Donations, sponsorship and advertising expenses: deduction limits

Spending by companies to contribute to society is assessed under three different headings in tax legislation: donations and aid, sponsorship and advertising. Each has a different deduction rule, and spending classified under the wrong heading can become a non-deductible expense.

Donations and aid

General rule: donations and aid against a receipt to general and special budget public administrations, special provincial administrations, municipalities, villages, foundations granted tax exemption by the President and associations working for the public benefit, as well as scientific research institutions, can be deducted up to 5% of that year's profit. In priority development regions the rate is 10%.

Donations deductible in full: the Law sets no percentage limit for certain donations. For example:

• Donations to public bodies for facilities such as schools, health facilities, student dormitories and nurseries,
• Food, cleaning, clothing and fuel donations to associations and foundations engaged in food banking,
• Cash and in-kind donations to aid campaigns launched by the President and through AFAD for natural disasters.

Conditions

1. The donation must be made to the institutions and organisations listed in the law. Donations to private persons or to foundations without exemption cannot be deducted.
2. A receipt must be obtained for the donation.
3. The deduction is made from the profit of the year in which the donation is made; a loss-making company cannot carry the donation forward to the next year.
4. For in-kind donations, the value of the goods is determined at cost or arm's length value.

Sponsorship

Sponsorship spending covers cash and in-kind spending on sports clubs, federations and designated institutions under Law No. 3289 and related legislation. It must be documented with a contract and a receipt or invoice.

Advertising and promotion expenses

There is no percentage limit on advertising spending; as long as it relates to the business's activity and is documented, all of it can be expensed. Points to watch:

• For internet advertising paid to platforms abroad, there is a 15% withholding and a VAT obligation: Meta and Google advertising invoices
• Promotional products are an advertising expense; however, if some of the goods bought are not given to customers but used personally, they are not accepted as an expense.
• In agreements with social media influencers, the type of document (invoice, self-employment receipt or expense voucher) and withholding are assessed separately.
• Payments made under the name of donations but for which advertising is received may count as advertising expenses depending on their nature; this should be stated clearly in the contract.

Common mistakes

1. Deducting aid to an association without checking whether it is an association working for the public benefit.
2. Expensing all sponsorship of a professional sports club.
3. Getting the donation receipt in the manager's name instead of the company's.
4. Trying to deduct donations in a loss-making year.

For calculations: Corporate tax · Non-deductible expenses: List of non-deductible expenses

Legal basis: Corporate Tax Law No. 5520 art. 10; Income Tax Law No. 193 art. 89; Law No. 3289 on Youth and Sports Services.