Why Sponsorship is Good for Tax Relief
Would you like to help your local GAA, soccer or rugby club and get tax relief too? In Ireland it is very possible to do this as long as you follow the clear rules put in by Irish revenue.
These clubs can reclaim tax from revenue on behalf of the donor. How does it work for PAYE workers? For those PAYE workers who contribute a minimum of €250 per annum, this contribution is paid from post-tax income and it is this tax payment that is reclaimed by the sporting body. It does not cost the donor anything additional but provides a huge benefit to the sporting body. Section 41 of the Finance Act 2002 provides for a scheme of tax relief for relevant donations to an approved sports body for the funding of approved projects.
HOW DOES THE SCHEME WORK IF YOU ARE A PAYE TAXPAYER?
Example – €590 donation per annum
A contribution of €590 to a club from a PAYE taxpayer is treated as having being received ‘net’ of income tax. This means that a donation from an individual who pays income tax at the higher rate of 41% is worth an additional 72% to the Club. The amount received by the sports club is calculated as follows:
– Donation / Cost to Donor € 590
– Tax rebate reclaimed by club € 410
– Sports Club receives € 1,000
The PAYE donor must complete an “Appropriate Certificate” and forward it to the approved sports body, to allow it to claim the grossed up amount of tax associated with the donation.
HOW DOES THE SYSTEM WORK IF YOU ARE SELF EMPLOYED?
If a person pays any tax under the self-assessment scheme, they can claim tax
relief on the amount themselves. For example, a person who pays income tax at the higher rate of 41% contributes an amount of €1,000 to the club, the value of that donation to the club is €1,000 and the actual cost of the donation to the individual may be calculated as follows:
– Sports club receives €1,000
– Tax relief available to the donor € 410
– Actual cost of donation to the donor € 590
System as it relates to Company Directors:
In this situation, the company can claim a deduction for the donation as a trading expense. An example would be as follows – a company donates €2,000 to a club, the value of that donation to the Club is €2,000. However, the cost of that donation to a company that pays tax at the 12.5% rate may be calculated as follows:
– Donation received by the Club €2,000
– Tax relief available to the donor € 250
– Actual cost of donation to the donor € 1,750
– The minimum qualifying total donation amount by a single donor in any year is €250.
– Donations made in instalments qualify for Tax Relief.
– Where sufficient tax has not been paid to cover the donation made, the refund of
tax will be limited to the amount of the tax actually paid by the donor
– The donations must be in the form of money and must not be repayable.
How to proceed:
Complete the form: Application for Approval of a Sports Capital Project for Tax Relief Purposes
This is available as a PDF from the revenue website
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