Theatre sponsorship - Saving in four acts

In this leaflet, we present the tax savings opportunities of theatre sponsoring as one of the four possible tax planning methods relating to theatre sponsorship.

Why do we as a tax consulting firm recommend theatre sponsoring?

Since the beginning of 2009, the sponsoring of Hungarian theatres has not only been a generous means of promoting underfinanced Hungarian cultural life but with the conscious planning of a new corporate tax allowance it may generate considerable savings.

Who is our offer for?

Our offer is for the organizations, which will probably have considerable corporate tax payment obligation towards the central budget on their 2012 operation as this form of saving may be realized as a tax allowance.

How much saving can be achieved on theatre sponsoring?

The saving relates to the 10 percent corporate tax rate applicable in 2012 on a tax base of up to HUF 500 million and the 19 percent corporate tax rate applicable in excess of this amount and is calculated on the basis of the sponsor’s profit. On the one hand, the amount of the theatre support decreases the profit of the sponsor as an expenditure, which also reduces the sponsor’s corporate tax liability; and on the other hand, the amount of the support is also deductable form the reduced corporate tax amount. The arrangements we offer generate savings amounting to 10, or in certain cases even 19 percent of the amount of the support granted for our clients, which manifests in the company’s profit after tax and may therefore even be paid to the shareholders in the form of dividend.

How is the 10 or 19 percent saving structured?

Let us suppose that an organization expects the following corporate tax liability for 2012:

If this organization supported theatres with an amount of HUF 7 000 000, its corporate tax liability would change as follows:

The tax reduction achieved by theatre sponsoring is structured as follows:

10 percent saving can be achieved on a tax base of up to HUF 500 million and 19 percent on the part of the tax base exceeding HUF 535 million if the sponsor intends to use the full tax advantage available. The rate of the saving increases to 19 percent gradually for the part of the tax base between HUF 500 and 535 million.

Let us see how the tax saving evolves if the company’s corporate tax base is above HUF 535 million:

If this organization supported theatres with a donation of HUF 36 000 000, its corporate tax liability would change as follows:

The tax reduction achieved by theatre sponsoring is structured as follows:

What do you need for saving?

1. choosing a theatre, which meets the prescribed criteria,
2. conclusion of a sponsorship agreement containing the required content elements,
3. payment of the support within a year and
4. obtaining of an official certificate of sponsorship.

Why should you engage us with the administration of your theatre sponsorship?

1. Our experienced experts help you in the assessment of your expected corporate tax liability and determine the support amount that is optimal for you.
2. A tax allowance may only be applied on the basis of a certificate of sponsorship but these certificates are only issued for an amount calculated based on certain revenues of the supported theatre in the order of receipt of the certificate requests. Our company is able to check the data qualifying for total deduction for a large number of theatres on the basis of which we can determine the amount for which certificates may be issued based on the current revenues of theatres. This way we can guarantee that our clients will be able to apply tax allowance on 100 percent of the support they grant to theatres.
   
3. We draft the sponsorship agreement incorporating the prescribed content elements and, if necessary, we also coordinate the conclusion of the agreement.
4. We administer the issuing of certificate of sponsorship for our client during the year also.
5. If requested, we obtain the consent of the theatre our client intends to support to an independent expert’s review of the theatre’s actual revenues so that our clients can ascertain the authenticity of the data presented.
6. We take care of the entire administration relating to the tax allowance so our clients do not have to struggle with the obstacles to the application of the tax allowance.