Sponsorship Contract in Romania– Legal Guide
Updated: Oct 29
In the current business environment, sponsorship contracts have become an essential element for financial support and the promotion of various initiatives, especially those supported by non-profit organizations. As with any other contracts, there are a number of legal and practical aspects that should be understood before signing a sponsorship contract.
What is a Sponsorship Contract?
A sponsorship contract is a legal agreement between two parties: the sponsor, who provides financial support or other resources, and the beneficiary, who receives this support either without expectation of direct reciprocation or in exchange for benefits such as the promotion of the sponsor's name or brand. In Romania, the framework for sponsorship contracts is governed by Law no. 32/1994 on Sponsorship, with subsequent amendments and completions.
There are several rules applicable to the conclusion of professional contracts, the absence of which may call into question its validity:
A Sponsorship Contract concluded in Romania Must Be in Writing.
According to Law no. 32/1994, the sponsorship contract must be concluded in writing, specifying the object, value, and duration of the sponsorship, as well as the rights and obligations of the parties.
The requirement for contracts to be in written form is not a general rule in Romania; most contracts are validly concluded in a "consensual" form, meaning they exist simply because the parties have reached a binding agreement. For other types of contracts, the written form is only required for evidence purposes (e.g., about loan contracts).
The Sponsorship Contract Includes an Evaluation of the Sponsored Goods
In a sponsorship contract, the evaluation of the goods forming the object of the sponsorship is an essential aspect that ensures transparency and clarity between the parties, as well as towards third parties. This evaluation, included in the sponsorship contract model used, aims to indicate the real value of the sponsorship and to facilitate compliance with fiscal regulations concerning the sponsorship contract, ensuring:
Clarity and Transparency: A precise evaluation ensures that both parties have a clear understanding of the sponsorship's value, preventing potential conflicts or misunderstandings.
Compliance with Fiscal Regulations: To benefit from the tax deductions provided by law, the value of the sponsored goods must be properly documented.
Financial Responsibility: The evaluation helps in monitoring and managing the financial and material resources involved in the sponsorship.
Legal Documentation: A well-documented evaluation can serve as legal proof in case of disputes or fiscal audits.
Examples of Material Goods that Can Be Subject to a Sponsorship Contract
Here are some examples of goods that may be included in a sponsorship contract and require evaluation:
Technical Equipment: If the sponsor provides technical equipment (e.g., computers, audio-visual equipment), their value can be determined based on the purchase price or an independent evaluation if the equipment is used.
Promotional Products: If the sponsorship involves promotional products (e.g., t-shirts, posters, brochures), their value should include production costs and possibly distribution costs.
Marketing Services: If the sponsorship involves providing services (e.g., marketing campaigns, consultancy), the value of these services can be determined based on the rates charged by similar service providers in the market.
Procedure for Evaluating Goods According to a Sponsorship Contract Model
The process of evaluating the goods subject to a sponsorship contract can vary depending on the nature of the goods and the complexity of the sponsorship. Generally, the steps for evaluating goods include:
Identifying the Goods: The first step is the precise identification of the goods or services to be sponsored, by listing them in the sponsorship contract model or its annexes. The goods that form the object of the sponsorship can include equipment, products, services, or other material resources, and their identification can be done by naming and describing the goods in the contract model.
Determining the Value: The value of the goods must be determined based on the market price or an independent evaluation. For goods with significant value, it may be necessary to involve an authorized evaluator to ensure the impartiality of the evaluation. Such an evaluation report can be annexed to the sponsorship contract model.
Documenting the Evaluation: All details of the evaluation must be properly documented in the sponsorship contract. This includes the description of the goods, the evaluation methodology, and the estimated value.
Agreement of the Parties: Both parties must agree to the established evaluation and sign the sponsorship contract that includes this evaluation.
When evaluating the goods forming the object of a sponsorship contract, there are a few key aspects to consider:
Market Price: The value of the goods should be set according to the current market price to ensure a fair and justified evaluation.
Condition of the Goods: The physical condition and functionality of the goods must be considered. New and used goods may have different values.
Value of Services: If the sponsorship includes services, their value must be determined based on the hourly rate or the estimated cost for providing the services.
Additional Documentation: In some cases, additional documentation, such as evaluation reports, invoices, or receipts, may be necessary to support the established value.
Who Can Sponsor under a Sponsorship Contract in Romania?
Any individual or legal entity, from Romania or abroad, can be a sponsor based on a sponsorship contract concluded according to the law.
Who Can Be the Beneficiary of a Sponsorship Contract?
The law provides a broad category of individuals and legal entities that can be beneficiaries of a sponsorship contract model. The main categories of beneficiaries are:
Non-Profit Legal Entities: Any non-profit legal entity operating or intending to operate in Romania in fields such as cultural, artistic, educational, scientific (fundamental and applied research), humanitarian, religious, philanthropic, sports, human rights protection, medical-health, social assistance and services, environmental protection, social and community, professional associations representation, as well as maintenance, restoration, conservation, and valorization of historical monuments.
Public Institutions and Authorities: Public institutions and authorities, including specialized bodies of public administration, can benefit from sponsorship contracts.
Broadcasting Programs: Television or radio broadcasting programs, as well as books or publications in the fields covered by sponsorship.
Individuals: Any individual residing in Romania whose activity in one of the fields provided by law is recognized by a non-profit legal entity or a public institution operating in the field for which sponsorship is requested. For example, a foundation (a non-profit legal entity) with consistent activity in environmental protection can recommend, based on written certification, an individual conducting activities to combat global warming for sponsorship.
