Company Tax

Company Tax Facility

1. § (1) Point 9. of paragraph 2. § (1) of the Governmental order number 107/2011. (VI. 30.) (further referred to as: R.) on the issuing and use of the supporting certificate ensuring the supports for spectacular-team sports, as well as on the accounting of the support and the control of accounting and on the rules of its payback shall be replaced by the following regulation:

These so-called “spectacular-team sports” shall be football, handball, basketball, water polo and ice-hockey. The sport branch organisations receiving the supports are: the Sports Specialised National Association of spectacular-team sports, any sports organisation operating as a member of the above association or any foundation of public interest established in order to develop spectacular-team sports.

Companies will become eligible for double tax facilities after their support given to any spectacular-team for they cannot only decrease the amount of payable tax but the law also allows them to account the amount of the support as a valid cost item. The tax facility can only be applied on the basis of a relevant certificate, which is to be issued by the specialised National Association of the subject spectacular-team sport upon the application of the professional or non-professional sports organisation or foundation of public interest subject to receiving the support after the relevant sports development program of the supported organisation has been approved. The range of use of the support includes grassroots development, operational expenditures of the teams or infrastructure development.

The issue of the support certificate will apart from the approval of the sports development program, be based on other conditions such as the supported sports organisation cannot have any public overdue and needs to have accounted for the state supports received earlier. Further to all that, the sports organisation shall not be subject to bankruptcy proceeding, liquidation or compulsory execution, its operation shall not be suspended by the court, there shall not be any proceeding subject to the termination of the organisation and shall not be under the effect of legal exclusion from any range of supports.

In case of support given to non-professional and professional sports organisations, a further relevant prescription is that the organisation shall enter one of the competitions, obtain right to enter one of the competitions or, based on a cooperation agreement concluded with an institution of higher education, supply for organised sports activity.

In case of supporting real estate investment or its renovation with a sporting aim, the certificate shall be issued based on some other special conditions to meet. These conditions include e.g. that the subject of the investment shall be put into operation within four years following the issue of the certificate is issued. The total value of the support certificates shall not exceed – 90 percent of the grassroots development expenditures as per the sports development program of the supported organisation; – 50 percent of their personal expenditures, – 60 percent of the costs of general training/education under the scope of educational tasks, – 25 percent of the cost in case of specialised training and – 70 percent of the value of investment, renewal in the subject year. The remaining amount (% in this case) shall be put to the disposal of the sports organisation or its operating body.

In essence, the sports organisation shall decide at their discretion what to apply for within the above range of conditions and in what amount; it is practically only the amount of their own source and the company tax of the cooperating company to be born.

Should a company select to transfer their due company tax to a sports organisation, it is mutually worth while for both the company and the subject sports organisation.

A simple example: supposing that the payable company tax of a company is HUF 10 million and the company offers the amount to a sports organisation supporting an investment of tangible assets then, in case of a 70 % support i.e. HUF 7 million will be disposed to the sports organisation. The remaining HUF 3 million still payable to the state shall be reduced to be HUF 2.3 million for 10% of the HUF 7 million may be kept with the company to cover own investments. In summary: out of HUF 10 million tax = HUF 7 million support + HUF 2.3 million tax + HUF 700 thousand remaining as own source for own investments. Therefore the support is mutually advantageous.

Speaking in numbers, The Hungarian Football Federation has received the applications from 1,078 sports organisations in the total amount of HUF 30 billion, of which the federation is to approve approx. HUF 20 billion. 6 of the applications were over HUF 500 million, which shall be subject to a separate approval of the executive board of the federation.

The amount of support the Csákvári Torna Klub’s football branch applied for is HUF 122 million, of which HUF 20 million was applied for grassroots development, while HUF 102 million for infrastructure development. The infrastructure development part of the application is of 70% financing that is the own source is 30%, while the rate of the grassroots development part application is 90% – 10%.

The application itself contains purchasing of sport kits primarily for the youth teams of different ages, renovation of dressing rooms in the club as well as the construction of an irrigation system, lighting modernisation and construction of an artificial cover-pitch.