In order to achieve the highest available tax credit, most companies applied the concept of tax donation when fulfilling their year-end corporate tax top up obligation as in this case, they could offer their corporate tax in an amount of up to 80 percent of their expected tax payment obligation and achieve 6.5-7.5 percent tax credit, tax advantage with the donation.
In contrast, in the case of offering in the annual corporate tax return, the rate of the tax credit is only 2.5-2.16 percent. Therefore, with the elimination of the corporate tax top up obligation, taxpayers may lose a tax advantage of substantial amount.
How to schedule donations optimally?
After the elimination of the option of sponsoring performing arts organizations, sponsoring of spectator team sport organizations is still available and should be used because of the tax allowance. Please note that the sponsoring certificate necessary for the donation is only provided in the case of organizations having an approved sport development program.
Legal regulations provide for the option of donating from the tax advance, which makes companies eligible for the increased amount tax credit (of 6.5 percent). At the moment, taxpayer can make donations for up to 50 percent of the tax advance, which will be 80 percent next year. The donation process should be started as soon as possible as there is still time for tax advance donation declarations regarding the August-December period and a higher tax allowance can be achieved by donating companies for this part of the donation.
From next year, it will be best to offer donations throughout the year from the monthly or quarterly tax advances in order to reach higher tax allowance.
Tax saving opportunities will not be affected by the legislative changes substantially for the companies reacting quickly.
We must point out that the summer tax package still allows companies this year to apply the legal regulations relating to topping up for their 2019 tax year, which may be best for the companies intending to apply tax donation as in this case, they can top up the amount offered this year to 80 percent of their annual tax payment obligation (during the year, they will only have the chance to do so up to 50 percent) and realize the substantially higher rate of tax allowance on this part also. Taxpayers can do so by filling out the declaration until the deadline for the filing of the top up return at the latest. It is important that this solution comes with additional administration and the payment obligation relating to the top up.