, research and technological bodies governed by L. 1514/1985, research facilities which are legally established, domestic non-profit legal entities governed by private law, as well as domestic non-profit legal entities governed by private law legally established or being established, provided they serve cultural purposes.

Such donations are taken into consideration only if they have been deposited in a special account of the legal entity (beneficiary) which must be opened for this purpose in a credit institution operating legally in Greece (Law 4110/2013). The deposit certificate issued by the credit institution must include the donor’s or sponsor’s and the beneficiary’s details, the amount of the donation or sponsorship in numbers and words, the date of deposit and the signature of the donor or sponsor, as appropriate.

The donations of the civil non-profit company are deductible from its gross income, if the amount does not exceed 10% of the total net income, and provided it has not been deducted according to any other provision of the Income Tax Code.
A monetary donation by a natural entity to the above bodies is tax deductible by up to 10% if it exceeds the amount of 100.00 euros and up to 5% of the taxpayer’s total income which is taxed according to the general provisions.
In any case, to receive the donation, the beneficiary issues a special receipt for the donor (“donation receipt”), which is legally validated.
In practice, except for monetary amount donations, which is the most common case, there may be a donation in kind (for example foodstuffs, school supplies, toys, etc.), with the exception that in this case the beneficiary does not issue any receipt, but only gives a letter of thanks or a receipt of acceptance for the goods it received from the donor.

In this case the donation may be entered in the books of the civil non-profit company (evidenced by the relevant purchase receipt of the donated goods, in combination with the donor’s receipt of acceptance), but there is a possibility that the Tax Authority will reject it during a tax audit.
Therefore, in order for the donor to have any tax benefit it is in any case recommended to give a monetary donation under the above conditions (monetary donation to specific categories of beneficiaries, deposit of amount into the beneficiary’s bank account, receipt of relevant receipt – “donation receipt”) and not a donation in kind.

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