In December 2018 the government limited the annual amount for supporting spectator team sports with corporate tax allocations to HUF 50 billion in a decree, then decided to increase that amount back to HUF 125 billion in March 2019. What consequences will this have? We take a look in this article.
According to Government Decree 318/2018 the amount for supporting spectator team sports with corporate tax allocations, namely the overall approved sum of support to be granted for sports development programmes in the funding period of 2019/2020, shall not exceed HUF 50 billion (roughly EUR 154 million). Hungarian sport associations of spectator team sports had until 15 January to submit their development programme proposals and the requested funding for them to the Ministry of Human Capacities. In line with the same Government Decree, the government would have had to notify the sports associations about the allocation of the HUF 50 billion (roughly EUR 154 million) by 25 February 2019. By now the associations would have had to publish these amounts on their websites too.
Supporting spectator team sports with corporate tax allocations now possible up to last year’s amount again
At the beginning of February the Minister of the Prime Minister’s Office announced at a government briefing that the HUF 50 billion (roughly EUR 154 million) limit will be raised to HUF 125 billion (roughly EUR 324 million). The amending decree number 39/2019 was published on 7 March, breaking down the HUF 124.9 billion into HUF 44.2 billion (roughly EUR 136 million) for investment and HUF 80.7 billion (roughly EUR 249 million) for operational purposes.
This way, the ceiling for corporate tax allocations has risen to last year’s level, but the breakdown indicates that this time the government wants to shift the focus from constructing sport facilities to covering their operating costs. This is also evident from the fact that from 2019 onwards, corporate tax allocations can be used to finance operating costs too. It remains to be seen though how long it will take to realise the sport investments of around HUF 300 billion (roughly EUR 926 million) mentioned by the Prime Minister, which have already been granted, but not yet approved due to the lack of sponsors, bearing in mind this year’s limit of HUF 44 billion (roughly EUR 136 million) and the fact that further investment proposals were submitted by 30 April 2019.
Tighter control of use of funds still in place
The Hungarian decree mentioned above and promulgated last year on supporting spectator team sports with corporate tax allocations prescribed stricter control mechanisms for the use of funds, which are still in place. Pursuant to Section 13 “if a body controlling the use of funds supporting spectator team sports finds in the accounts or during an on-site inspection that invoices to be accounted on specific grounds during the approved sport development programme or other credible accounting documents are not in harmony with the programme element supporting the professional realisation of the approved sports development programme as per the sponsor’s memorandum of understanding, with due consideration of the estimated market value of the items defined based on the benchmark system for the given sport that can be accounted on the respective grounds, the control body
a) can request a detailed tax inspection from the Hungarian tax authority with regard to the sponsor and the mediator, and exclude the sponsor, and
b) may ban the beneficiary from the system of spectator team sport allocations if they are deemed to have participated in bad faith.”
The amendments above allow us to conclude that 2019 will be an exciting year too as regards supporting spectator team sports with corporate tax allocations. This year it is even more advisable for Hungarian companies to decide in time whether they wish to allocate part of their corporate tax to support spectator team sports, and save somewhat more than 5% of their corporate tax in the form of a tax credit as a result. If yes, the tax adviser team of WTS Klient Hungary is happy to help navigate through the detailed rules. Please feel free to contact our colleagues.