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We present the tax saving opportunities of theatre sponsoring.
Since the beginning of 2009, the sponsoring of Hungarian theatres has not only been a generous means of promoting underfinanced Hungarian cultural life but with the conscious planning of a new corporate tax allowance it may generate considerable savings.
Our offer is for the organizations, which will probably have considerable corporate tax payment obligation towards the central budget on their operation as this form of saving may be realized as a tax allowance.
The saving relates to the 9 percent corporate tax rate applicable in 2018 on a tax base in excess of this amount and is calculated on the basis of the sponsor’s profit.
On the one hand, the amount of the theatre support decreases the profit of the sponsor as an expenditure, which also reduces the sponsor’s corporate tax liability; on the other hand, the amount of the support is also deductible form the reduced corporate tax amount. A company may apply for tax allowance up to 70 percent of the corporate tax payable in the given tax year. This does not mean that the taxpayer may not provide support in a higher amount. It only means that the rate of application is connected to the tax payable in the current tax year. The taxpayer may apply the tax allowance in the 8 years following the year of granting.
If the support is provided after 1 January 2014, supplementary support shall be paid in the tax year of granting to the eligible ministry or to the supported performing arts institution. The rate of the supplementary support is at least 75 percent of 9 percent of the tax allowance, which may be applied based on the support granted.
Deducting the amount of the supplementary support and the administration service fee, a saving of maximum 2.25 percent of the granted support amount can be realized. The saving manifests in the company’s profit after tax and may therefore even be paid to the shareholders in the form of a dividend.
Let us suppose that the organization’s corporate tax liability for the given year is as follows:
|tax base based on profit:|
550 000 000
|expected corporate tax liability:|
49 500 000
If the taxpayer supports an eligible performing arts institution with an amount of HUF 32 596 000, its corporate tax liability will change as follows:
|tax base without support:|
550 000 000
maximum support applicable:
-32 596 000
new tax base:
517 404 000
calculated corporate tax base:
46 566 000
-32 596 000
new corporate tax liability:
13 970 000
The supporter would also have to pay supplementary support in the tax year of granting to the eligible ministry or the supported performing arts institution. This amount may not be considered as an expenditure in the calculation of corporate tax:
32 596 000
2 200 230
The saving achieved as a result of the granted support is as follows:
35 530 000
expenditure due to support:
-32 596 000
-2 220 230
fee of official certificate of sponsorship
|rate of saving:|
The saving of hardly 2% measure that may be realized based on our example may seem slight but we must not forget the other tax-saving opportunity that lies in theatre sponsoring, namely the fact that the lower corporate tax liability also reduces the amount of the corporate tax advance payable in the following one year period. In the case of our example, corporate tax advance of only HUF 1 164 000 would be payable monthly instead of the monthly tax advance of HUF 4 125 000 payable originally.
If the tax base of the taxpayer without the support is between HUF 55 562 000 and HUF 196 837 000, quarterly instead of monthly corporate tax advance payment obligation can be achieved through theatre sponsoring.
Contact our expert directly or send us an offer request!