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The Corporate Tax Program (TAO)

The system of corporate tax-breaks for those promoting sport ensures the possibility of attracting substantially greater funds into spectator sports, football included. The aim is for as many amateur footballers as possible to play the world’s most popular game in the best circumstances possible.
As per the plans of the Hungarian Football Federation and as a result of this financial backing, more and more are beginning to play football, which in the long term can lead to football becoming more successful. Numerous clubs, thanks to the resources brought in via the TAO programme, should in the future be able to stand on their own feet financially.

Legal background

Hungarian parliament modified the law regarding sports on 27 June 2011, as well as Law LXXXI of 1996 on Corporate Tax and dividends.  This makes it possible to support five spectator sports (football, handball, basketball, water polo and ice hockey) up to a limit of 70% of corporate tax obligations. It makes sense to provide this support since those businesses that do so receive a corporate tax break as well as a smaller tax-base break. Details of the tax breaks can be found in the government decree published on 1 July 2011 (the law and the decree can be found on the right, under the title Related Regulations). Every profitable, corporate tax-paying Hungarian business may provide support (except for the state-owned TAO entity). The total of the support (grant) is, in the interest of the business activity, qualified as an expense - extraordinary expenditure - thus it does not increase the corporate tax base. A so-called complementary support is attached to the grant, through which further funds find their way into football.

Benefits of supporting

Companies or organisations which take the opportunity to support can write off the amount they put in from their taxable income and may also take advantage of a tax-break equal to the support amount.  That is, the companies can claim two kinds of tax-break:
- they can write off the support amount as an expense (reducing their taxable income);
- from the corporate tax paid following on from their reduced tax basis, the amount of support paid in can also be deducted;
- complementary support must be provided to football in an amount of up to 75% of the amount of savings deriving from the reduction in the tax base.
Overall this is a form of investment which derives real profit, underpinned by the undertaking of specific social responsibility with the goal of directly and indirectly aiding the value of the sport.

Support step by step

Step 1: Sport development programme submission

The first step for a company entitled to support is to submit a so-called sport development programme to the federation (MLSZ), in which they present the programme they wish to implement in the coming sporting year, along with the necessary support amounts required for its implementation (tender submissions can be made electronically between 1 March and 30 April each year). This programme is judged – as the authority – by the MLSZ, which may approve in part or in whole in the event of the existence of the content- and formal requirements. The sports organisation receives a declaration pertaining to the approval which contains the receivable support amount. A minimum of 10% of the support amount must come from their own funds, depending on the legal title of the expenditure.

Step 2: Search for a backer

The next step sees the sports organisation search for a backer. The backer may be any company which does not have any tax arrears, and which has a positive tax balance. The sports organisation and the backer sign a contract concerning the amount of support given, as well as the payment conditions, and on the basis of this submit a support acknowledgement request via the aforementioned electronic system. The MLSZ shall issue the acknowledgement to the sports organisation and the backer within eight days.

Step 3: transfer of funds

The backer, on the basis of the issued support acknowledgement, performs the bank transfer of the support amount.

Step 4: The tax-break

The backer may, at the earliest from the obligatory 20 December upload, deduct the social security tax-break due from the support amount or may request reimbursement in their submission of 31 May, providing that they transfer the support amount by 31 December. Taking advantage of the tax-break is only possible in the financial year in which the transfer takes place. The tax-break can only be claimed following the financial payment of the support amount: should the tax-break exercisable not cover the necessary reserves, the tax-break may be spread over a further three years.

Organisations which may be supported

National associations of spectator sports, in the current instance the national football authority, the Hungarian Football Federation and its member sports organisations are eligible for support:

- amateur sports clubs operating as a member of the federation,
- Sports schools and student sports clubs operating as a member of the federation,
- professional sports clubs operating as a member of the federation,
- public foundations established for serving the development of football,

Fields which may be supported

Organisations which receive the support may only use it for the development of specific areas:
- provision of youth-football and educational tasks,
- aiding expenditure related to participation in competitions,
- expenditure related to personnel,
- investment in material assets, renovations, including the development of infrastructure pertaining to security requirements,
- tasks related to training courses.

The total amount of support is not permitted to exceed the below values which appear in the approved sports-development programme of the supported sports organisation:

- 90% of the expenditure related to youth football development and competition participation in the given year,
- 50% of the expenditure related to individuals in the given year (in the event of a professional sports organisation a so-called, but minimal/negligible amount may be given as support),
- 70% of the value of investment, renovation- and infrastructure development for the given year,
- 60% of expenditure related to general training and training tasks; in the event of professional training, 25%.

It is important to understand that TAO support does not constitute sponsorship: there are no return services (e.g. advertising exposure) for those participating.

Regarding the Corporate Tax inspection

Within the framework of governmental restructuring, as of 1 January 2014, according to 51. § (2), point g) of Law I. of 2004 on sport and related to spectator sport support, the public administration authority- and service tasks (approval of sports development programmes, monitoring- and methodology tasks related to support of spectator sports) shall in part be carried out by the Ministry of Human Resources and in part by the national spectator sport federations for the National Institute for Sport.

The aim of the modification of law CCXXXVI of 2013 was that with the restructuring of the organisational system of support for spectator sports, in accordance with 51. § (2), point g) of Law I. of 2004 on sport the provision of public administration authority- and service tasks also be ensured as of 1 january 2014.

The restructuring seeks to increase the efficiency of the provision of tasks by placing a greater emphasis on the professional elements of the sports’ monitoring.

The tasks which up until then were under the jurisdiction of the authorities, have been extended to include inspection of the use of funds. Within this framework the Hungarian Football Federation, in relation to those organisations entitled to take advantage of support as laid out in Law LXXXI. Of 1996, para 22/C. § (1) points b)-d) – except in the instance of those with a sports development programme with a current value in excess of 300 million forints – shall inspect the use of funds in line with the regulations, as well as the renovation- and maintenance of real estate catering for sport and sports-related assets realised from the support.

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