Donations made to organisations qualifying under Law 49/2002 are directly tax-deductible in Spain for both individuals (Personal Income Tax) and companies (Corporate Income Tax):
For Individuals
- 80% tax credit on the first €250 donated.
- 40% tax credit on the amount exceeding €250.
- If donations of at least the same amount are made to the same qualifying organisation for two consecutive years, the tax credit increases to 45%.
- The maximum deductible amount may not exceed 10% of the taxpayer's Personal Income Tax taxable base.
For Companies:
- A tax credit equal to 40% of the donation is available against Corporate Income Tax.
- The tax credit increases to 50% if donations of at least the same amount have been made to the same organisation for three consecutive years.
- The donation itself (not the tax credit) may not exceed 15% of the company's taxable base. Any unused tax credits may be carried forward to future tax years.
Since 2024, donations are no longer treated as deductible business expenses for Corporate Income Tax purposes but instead directly reduce the Corporate Income Tax payable. This creates an important planning opportunity, particularly for companies with only a small number of shareholders, allowing them to choose whether the company first distributes the funds to the shareholder, who then makes the donation personally, or whether the company makes the donation directly.
Option A) The company pays the shareholder an additional €10,000 in salary, and the shareholder makes the donation personally:
In order to make the donation as a private individual, the company would normally have to pay the shareholder the additional €10,000 as salary or remuneration.
If the shareholder's annual employment income exceeds €65,000, this additional income is generally taxed at a marginal Personal Income Tax rate of 46% (applicable from taxable income exceeding €60,000).
The subsequent €10,000 donation would then entitle the shareholder to a tax credit of approximately 41% to 46%.
Where the shareholder's marginal tax rate is 40% or higher, the tax paid on receiving the additional income is equal to or greater than the tax credit generated by the donation. Consequently, making the donation personally ultimately becomes more expensive.
Conclusion – Option A: For an initial donation of €10,000, the shareholder's tax liability is reduced by approximately €4,000. However, where the shareholder's annual taxable income exceeds approximately €51,000, the marginal tax rate reaches 41%, meaning that part of the donation is effectively financed through additional taxation. At even higher marginal tax rates of 45% or 47%, the shareholder effectively bears an additional tax burden of approximately 5% to 7% despite making the donation.
Option B) The shareholder does not receive the funds, and the company makes the donation directly:
The situation is different for Corporate Income Tax, as this tax is not progressive like Personal Income Tax. Instead, companies are generally taxed at a flat rate of 25%, although reduced rates of 23%, 21% or even 15% may apply depending on turnover and the time elapsed since incorporation.
Although donations are no longer deductible operating expenses, they directly reduce the Corporate Income Tax payable by 40% to 50%. From a tax perspective, this mechanism is even more advantageous than treating the donation as an ordinary deductible business expense.
For example, if a company donates €10,000 while being subject to the standard 25% Corporate Income Tax rate, the donation produces the following result:
Example – Corporate Income Tax rate of 25%
Corporate Income Tax without considering the donation: €2,500 (€10,000 × 25%)
Tax credit generated by the donation: €4,000 (€10,000 × 40%)
Additional tax benefit: €1,500
Example – Corporate Income Tax rate of 15%
Corporate Income Tax without considering the donation: €1,500 (€10,000 × 15%)
Tax credit generated by the donation: €4,000 (€10,000 × 40%)
Additional tax benefit: €2,500
Accordingly, depending on the applicable Corporate Income Tax rate, the company achieves an additional tax advantage of between €1,500 and €2,500 compared with the tax that would otherwise have been payable.
Conclusion:
A corporate donation of €10,000 reduces the company's Corporate Income Tax liability by €4,000. This represents the full tax benefit generated by the donation plus an additional tax advantage of approximately €1,500 to €2,500, depending on the applicable Corporate Income Tax rate.
In practical terms, a €10,000 donation results in an actual net cost to the company of approximately €8,500, while the remaining €1,500 is effectively recovered through the Corporate Income Tax credit.
If the company makes recurring donations to the same qualifying organisation (for at least three consecutive years), the available tax credit increases to 50%. In this case, the tax saving rises to €2,500 and the effective economic cost of a €10,000 donation is reduced to only €7,500.
Consequently, for shareholders with a high annual income and a correspondingly high marginal Personal Income Tax rate, it may be considerably more tax-efficient for the company itself to make the donation rather than distributing the funds to the shareholder, who would then donate them personally.
For more information on the general tax treatment of charitable donations in Spain, please read our article: Tax Deductions for Charitable Donations under Spanish Personal and Corporate Income Tax Law.
If you require legal or tax advice or have any questions regarding this topic, please feel free to contact us by email or telephone.
Business Service Agreements:
Schedule an Initial Consultation (A, B2)
Company Formation (Spanish S.L.)
Bookkeeping, Tax Compliance, Financial Statements and Legal Representation
Author:
Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
Facebook I LinkedIn I Amazon
Stay informed! Follow us on:
(+34) 
