What are the main tax obligations of a non-profit organisation not included under the patronage tax regime which wishes to launch a fundraising campaign for COVID-19 relief efforts?

The direct flow of funds from donors/patrons to the non-profit organisation, in the context of a simple fundraising campaign, can qualify as donations.

There are no specific obligations for a non-profit, not included under the patronage tax regime, wishing to launch a fundraising campaign. There are, however, tax implications, particularly for donors/patrons (whose donations will not be recognised as deductible incremental expenses for tax purposes), which will have to be analysed on a case-by-case basis.

In the sphere of non-profit organisations, and provided that the donations in question are to be used towards achieving the organisation’s social purpose, any  donations received are exempt of corporate income tax (Imposto sobre o Rendimento de Pessoas Coletivas – IRC).

 

What are the main tax obligations of a non-profit organisation included under the patronage tax regime which wishes to launch a fundraising campaign for COVID-19 relief efforts?

Within the legal sphere of non-profits (such as foundations, associations and some cooperatives), and provided that the donations are to be used towards achieving the organisation’s social purpose, any donations received are exempt of corporate income tax.

With respect to donors/patrons, any donations given to organisations included under the patronage tax regime are recognised as deductible incremental expenses. The amounts of such deductibility or increment will vary according the specific patronage regime in question.

The most common way to ensure a non-profit organisation’s eligibility for the patronage tax regime is through its application for special status (e.g. that of IPSS (Private Institution of Social Solidarity) or of public interest, although in the latter case only for entities whose purpose is the provision of social assistance, charity or social solidarity) or, less commonly, based on its social purpose (e.g. foundations or associations whose main purpose is the promotion of the values of citizenship, respect for human rights, women’s rights and gender equality).

Non-profit organisations included under the patronage tax regime are obliged to submit the Model 25 tax return (Declaração Modelo 25)(which is submitted at the end of February of each year, with respect to the donations received during the previous year) and to comply with all other requirements established in Article 66 of the Tax Benefits Statute (Estatuto dos Benefícios Fiscais).

 

Are these obligations also applicable to goods collection drives (namely, for the collection of hospital supplies and equipment, among others)?

Donations in the form of goods are treated in the same way, with the necessary adaptations with reference to the answers to questions 1 and 2..

 

What kind of tax benefits/non-conformities may arise for donors/patrons (legal or natural persons) if the organisation in question is not included under the patronage tax regime?

The granting of a donation to a non-profit organisation not included under the patronage tax regime does not entail any non-conformity with the law or the applicability of a sanctions regime.

In the sphere of non-profits (foundations, associations and some cooperatives), and provided that it can still be considered that the donations in question are to be used towards achieving the organisation’s purpose, they will remain exempt of corporate income tax.

Nonetheless, with respect to donors/patrons, depending on whether they are a legal or natural person, their donation will not be considered a deductible incremental expense for corporate income tax purposes and, in relation to personal income tax, it will not be possible to gain any benefit in the form of tax deductible expenses. –

 

If my organisation falls under the patronage tax regime, are there any additional tax incentives if the campaign or drive in question is for COVID-19 relief efforts?

No. The tax benefits applicable under  the patronage tax regime (specifically for donors/patrons) will remain unchanged.

It should be noted, however, that in the current context, and considering Order no. 137/2020.XXII of the Secretary of State for Tax Affairs, the SPMS – Serviços Partilhados do Ministério da Saúde, E.P.E. and the hospital entities, E.P.E. of the Regional Health Services, are also considered eligible to be included under the patronage tax regime.

This clarification, presented by the Secretary of State for Tax Affairs, arises following a consolidated understanding of the Tax and Customs Authority, according to which, under normal circumstances, entities that carry out public management activities and are governed by public law (as is the case of E.P.E.s) cannot be included under the patronage tax regime.

 

If this campaign is a crowdfunding campaign do the answers above still apply?

From a regulatory standpoint, and considering the legal regime for collaborative funding, approved by Law no. 102/2015, of 24 August (“RJFC”), organisations wishing to launch a crowdfunding campaign must comply with certain requirements.
For instance, a crowdfunding campaign must be promoted through a platform duly constituted for that purpose.

When adhering to the platform, information should be provided regarding the identification of the parties participating in the campaign, the method of collaborative funding to be used (donation, capital, loan or obligation to provide the financed product or service), the identification of the project or activity to be funded, as well as the purposes of the funding to be raised, the amount and deadline of the collection and the financial instruments to be used to raise funds.

Information on the beneficiary of the crowdfunding campaign (who will receive the funds raised) should also be disclosed on the abovementioned platform and immediately updated, when applicable. Required information includes the identification of the beneficiary, its legal nature, contacts, registered office or place of residence, as well as the identity of its management body members, when applicable. The beneficiary can be a natural or legal person, national or foreign.

It should be noted that the beneficiary will be personally responsible for the transfer of funds to the project or activity to be funded, after the settlement of all taxes/bank charges (corresponding only to the payment of any fees due), within one month of the end of the crowdfunding campaign.

Each offer made available is subject to a maximum collection limit, which shall not exceed 10 (ten) times the global value of the activity to be funded.


The extension of the relevant deadline or modification of the relevant amount is only permitted once per offer and each offer can only be made available on one collaborative funding platform.

 

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.