General election announcement in Spain delays approval of Patronage Law update

In Spain, the government has been called upon to process the long-awaited reform of the country’s Patronage Law through Decree-Law after the snap announcement of a general election halted the approval process.

Before the announcement, the reform was moving through the approval process, with the changes set to come into force at the beginning of 2024. They include the widening of the definition of donation to include non-financial donations such as professional services, advertising space, and real estate. In addition, donors will be able to receive goods or services in recognition of their donation, provided these do not exceed 15% of the value of the gift, up to a maximum ‘thank you’ value of €25,000.

The law reform was approved in late April in the Congreso de los Diputados, the lower house of Spain’s parliament, and was being processed in the Senado (upper house) when the announcement of a general election saw both chambers dissolved.

In this scenario, sector bodies say, the only possibility for the patronage reform to go ahead is if the government processes it through a Decree-Law.

President of the Spanish Association of Foundations AEF Javier Nadal says:

“Being realistic, retaking this reform will mean starting the parliamentary process again, which would take more than a year and would delay its entry into force until at least 2025.” 

Highlighting the reform’s importance, Glòria Oliver, president of the Spanish Fundraising Association (AEFr) adds:

“A fiscal framework that encourages philanthropy is justified because it increases the social benefit that the government could otherwise have achieved through direct spending. Philanthropic donations strengthen civil society, foster solidarity and reduce inequality, and should therefore be encouraged.”

Other key changes in the Patronage Law reform highlighted by AEFr are:

1. Increasing tax relief on donations. Currently, donors can claim 80% tax relief on the first €150 of donations, and 35% on the rest. Under the new law, 80% would apply to the first €250, and 40% would apply to the rest. Increased deductions will apply for individuals or organisations making repeated donations.
2. Research & development; social and employment services for those at risk of social exclusion; and teaching or training for high-performing students are added to the list of operations for which non-profit organisations can receive tax exemptions.
3. Nonprofit organisations will be exempt from certain taxes on their assets.

The country’s third sector has been lobbying for reforms to the law, which was created in 1994 and last updated in 2002, for a number of years.

Oliver says:

“This new law presents us with a unique opportunity to improve Spain’s global positioning in philanthropy, increasing tax incentives for millions of citizens and companies. We are sure that these citizens and companies will respond by again increasing their level of contributions to nonprofit entities.”

Fundraising Europe recently reported that Spain’s third sector grew its total income by 10.5% in 2021 as it diversified fundraising streams, although it remains marginally smaller than it was 10 years ago.

Picture: Henrique Ferreira on Unsplash