However, the timing of the allocation is crucial. An annual decree of the Hungarian government determines a national support cap each year, and once this cap is exhausted, the allocation option is no longer available in that tax year. For example, since the total amount of approved sports development programmes exceeds this annual cap, only those sponsors and sports organisations will be eligible to apply CIT allocation who initiate the request for issuing the support certificate and conclude the support agreements in time.

What is CIT allocation about?

The essence of CIT allocation is that the company does not try to reduce its tax retrospectively through costs or allowances, but directs a portion of its payable corporate income tax to the beneficiary organisation instead of the budget. The allocated amount is already tax (a tax advance) that the company would normally pay to the Hungarian tax authority. The only difference is that, with state approval, this amount can be redirected to specific public‑interest purposes. This mechanism is particularly advantageous because the support does not appear as an expense, does not deteriorate the company’s financial result, and still provides a direct tax credit without creating additional tax liabilities.

To what extent, when and for what purposes can CIT be allocated?

Under the applicable rules, the upper limit of the allocation is 80% of the corporate income tax. This applies to both the tax advances paid during the year and the final annual CIT liability.

A company may decide to:

• use the allocation option during the tax year, or
• allocate a portion of its tax when submitting the annual CIT return.

The earlier the allocation takes place, the more favourable the amount of the tax credit may be. In addition, the support caps restrict the possibilities of allocation as the tax year progresses. For this reason, forward‑looking companies launch the administrative steps of the allocation process already at the beginning of the year.

The support may target two main areas:

• Support for spectator team sports – from youth development to the improvement of sports facilities, it can be applied for a wide range of purposes.

• Support for film productions – in this case, CIT allocation plays a role in financing Hungarian and international film projects.

Although the two areas differ in their professional background, from a tax perspective they operate on similar principles. At the same time, administrative details and project selection procedures may differ significantly, and film support generally allows for a slightly higher tax credit than sports support.

Conditions of CIT allocation

To ensure that the allocation is valid and enforceable, several conditions must be met:

• Absence of public debt: this is a fundamental requirement. The taxpayer may use the allocation only if it has no overdue liabilities towards the Hungarian tax authority.

• Approved programme / project: the supported organisation must have an approved sports development programme or film project for the given year.

• Support agreement and certificate: the agreement must clearly state that the company receives no consideration for the support. The beneficiary organisation then issues a certificate confirming the receipt of the support. These documents form the basis for the company’s lawful allocation of corporate income tax to the Hungarian tax authority.

It is important to emphasise that CIT allocation is not automatic. If the allocation is not made in the correct form or by the applicable deadline, the tax benefit may be lost. Another common mistake is that companies do not consider the 80% cap in advance or fail to verify the eligibility of the supported organisation in time. With proper preparation and professional guidance, these errors can easily be avoided.

Why is allocation worthwhile?

One of the major advantages of CIT allocation is that it does not worsen the company’s financial indicators, while providing real tax savings. It can also strengthen corporate reputation: the company contributes to the achievement of sports or cultural objectives while consciously and legally optimising its tax burden. This duality – financial rationality and social value creation – makes CIT allocation one of the most attractive tax planning tools for profitable companies in 2026.

CIT allocation is not a “trick”, but a legally regulated option that benefits companies that plan ahead, are aware of the deadlines and know what, when and under what conditions must be done for the tax advantage to be fully realised. If you need support with allocating your corporate income tax or with optimising your company’s tax position, feel free to contact the tax team of WTS Klient Hungary.

This article provides general information and does not constitute advice.

A CIT allocation in Hungary: pay attention to timing! bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

Corporate tax allocations are an important part of corporate tax returns

As we have reported several times already (most recently in this article), when filing corporate tax returns and calculating the final tax liability for the previous year, companies have the option to support some form of spectator team sport with up to 80% of their corporate tax. Spectator team sports include football, handball, basketball, water polo, ice hockey and volleyball.

Many companies use their tax advances during the year for their corporate tax allocation. In such case, the sum of the actual tax to be paid simultaneously with the filing of the corporate income tax return and tax advances already paid cannot exceed 80% of the final corporate income tax liability.

Corporate tax returns to be submitted by 31 May also include information on the frequency and amount of corporate tax advances that companies will be liable to pay from July 2022 to June 2023. With knowledge of these advance payments, companies can subsequently decide on a separate form whom to allocate up to 80% of the monthly or quarterly corporate tax advance to.

Tax credit: 7.5% or 2.5%?

In addition to supporting a noble cause and promoting the next generation of sportsmen and women for example, businesses also receive a tax credit for their tax allocations. This amount is credited to your tax current account once a year, in July, and can be used against future tax liabilities. The amount of the credit is 7.5% of the donated amount if the allocation was made from a tax advance, and 2.5% if the allocation was made from the tax payable at the end of the year.

If you have not yet made use of the option to allocate part of your tax advance in 2021, you should definitely donate up to 80% of your 2021 corporate tax now, before the 31 May deadline for filing corporate tax returns, as this is the only way to benefit from the 2.5% tax advantage for 2021. However, for monthly or quarterly corporate tax advances payable in 2022, it is worth starting with the allocations now as the tax credit available this way will be exactly three times the size of the tax advantage of the amount pledged after the year-end.

