6.10. Policy for Charitable Donations and Sponsorships

 

Sometimes it is attempted to disguise a bribe as charitable donation or sponsorship, therefore, it is also expedient to discuss the aspects of transparency in charitable donations and sponsorships.

 

Article 6.476 of the Civil Code of the Republic of Lithuania establishes the main characteristics of donation (i.e. aid and charity):

  • A gift of property or property right for certain useful purposes shall be deemed to be a donation;
  • No authorisation or consent shall be required for the acceptance of donations;
  • A donation must be used for the determined designation.

 

The legal acts establish two types of possible donations by legal persons: charity and sponsorship.

 

According to the provisions of the Republic of Lithuania Law on Charity and Sponsorship (hereinafter referred to as the LCS):

  • Sponsorship is a voluntary and gratuitous provision of sponsorship items (except where recipients may undertake the appropriate allowed obligations to the provider of sponsorship  in accordance with the procedure prescribed by the Government of the Republic of Lithuania or its authorised institution) by the providers of sponsorship to the recipients of sponsorship [89] for the purposes stipulated in this Law.
  • Charity is a voluntary and gratuitous provision of charity items by the providers of charity to the recipients of charity as specified in Article 6 of the LCS, which is conducted for the purposes and in a manner stipulated in this Law.

 

Charity and sponsorship items shall comprise:

  1. monetary funds;
  2. any other assets, including manufactured or purchased goods;
  3. services provided.

 

Charity and sponsorship items shall not include funds from the State budget and municipal budgets of the Republic of Lithuania, the State Social Insurance Fund, Compulsory Health Insurance Fund and other state monetary funds, monetary resources of the Bank of Lithuania, other state and municipal monetary resources, tobacco and tobacco products, ethyl alcohol and alcoholic beverages as well as items of limited circulation.

 

The purpose of charity:

  • meeting the minimal socially acceptable needs of the recipients of charity;
  • ensuring healthcare;
  • the aid in the liquidation of the effects of war and natural disasters, fires, ecological catastrophes, outbreaks of contagious diseases and epidemics.

 

According to Article 6 of the LCS, the following persons may be the recipients of charity:

  1. the disabled;
  2. the sick;
  3. orphans and children deprived of parental care;
  4. non-working pensioners whose income comprises only pensions and other social benefits;
  5. the unemployed;
  6. persons who have been recognised as having the legal status of victims in accordance with the procedure set out in the laws of the Republic of Lithuania;
  7. families (persons) whose income fails to meet their minimal socially acceptable needs the extent of which is established by local municipalities;
  8. persons recognised as victims of war, natural disasters, fires, ecological catastrophes, epidemics, and outbreaks of contagious diseases in accordance with the procedure established by municipalities.

 

The purpose of sponsorship — to provide sponsorship to recipients of sponsorship  for the purposes of public benefit stipulated in their articles of association or regulations or in the canons, statutes and other rules pertaining to religious communities, associations and centres. The following purposes shall be presumed to be for the public benefit including these activities:

  • international cooperation;
  • protection of human rights;
  • integration of minorities;
  • culture;
  • promotion of religious and ethical values;
  • educational, scientific  and vocational development;
  • non-formal and civic education;
  • sports;
  • social security and labour;
  • healthcare;
  • national security and defence;
  • law and order;
  • crime prevention;
  • adjustment of living environment and development of housing;
  • protection of copyright and related rights;
  • environmental protection;
  • as well as any activities in other fields recognised as selfless and beneficial to society.

 

According to Article 7 of the LCS, the following entities registered in the Republic of Lithuania may be the recipients of sponsorship:

  1. charity and sponsorship funds;
  2. budgetary institutions;
  3. associations;
  4. public organisations;
  5. public institutions;
  6. religious communities, associations and religious centres;
  7. branches (divisions) of international public organisations;
  8. other legal persons whose activities are regulated by special laws and the purpose of the activity whereof is not profit-seeking, while the profit received may not be allocated to their participants.

 

The recipients of sponsorship may also be Lithuanian communities abroad and other Lithuanian bodies or organisations[90] as well as legal entities or other organisations established in the European Economic Area, the purpose of the activity whereof is not profit-seeking, while the profit received may not be allocated to their participants[91].

 

Sponsorship may be provided by:

  • Natural and legal persons of the Republic of Lithuania, except for political parties, political organisations, state-owned and municipal enterprises, budgetary institutions, state enterprises, state and municipal institutions, and the Bank of Lithuania. In accordance with this Law, sponsorship shall be recognised as such if it is provided by enterprises in which the State or municipality has ownership of the shares carrying over 50 percent of voting rights at a general meeting of shareholders and if the said enterprises do not have any tax arrears to the state budget and/or municipal budgets of the Republic of Lithuania or to the funds administered by the State Tax Inspectorate, arrears with overdue deadlines for payment to the budget of the State Social Insurance Fund as well as overdue debt liabilities under loan contracts and other instruments of debt signed with the Ministry of Finance or under contracts covered by a state guarantee.; 
  • foreign states, foreign natural and legal persons, and international organisations.

 

It is important to take note of whether the fact of provision/ receipt  of sponsorship  must be formalised by  an appropriate contract or other free-form documents certifying the fact of transfer of sponsorship, which shall have all the mandatory details established  by the Law on Accounting (a contract  is not necessary if sponsorship is provided not under  the procedure prescribed by  the Law on the Notariate and if  no additional conditions for the provider of sponsorship are established).

 

In order to avoid potential risks of corruption, business organisations should prepare their policies for charitable donations and sponsorships, where, along with the provisions discussed above, it is also recommended that they prepare   the following procedures:

  • prior to the provision of  charity or sponsorship an organisation should  ascertain  that the recipients of charity or sponsorship are not somehow related to politicians, government representatives or other entities authorised to make decisions  on the interests of the donor;
  • after the provision of  charity  or sponsorship — it should attend to  transparency and legitimacy of the use of  charity or sponsorship;
  • publish information on the charity provided at least on the website of the organisation.

 

It is noteworthy that according to the legal acts of the Republic of Lithuania, legal persons may not fund or sponsor political parties and their political campaigns.



[89] A person who seeks to be granted the status of a recipient of sponsorship  must fulfil the requirements laid down  in Article 15 of  the LCS .
[90] The list of Lithuanian communities abroad and other Lithuanian bodies or organisations, which  may be the recipients of sponsorship according to the Republic of Lithuania Law on Charity and Sponsorship, is approved by  Minister of Foreign Affairs of the Republic of Lithuania Order  No. V-265 of 30 December 2011 available here:

https://e-tar.lt/acc/legalAct.html?documentId=d8d141d02cdb11e4a83cb4f588d2ac1a&lang=lt 
[91] This is regulated  by: the Procedure for the Submission  of Documents Proving that the Sponsorship by the Provider of Sponsorship is Provided for the Purposes of Public Benefit Stipulated in the Operational  Documents of Legal Persons or Other Organisations Established in the European Economic Area, Which Are Specified  in Article 3(3)   of the Republic of Lithuania Law on Charity and Sponsorship, to the State Tax Inspectorate approved by Order No. VA-28 of the Head of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania of 17 April 2015, which is available here: https://www.e-tar.lt/acc/legalAct.html?documentId=704b35f0e50211e4a4809231b4b55019&lang=lt