This is the first year when companies, i.e., specific corporate income tax payers, can support spectacular team sports with a special tax instrument and benefit from it themselves too.
The Act on Sports Support (Act LXXXII of 2011) contains various preferences, the majority of them entered into force in July 2011, but its practical impact can be felt from the autumn.
In the new system, the state will mediate support through the tax of profitable companies instead of providing it directly. In the above system, any business providing support free of charge will enjoy a double tax benefit. On the one hand, any support, donation, transferred funds and the book value of assets or cost of services provided free of charge for this specific purpose is an expense incurred in the interest of the business. On the other hand, if the requirements are fulfilled, tax credit can be used up to the amount of the support based on a support certificate. In the given year, this cannot be higher than 70% of the corporate income tax payable for the tax year. However, it can also be used in the subsequent 3 tax years if 70% of the tax paid by the enterprise for the given year does not cover it.
The following example illustrates the support of spectacular team sports, in which for simplification purposes we assumed that already the 19% corporate income tax rate is applied.
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With sports support
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Without sports support
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Taxpayer’s profit before taxation
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1000
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1000
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Earmarked support amount
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100
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0
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Tax base
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900
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1000
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Tax payable
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(900 X 0.19) – 100 = 71
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1000 X 0.19 = 190
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Payments made (support + tax)
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171
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190
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Savings
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19
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0
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Profit after tax
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829
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810
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The above example also illustrates that businesses liable to pay corporate income tax have an absolute advantage, and also support an important objective of the society.
The sports support relates to the following spectacular team sports: football, handball, basketball, water polo and ice hockey. The new Act fulfils the EU principle related to sports: the state can provide assistance funding leisure and university sports and junior teams, but the above support cannot be applied to professional sports. The beneficiaries of the support, the support title, the procedure applied to support certificates and the blacklist are defined in detail in the related modification of the Corporate Income Tax Act.
Sports support is not only an important objective of the society, it is also a tax planning tool, because the estimated tax credit amount and its impacts can be projected well right from the beginning of the year based on the preliminary contracts.
Our advisers will be happy to help you in the exact description of the options and rules and assist you in fast and professional practical implementation during the year-end support boom as well as in the preparation of the related tax plans. (tax@bdo.hu; 1/235-3010)