corporate sponsorship

&

Tax exemption*

Tax exemption through the purchase of works of art

It's bringing art into your business while reducing tax. This is an opportunity to combine the pleasure of an acquisition with a tax exemption operation.

“To be a patron today, for a company or an entrepreneur, is to make the choice of audacity to bring about an in-depth transformation of society, to decide to involve people in a dynamic that brings meaning and a future. that surround it; it means committing to an approach that creates value for the patron while contributing to the general interest.”

Purchases of works of art, the tax benefits in detail

A tax deduction for 5 years

If your company buys an original work of artist, you can deduct it from your taxable result by fraction of equal value and this, from the first year of purchase then during the following four, and this within the limit of 5 ‰ of the figure business.

The conditions for deducting the purchase of a work from your result

To deduct the purchase of a work of art from your result, this work must be:
– Acquired from a living artist.
– Purchased directly from the artist or through an intermediary on the art market (galleries, art dealers, public auctions, etc.).

Then you must:

– exhibit the work in a place accessible to the public or to company employees for 5 years: building hall, waiting room, excluding your offices.
– exhibit the work free of charge.
– enter the work of art as an asset on the balance sheet.

Beyond the simple tax advantage, the purchase of a work of art by the company is an excellent relay of communication.

Tips :
– inauguration during the installation of the work in your premises.
– invitation of your privileged customers,
– support for artists on your usual media: website, newsletter or brochure.
– purchasing group with several sponsors.
A rewarding approach for your company will allow you to develop relationships with your prospects and partnerss.

Beneficiary companies :
– companies subject to corporation tax
ex: Public limited company, Simplified joint stock company

– companies subject to income tax
ex: General partnership

How to register the work in the accounts of the company ?

Works of art are capitalized at their cost price under fixed assets under “Other tangible fixed assets” (account: 2184).
The accounting and deduction basis is the cost price of the work, i.e.:

- the purchase price

– incidental costs: import customs duty, VAT and taxes not recoverable by the company, transport costs, etc.

Note that commissions paid to intermediaries are excluded from the tax deduction basis. They are recognized as expenses and are therefore immediately deductible.

How to make the tax deduction ?

The acquisition price of the work of art can be deducted extra-accounting from the taxable income for the year of acquisition and the following 4 years, in equal fractions (i.e. 1/5th each year).

The basis for the deduction is the cost price of the work corresponding to the original value (ie its purchase price, plus any incidental costs and minus recoverable VAT).

The costs incurred during the acquisition, which are not included in its cost price (notably commissions paid to intermediaries), are excluded from the basis of the deduction; they are immediately deductible.

The deduction thus made for each financial year is capped:
It cannot exceed the limit of 5‰ (per thousand) of turnover excluding tax, minus the total payments made under sponsorship.
If the fraction of the acquisition price cannot be fully deducted for a year, the unused excess cannot be carried over to be deducted for a subsequent year.

For companies subject to corporation tax (IS) or income tax under BIC, the amounts must be deducted from the result for the financial year:

• on table no. 2058-A (Cerfa no. 10951), line XG, when the company falls under the normal real regime

• on table no. 2033-B (cerfa no. 10957) when placed under the simplified tax regime.

This deduction having the character of a management decision, this means that any deduction not practiced by the company for a year is definitively lost.
The company must enter an amount equal to the deduction in a special reserve account, appearing on the liabilities side of the balance sheet.

This sum must be reintegrated in an extra-accounting manner into the taxable result in the event of:

• change of assignment (the work is no longer exhibited to the public)

• transfer of the work (the property leaves the fixed assets)

• deduction from the reserve account (the deduction of all or part of the sums allocated to the special reserve account entails a reintegration of the sums withdrawn in the profits taxable at the ordinary rate).

The company may constitute a provision for depreciation, when the depreciation of the work exceeds the amount of the deductions already made.

Attention :

The deduction system requires the ability to enter the deductible acquisition price in a special reserve account on the liabilities side of the company's balance sheet, which effectively excludes individual entrepreneurs subject to the BNC category, mainly the liberal professions, who do not have the ability to create an account of this nature on the liabilities side of their balance sheet.

*Information dated 2017