Legal Eye: Promoting good corporate citizenship

Today, in parts of the EU (Germany, Austria and Denmark) the payment of a tithe in support of religion is mandatory, although the effective rate is closer to one percent.

In Poland the payment of a tithe is not regulated. However, the principle remains alive and well, albeit with a few twists, as an inducement to business to act in a socially responsible manner. Moreover, EU regulations also promote good corporate citizenship. Below are just two examples of how business can profit by behaving as good corporate citizens.

Donations

A corporation may donate up to 10 percent of its annual income for a recognized charitable purpose and deduct the amount from its tax base, provided that two conditions are met: (i) the total sum of all donations made in a given year may not exceed 10 percent of the donor's annual income; and (ii) the money donated is actually used to achieve a public good.

The recipient of the donation does not necessarily have to be officially recognized as a charity or public-benefit entity per se, but merely has to use the donation toward achieving a public benefit, such as running a clothing bank or food pantry. As such, a corporation may administer a charitable activity internally and deduct the related costs as if the money had been donated to a third party.

One word of warning. In-kind donations may very well trigger an obligation on the donor to pay VAT on the imputed value of the donated equipment. Yes, such a donation may be structured to avoid payment of VAT, but you should first consult with your firm's accounting department.

Employing the disabled

EU Council Directive 2000/78/EC declares that "discrimination based on religion or belief, disability, age or sexual orientation ... should be prohibited throughout the Community." Three years prior to adoption of this directive and seven years before accession to the EU, Poland enacted legislation to combat discrimination in the employment of the disabled by providing financial incentives to businesses to hire disabled employees. Adopted in 1997, the Act on Social Rehabilitation and Employment of the Disabled provides various financial incentives to business to hire the handicapped.

An employer may obtain up to 130 percent reimbursement of an employee's annual salary from the government in the case of a severely disabled employee; however the 130-percent is calculated against the national minimum wage. The salary of an employee with a moderate disability will be reimbursed at the rate of 110 percent, followed by 50 percent reimbursement with respect to an employee with a slight disability. Again, both calculations are against the national minimum wage.

In order to qualify, the employee must be recognized by the government as possessing a disability, as evidenced by being listed on a register maintained by the National Fund for the Rehabilitation and Employment of the Disabled. Moreover, in order to receive such reimbursement the company must have a work force of at least 25 employees, of which at least six percent must qualify as being disabled. Companies with a work force of less than 25 employees who employ one or more disabled employees will also be entitled to reimbursement. However, the amount of compensation will be reduced by a factor of 30 percent.

Paul Fogo is a senior attorney with Miller, Canfield, W Babicki & Partners; fogo@pl.millercanfield.com