Tax & law
Getting a company to fund your work, the proper way
Corporate patronage isn't sponsorship. The difference is a tax one, and it changes everything about the contract.
A company can fund your work through two legally distinct routes, and confusing them exposes both parties.
| Patronage | Sponsorship | |
|---|---|---|
| Consideration given | None, or symbolic | Defined visibility |
| Nature | Donation | Service provision |
| VAT | Out of scope | Applicable |
| For the company | Tax reduction | Deductible expense |
| Contract | Patronage agreement | Service agreement |
Consideration that's too visible reclassifies patronage as sponsorship, with VAT owed retroactively. The rule of thumb used by most tax authorities: the consideration given should not exceed a modest fraction of the amount paid.