Prominent team sport sponsorship with tax donation

The sponsoring of sprominent team sports is not only an element of social responsibility of market players any more but an opportunity the conscious planning of which may generate substantial savings and tax advantage.

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Gábor Fajcsák, RSM Hungary, Tax Manager, Qualified International and Value Added Tax Expert

Gábor Fajcsák

Partner, Head of Tax Services

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Who is our offer for?

Our offer is for taxpayers who expect a substantial corporate tax payment obligation based on their current tax year expected profit and are to pay a higher amount of tax advance or corporate tax top up. 

Tax donation - the cost-effective form of tax saving

If you would like to support a prominent team sport and reduce your corporate tax liability without deteriorating your company's profit, you have to choose tax saving by tax donation. 

Tax donation may represent a tax saving at a rate of up to three times higher for your company than the saving you can achieve if you support spectator team sports applying a traditional tax credit. 

The company's profit (EBIT) remains the same in the case of a tax donation as, unlike in the case of support in the form of a tax credit, the tax donation is not an expenditure. The donation is provided from the amount of tax paid, which means that it qualifies as tax for both Hungarian accounting and IFRS purposes. The tax credit received with regard to the amount of the tax donated will qualify in the following year as income not included in the tax base. Therefore, unlike in the case of the former support form, tax donation does not affect profit in the current year in any way and improves profit in the following year. 

Key elements of tax donation

A tax credit of 6.49% can be achieved in the case of donating your tax advance or tax advance top-up while the rate of corporate tax credit accepted by the tax authority in the case of donation in the annual tax return is 2.16%. 

Limits to the amount of the donation: 

  • maximum 50% of the interim tax advance. 
  • in the case of year-end tax advance top-up, maximum 80% of the tax liability expected at the time of the top-up and maximum 80% of the actual liability declared in the annual corporate tax return. 

The donation can be made to multiple recipients and can be divided in terms of its amount and period. The donation is disbursed to the supported organization by the tax authority and therefore has no risk. 

12.5% of the donation granted for sport development qualifies as supplementary support. Prominent team sports cannot be supported within the same tax year in the form of both tax donation and traditional applying of a tax credit. 

Donations can only be made by taxpayers free of any public debt. 

Documents required for the tax donation (among others): 

  • selection of a sports organization with an approved sports development program satisfying requirements; 
  • stating in the sponsorship contract that the sponsored team is not obliged to provide any service in return; 
  • obtaining of a support certificate issued by the sports administration body or sports association; 
  • substantiation of no public debt; 
  • submission of a declaration on the tax donation to the tax authority. 

Who can this support be offered to?

Support can be offered to the following organizations operating in prominent team sports under the titles listed below: 

 FederationAmateur
sports club, sports school
Professional sports club

Non-profit
foundation

Sporting body (Hungarian Olympic Committee – MOB)

Recruitment - training tasksXXXX 
Personnel-related expendituresXXXXX
Tangible assets investments, renovationXXXX 
Infrastructural development to comply with safety requirementsXXXX 
Tasks associated with training, educationXXXXX
Sponsoring expenditures associated with competitions X*       X* 

* Through the federation

Why should you opt our service in relation to the administration of prominent team sport sponsoring?

  • Our qualified experts help you in the assessment of the amount of your expected corporate tax liability and in determining the optimal support amount and your support options. 
  • Our company helps in determining the amount of support for which the certificate can be issued under various titles based on the sports development program of the organization to be supported, which guarantees for our clients that they can apply tax credit on 100 percent of the support they provide. 
  • We can take care of the total administration of the support. We prepare the sponsorship contracts containing the necessary elements and, if required, coordinate the conclusion of the contract. We also prepare the necessary forms to be filed with the Hungarian tax authority for the donation. 

If you have any question, please don't hesitate to contact our experts!

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