Non-profit organisations

Law 49/2002, of December 23, on the tax regime of non-profit entities and tax incentives for patronage is approved to regulate the tax regime of non-profit entities, as well as the set of incentives that are applicable to the patronage activity carried out by individuals. In any matter not provided for in said Law, the general tax rules shall apply.

For the purposes of this Law, are considered non-profit entities , provided they meet certain requirements:

1. The foundations
2. Associations declared of public utility
3. Non-governmental development organizations referred to in Law 23/1998, of July 7, on International Cooperation for Development, provided that they have one of the legal forms referred to in the previous paragraphs
4. Delegations of foreign foundations registered in the Registry of Foundations
5. The Spanish sports federations, the regional sports federations integrated into those, the Spanish Olympic Committee and the Spanish Paralympic Committee
6. The federations and associations of non-profit entities referred to in the preceding paragraphs

The requirements that these entities must meet to benefit from this law are, broadly speaking, the following:

1. That pursue purposes of general interest
2. That they allocate at least 70% of the results of the economic operations they carry out and of the income they obtain from any other concept, less the expenses incurred to obtain them, to the achievement of said purposes.
3. That the activity carried out does not consist of the development of economic operations unrelated to its statutory purpose or objective.
4. That the founders, partners, patrons, etc., are not the main recipients of the activities carried out by the entities
5. That the positions of patron, statutory representative and member of the governing body be free of charge
6. That, in the event of dissolution, its assets are allocated to one of the entities considered to be beneficiaries of patronage
7. That they are registered in the corresponding registry
8. That they comply with certain accounting obligations
9. That they comply with the accountability obligations established by their specific legislation
10. That they prepare an annual financial report

The special tax regime regulated by Law 49/2002 affects :

• Taxation by corporate tax
• Local taxes

Regarding the tax regime for the Corporate Tax we can highlight the following notes:

• The exemption is declared for income derived from revenue obtained without compensation, income from the entity's movable and immovable assets, income derived from acquisitions or transfers of assets or rights, income obtained in the exercise of exempt economic operations, etc.
• Only income and expenses corresponding to non-exempt economic operations will be computable in the taxable base of the Tax.
• The tax base will be taxed at a single rate of 10 percent.

As regards local taxes , the special regime affects the following:

1. Property tax

   All assets subject to this tax owned by non-profit entities are exempt, with the exception of those affected by economic operations not exempt from Corporate Tax.

2. Economic Activities Tax

   The economic operations carried out by these entities are exempt when they have been classified as exempt by the Law itself.

3. Tax on the Increase in Value of Urban Land

   Increases in value corresponding to the legal obligation to pay the tax fall on a non-profit entity are exempt from this tax.

   The application of the special tax regime of Title II of Law 49/2002 is subject to compliance with the requirements imposed thereon, which must be proven by the entity at the request of the tax authorities.