Essential Elements of a Sponsorship Contract Model
A sponsorship contract model must include certain essential elements to be considered legally valid and enforceable, such as:
Contracting Parties: It is important to clearly specify the parties involved in the contract – the sponsor and the beneficiary.
Object of the Contract: The nature of the sponsorship must be detailed, including the type of support offered (financial, material, services, etc.) and its purpose.
Obligations of the Parties: Both the sponsor and the beneficiary must have clearly stipulated obligations in the contract. For example, the sponsor commits to providing the agreed support, while the beneficiary commits to promoting the sponsor according to the agreed terms.
Duration of the Contract: The validity period of the contract must be clearly specified, including any conditions for extension or early termination.
Financial Conditions: Details regarding the amounts of money or material value of the sponsorship, payment methods, and payment terms are essential. (read about benefits of template contracts)
Confidentiality: In certain cases, the parties may agree on confidentiality clauses to protect sensitive information.
Termination of the Contract: Conditions under which the contract can be terminated, either by mutual agreement or due to non-fulfillment of obligations by one of the parties.
Legal Aspects Revelant for a Sponsorship Agreement
In Romania, sponsorship contracts are subject to specific regulations that ensure the necessary legal framework for their execution:
Sponsorship Law: Law no. 32/1994 regulates sponsorship in Romania. According to this law, sponsorship is defined as an act through which two parties agree on an activity involving financial or material support, in exchange for image benefits.
Taxation of Sponsorship: Sponsorships are tax-deductible under certain conditions. According to the Fiscal Code, sponsorships can be deducted from the profit tax owed by the sponsor, up to 20% of the profit tax but not exceeding 0.5% of the turnover.
Necessary Documentation: To benefit from tax deductions, sponsorship must be properly documented. This includes concluding a written sponsorship contract, keeping receipts, and other supporting documents.
Why Do Parties Conclude Sponsorship Contracts? Benefits of Sponsorship Contracts
A sponsorship contract can bring numerous benefits to both parties involved:
For the Sponsor:
Increased Visibility: Sponsorship can help increase the visibility and recognition of the brand.
Tax Benefits: The tax deduction for sponsorships can reduce the profit tax owed.
Reputation and Social Responsibility: Involvement in sponsorship activities can improve the public image of the company, showing commitment to the community and social causes.
For the Beneficiary:
Financial and Material Resources: Sponsorships provide essential resources for the execution of activities and projects.
Strategic Partnerships: Collaboration with sponsors can open new opportunities and long-term partnerships.
Promotion: The beneficiary can benefit from the promotion carried out by the sponsor, attracting a wider audience.
What Tax Facilities Exist for Sponsors?
Law 32/1994 provides that sponsors who conclude sponsorship contracts benefit from a reduction in the taxable base equivalent to the value of the sponsorships, but not more than 5% of the taxable base.
Such facilities are not granted in the case of:
Reciprocal Sponsorship Contracts: Concluding reciprocal sponsorship contracts between individuals or legal entities.
Contracts with Relatives or Affines: Concluding a sponsorship contract with relatives or affines up to the fourth degree inclusive.
Contracts with Controlled Non-Profits: Concluding a sponsorship contract with a non-profit legal entity by another legal entity that directly conducts or controls the sponsored non-profit.
What Facilities Does the Sponsored Person Have Through a Sponsorship Contract?
The beneficiary of a sponsorship contract also has tax facilities, meaning the amounts of money or goods received from sponsorship or patronage are exempt from income tax.
Patronage as a Variant of the Sponsorship Contract
What is a Patronage Contract?
Patronage is a disinterested contract, an act of liberality, through which a natural or legal person (the patron) transfers, without obligation of direct or indirect reciprocation, their property right over material goods or financial means to a natural person, as a philanthropic activity with a humanitarian character, for the execution of activities in the fields of cultural, artistic, medical-health, or scientific (fundamental and applied research).
The patronage contract must be concluded in authentic form, before a public notary. The authentic form of the patronage contract – a variant of the sponsorship contract – is provided by law for the validity of the contract, meaning it is mandatory.
In the patronage contract model, the parties must specify the object, duration, and value of the contract.
Differences Between Patronage and Donation Contracts
The patronage contract and the donation contract are two forms of financial or material support, which, although similar in essence, present significant differences regarding objectives, legal implications, and tax benefits for the parties involved.
The patronage contract aims to provide material or financial support by a natural or legal person (patron) for the execution of cultural, scientific, educational, artistic, or other activities, without expecting a material or financial reward. It is an act of philanthropy, through which the patron expresses interest and support for the development and promotion of these activities.
Donation, according to the Romanian Civil Code, is a legal act (contract) through which a person (donor) transfers ownership of a good or a sum of money to another person (donee), without receiving any reward in return. The donation contract can be signed for various purposes, including charitable, humanitarian, religious, or personal.
In the case of the patronage contract, sponsors can benefit from tax deductions according to Law no. 32/1994 on Sponsorship and Patronage or the Fiscal Code. Besides tax benefits, patronage can also bring non-financial advantages, such as improving public image and consolidating reputation as a supporter of culture and education.
The donation contract does not attract tax benefits for the parties involved, being most often used as private interest contracts, considering the close relationships between the donor and the donee.
Conclusion
Sponsorship contracts represent a valuable tool for the development and support of various initiatives in Romania. A well-drafted sponsorship contract model that complies with all contractual legal requirements and includes all essential elements can ensure success and mutual benefits for both parties involved. Compliance with the current legislation and fiscal procedures is crucial to avoid legal issues and to maximize the advantages offered by sponsorships.
Whether you are a sponsor or a beneficiary, understanding and correctly using sponsorship contracts can bring numerous advantages and significantly contribute to achieving your goals.
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