If you are thinking about making a tax allocation before the filing deadline for corporate tax returns, or at any time during the year, we are happy to help you calculate the tax advantage, complete the form, or even find an appropriate spectator team sport to support. Please do not hesitate to contact the tax advisers at WTS Klient Hungary.

A Deadline for filing corporate tax returns fast approaching bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

Forms of corporate tax support in Hungary 

Hungarian companies can basically choose from two options if, in order to obtain some tax benefit, they want to support an association operating a youth team in one of the six spectator team sports (football, handball, basketball, water polo, volleyball and ice hockey). The direct support which seems simpler and can be given at any time of the year, and which is capped at 70% of the corporate tax amount, results in a corporate tax saving totalling 2.25% of the support. The other form is the corporate tax allocation available up to 80% of the corporate tax, which is transferred by the National Tax and Customs Administration from the company’s monthly tax advance paid according to the general rules, or from the annual tax specified in the annual tax return, and it results in a corporate tax saving of nearly 6.6% (in the case of monthly tax advances) or around 2.2% (in the case of an allocation made parallel to the annual tax return).

At first glance, the direct support seems a simpler solution with a similar tax benefit. Yet why do a significant number of companies still opt for the corporate tax allocation method in Hungary?

The answer is the difference in the accounting of the two methods. The direct support diminishes the company’s profit before tax as an other expense, so it results in lower EBIT, EBITA and EBITDA figures in a given year and only “recovers” the amount of the support at the level of profit after tax, “recognising” the higher value achieved through the corporate tax allowance.

By contrast, the fact of the corporate tax allocation does not even appear in the financial statements for a given year. The allocated amount “remains hidden” in the corporate tax and the achieved tax benefit even increases the company’s EBIT, EBITA and EBITDA figures in the following fiscal year. However, the aforementioned indices are used to measure profitability at most of the companies, they affect goodwill and senior staff are also rewarded on this basis. This is primarily why corporate tax allocation became almost the only method applied by large multinational and Hungarian companies. 

Contradictions in deadlines for corporate tax and support for associations in Hungary 

A significant proportion of companies close their accounts for a financial year that coincides with the calendar year, thus the deadline for their corporate tax return falls at the end of May. Although you can also make an allocation against your monthly tax advances, and indeed the tax benefit available is three times that of an allocation made at the same time as your annual tax return, the majority of large companies still only award the support once a year, in time for the end of May deadline, after the assessment of dozens of applications from associations. To this end, however, they ask associations to attach to their application the resolution of the relevant sports federation necessary for the disbursement of the support. But when are these resolutions issued, and for which period do the associations have to account for the permitted amount of support?

The resolutions of the sports federations are issued in April-May after the deadline for the submission of the support requests of the associations at the end of February, and the authorised costs can be accounted for in the season between 1 July of the given year and 30 June of the following year. Associations are therefore very unlikely to have a new resolution for the end of May tax allocation of the companies, and they can only submit applications for the amounts specified in the resolutions passed in the previous year. They only have a realistic chance of getting the support 9-10 months after receipt of the resolution. Additionally, they will only receive the money on the 15^th day after the deadline for the end of May tax returns, i.e. 15 June, which means they have only 15 days left until the end of the season, i.e. 30 June, to account for it. There is no alternative, they must apply for a one-year extension of the accounting period, so only 16 months later can they finally start implementing their sports program submitted in February of the previous year.

Proposal for solving the problem arising in respect of the corporate tax allocation

This problem arose when the deadline of 20 December for the oft-criticised corporate tax top-ups was cancelled in Hungary. As a tax expert I fought long and hard for the cancellation of this pointless rule, and I am not about to take steps to reinstate it. I only propose that companies be given the chance to decide on the lump-sum allocation of 80% of their tax advances paid during the year either by the current deadline of 20 December or by an earlier date in the autumn, preferably ensuring a tax benefit that is identical to that available from the allocation from the monthly tax advances. Thus, companies could collect the applications of the associations, which are based on the resolutions already issued by the sports federations, until the end of summer/beginning of autumn, and with a year-end disbursement the associations would have enough time to spend the amount until the end of the season, i.e. by June of the following year. At the same time, the deadline for the corporate tax allocation still unused and calculated based on year-end data, and the deadline for allocations from companies not paying tax advances but realising a high profit in the given fiscal year, and thus paying significant corporate tax, would remain the end of May, as in former years.

Our tax advisers have been drafting proposals to streamline the Hungarian tax regime since our company was formed to facilitate and optimise the taxation of our clients. We have successfully pushed our proposals through the Hungarian tax administration systems and decision-makers several times. If, having seen our results, you think we could be of help for your company in tax matters, or if you have an opinion on taxation and would like to have your proposals regarding Hungarian taxation policy heard by the government, please do not hesitate to contact us.

A Timing difficulties of corporate tax allocations in Hungary bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

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.

A News on supporting spectator team sports with corporate tax allocations bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.