Patronage has become one of the preferred means of corporate communications since the Aillagon law - allowing companies to benefit from tax reduction - was passed. Large companies are already using all of the resources. SMEs are beginning to develop more patronage projects.
The law of 1 August 2003 amended in article 6, article 238 bis and article 238 bis AB of the French General Tax Code (CGI).
Patronage expenses entitle companies to a tax reduction equal to 60% of the amount due (payments in kind or in cash) up to a limit of 0.5% of pre-tax turnover.
The company may carry over the sum linked to patronage for a five-year period, respecting the upper limit for each fiscal year.
The amended Article 238 bis AB allows companies that purchase original pieces of art by living artists and allocate them to an immobilised assets account, to deduct from the acquisition year end and from the four following years, in equal fractions of 1/5, an amount equal to the purchase price. These sums are deductible within the limit of 0.5% of pre-tax turnover, less payments made under article 238 bis of the French General Tax Code.
The aim of this law is to encourage patronage activity by modifying the nature of the tax benefit given to the company.
It is now a question of tax reduction rather than tax exemption.
Reduction terms and conditions
1) Companies subject to corporation tax, with the exception of micro-enterprises, are eligible.
2) Territorial conditions :
For companies operating both inside and outside of France, the turnover taken into account corresponds to profit taxable in France, excluding other countries. For holding companies, dividends and financial products in the selected turnover are taken into account to determine eligibility ceiling.
3) In practice, tax administration establishes a boundary between patronage and sponsorship.
- It defines patronage as follows : « material support given to a work of art or a person for an activity presenting a mutual interest without any direct return from the beneficiary ». It prohibits direct benefits through the sale of products or services, for example, during the period of patronage. However indirect payment, such as communications regarding the patronage to enhance the company image, is allowed.
- The principle of tax reduction dœs not apply to sponsorship which implies significant advertising with direct economic benefits for the company.