Spectator sports incentives in corporate income tax regime
Tax incentives regarding the financial support of certain spectator sport organization (ice-hockey, handball, basketball, football, volleyball and water polo), resulting tax savings for taxpayers, are still available in 2021.
Below, we summarize the most frequently asked questions regarding the two possible forms of support.
Which organizations can be supported?
- National Sports Association,
- Amateur and professional sport club operating as member of the Association – including sport schools too,
- Nonprofit organization established for the development of spectator team sport,
- Hungarian Olympic Committee.
What kind of support shemes exist
In case of Direct support (’Sport subsidy’), the sponsor transfers the financial support to the organization directly. In case of Tax allocation, the sponsor allocates its tax advance payments and/or year-end tax liability payable for Tax Authority.
When can it be provided, and how does it influence the profit and tax liability of the sponsor?
Sport subsidy – possessing the sponsorship certificate – can be provided at all time during the tax year and is deducted from the profit before tax. The tax incentive can be utilized on the specific part of the subsidy.
On the contrary, Tax allocation does not decrease the sponsor’s year-end profit, but the sponsor provides support from its interim tax advance payment(s) and/or year-end tax liability. Regarding the allocated tax advance (and/or tax) payments, the sponsor is eligible for tax credit which decreases next year’s tax liability. The amount of tax credit shall be recorded as other revenue with which the corporate income tax base can be decreased.
How much is the extent of tax savings?
In case of Direct support, the maximum amount of attainable saving is 2.25% of the financial support, while in case of Tax allocation the effective saving is 2.16-6.5% (maximum intensity can be reached by allocating solely the tax advance payments).
What kind of consideration is the sponsor entitled for?
Sport subsidy consists of two parts: support and supplementary sport development support. (The amount of the latter is 75% of CIT liability reduction reached after the support) While the sponsor cannot expect any consideration in return for the financial support, supplementary sport development support can be provided under sponsorship agreement for which it can receive consideration.
Regarding Tax allocation 12.5% of the support qualifies as supplementary support, related which grant contract or sponsorship agreement can be concluded. Applying the latter contractual form, the sponsor is entitled for consideration.
Should you have any further questions in this respect, please do not hesitate to contact us.
