The future of tax deductible sponsorships may become uncertain
Next year's tax modification package will eliminate the corporate tax (Tao) top-up obligation, that may result in the loss of tax creditable sponsorship amounts; the procedure now is completely uncertain.
6/27/2019
The recently released details of the next year's tax
package cover the corporate tax (Tao) top-up obligation in detail, but there
are some aspects that are not yet fully clear.
The recently released details of the next year's tax package cover the corporate tax (Tao) top-up obligation in detail, but there are some aspects that are not yet fully clear.
Taxpayers can offer part of their taxes for ‘preferential purposes’, that is, they can support cinematography or team sports. So far, they could do so from the monthly or quarterly tax advance payments, from the year-end tax top-up payments and from the annual final tax payment. If the obligation for top-up payment is terminated, the possibility of sponsorship from this amount may also cease.
The abolition of the top-up payments can only be welcomed, since substantial reduction of the administrative burdens can only be achieved by the definitive and final abolishment of this obligation. The submitted proposal is a step in the good direction, but it is important to note that it applies only to the corporate tax top-ups, but not to local business tax. So far, business tax top-up was required for taxpayers who were also required to top-up corporate tax payments.
For the future, the amendment of the Local Business Tax (HIPA) Act includes the obligation of top-up payments for enterprises with turnover in the preceding tax year was over HUF 100 million. It is very important to understand, therefore, that only corporate tax top-up is abolished, and other taxes still have to be checked for possible top-up obligation.
The top-up obligation currently applies to companies with annual turnover in the preceding tax year exceeding HUF 100 million. The tax advances paid during the year had to be topped up to the expected annual tax amount by 20 December, with an additional tax declaration filing required at the same time. According to the rules in force so far, after the filing of the final tax return (May 31), the National Tax Authority checked the top-up, and if it did not reach 90% of the actual tax, 20% penalty was charged for the missing amount. This was reduced to 10% penalty from 2019. This process was mainly criticized by large companies, as it is quite difficult to estimate the expected tax amount with 90% accuracy by December 20th of a given year.