Donations through IRS and VAT are causing confusion. See what to do – Executive Digest

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The Tax Authority published, on the Finance Portal, the list of entities to which taxpayers will be able to donate 0.5% of their Personal Income (IRS) and the entire Value Added Tax (VAT) in favor of third parties.

There are, however, differences between the allocation of IRS Tax and Value Added Tax (VAT) that may impact the amount of tax payable or refunded.

IRS

The option to donate part of the IRS does not represent an additional tax burden on those who do so, as it is a simple reallocation of the money. In other words, instead of entering the State coffers, it goes to the account of an institution of social solidarity, charity, humanitarian assistance or religious purposes.

IVA

On the other hand, if you choose to donate VAT, that is, the amount collected from invoices requested with a tax identification number (restaurants, mechanics, hairdressers and hotels, for example), this means that you will no longer be able to deduct the value of these invoices in the your IRS. In practice, this translates into receiving less reimbursement or the delivery of more additional tax, because the discount on the tax that was due to you, through the deduction of the VAT supported by the invoice requirement, is delivered to the organization chosen by you.

What to do?

In the automatic IRS regime, the taxpayer can deposit 0.5% of the IRS or the entire VAT by clicking on the “Pre Settlement” tab of the income declaration (in Model 3 it is through Table 11, annex “Face”). You must indicate the type of entity you wish to support, its respective Tax Identification Number and the tax you wish to pay (IRS and/or VAT).

Among firefighters, misericordia, parish centers, cooperatives, people’s houses, kindergartens, homes, associations supporting victims of illnesses, among many others, this year’s list covers more than four thousand entities.

Practical case

Imagine that, in relation to your 2023 IRS, due in 2024, your paid IRS is 15,000 euros and you are entitled to a refund of 2,000 euros. If you decide to allocate 0.5% of your IRS paid to an entity, they will receive 75 euros (15,000 euros x 0.5%). The State will collect the difference between the IRS paid (15,000 euros) and the consignment of 0.5% of the IRS (75 euros), leaving only 14,925 euros (15,000 euros – 75 euros).

If you choose not to allocate 0.5% of your IRS paid, the State will benefit. In other words, you will receive the entire amount of your IRS paid (15,000 euros). In either scenario, your refund is not affected. You will therefore receive 2,000 euros.