Tax Impact Of Sponsorship Agreements Between Companies And Individual Athletes And Sports Teams

What Is A Sponsorship Deal ?

Sponsorship agreements are agreements in asset and in cash made by companies or real person traffickers with sports clubs or individual athletes.Within the scope of the sponsorship activity that will take place in asset sponsorship, institutions sponsor the persons or sports teams by offering their products or services. .In financial sponsorship, instead of providing products or services, it is necessary to allocate a budget.In other words, it is realized by giving some money in line with the value of the sponsorship.

What Are The Types Of Sponsorship Deals ? :

  • Name Sponsorships:

Name sponsorships are a type of sponsorship that occurs when the name of the sponsoring institution is added to the sponsored sports club.  The stadiums of sports clubs are used in front of the names of sports clubs.

  • Main Sponsorship:

Main sponsorship is the type of sponsorship that is evaluated by institutions that want to own the sponsored athlete or sports club. In sports branches, forma chest sponsorships can be considered as the main sponsorship. An athlete or sports club may also have more than one main sponsor.

  • Official Sponsorship:

Official sponsorship is a type of sponsorship that takes place on a lower budget than name and main sponsorships in order to support and benefit the sponsored athlete or sports club. In sports branches, form backs and shorts sponsorships can be considered as official sponsorships.

  • Product and service sponsorships:

It is the type of sponsorship carried out by the institutions participating in the sportsman or the Sports Club by providing products or services, not financially.Many examples of product and service sponsorships can be given.A company that offers the materials of an athlete or sports club may be referred to as a material sponsor.

What Is The Effect Of Sponsorship Deals On Taxes ?

  1. The procedures and principles of sponsorship agreements are laid down in the sponsorship regulation issued by the General Directorate of Youth and Sports dated 16/6/2004 and numbered 25494.Real person traffickers or companies may enter into sponsorship agreements with individual athletes or sports clubs in accordance with this regulation.
  2. 3289, Youth and Sports General Directorate Law No. 3813 on the establishment and duties of Turkish Football Federation for amateur sport sponsorship under the law on the organization and duties of all professional sports, spending 50% in the determination of the tax base, the income declared shall be the discount factor.
  3. Amateur and professional distinction should be looked at whether athletes earn a certain income either individually or through the institutions, organizations, clubs or similar undertakings they are affiliated with due to the events, races and similar organizations they participate in.Those who earn income will be assessed as professionals,while those who do not earn income will be assessed as amateurs.
  4. According to Regulation 4. and 13. There is no regulation that the support given in asset or in cash to the sponsored persons, institutions and organizations in accordance with its articles must be based on documents issued in accordance with the Tax Procedure Law.
  5. When the sponsors provide financial assistance to the institution they are sponsoring, the receipt to be given by the banks for the amounts deposited with the sponsors must be considered as proof of the donation. However, the bank receipt must clearly state that the money was deposited for sponsorship purposes.If the money is given by hand, this process is provided with receipt.
  6. In the event that the assistance of the sponsorship scope is made in asset,it can be done with an invoice in which the assistance of goods and services is within the scope of sponsorship and information such as the type and amount of the assistance is available.This invoice must contain all the details of the content of the goods or services.As a matter of fact, this bill is a proofreading document of the expenditures made for sponsorship purposes.The back side of this bill must be signed by the sponsored person or their legal representatives.
  7. Donations made without receipts cannot be an element of discount on behalf of taxpayer sponsors.Because the proof that the expenses are for sponsorship purposes is the receipt.Expenses made in asset or in cash in accordance with the sponsorship regulation are considered by the taxpayers as the reason for the discount for the year in which the expenditures were made.Deductible expenses cannot be transferred to the following year.
  8. Sponsorship deals can’t be indefinitely.In the agreement between them, the parties must decide when the sponsorship will start and end.
  9. It is essential that what is advertised through sponsorship is not contrary to the understanding of sport, morality and decency. Sponsored advertisements with political, racist or religious content, especially related to alcoholic beverages, tobacco products, gambling investments, are strictly prohibited.
  10. Sponsors should not be liable for taxes when making sponsor deals.For this reason, they must obtain a certificate from the tax office that they do not have any debts.They are also required to provide an example of the sponsorship agreement to the tax office to which they are affiliated.Other than these, there is no need to present any documents when sponsoring.
  11. However, the books and documents of taxpayers because they are under any obligation under the relevant provisions of the Tax Procedure Code or by the IRS during the review of the requested documents need to be submitted duly.
  12. For sponsorship by individual athletes and clubs, there is no need to obtain approval from the General Directorate of Youth and Sports (excluding expenses for sports facilities). Sponsorship expenditures are not subject to the permission and control of the General Directorate of Youth and Sports and the Ministry of Finance.
  13. If an individual athlete is sponsored, the tax liability for Income Tax and VAT shall belong to the sponsor.
  14. The testimonial and training compensation paid for the transfers of the athletes and the right to play in a similar nature are covered by sponsorship in accordance with the General Communiqué of KVK 1. Other punitive damages are not covered by the sponsorship agreement.
  15. Fees and other benefits for athletes are not covered by sponsorship. However, premium payments made in accordance with the General Communiqué KVK 1 are included in the scope of sponsorship.Any fees,salaries or benefits other than those listed are not covered by sponsorship.
  16. In sponsorship deals, the contract price is subject to Stamp Duty.For this reason, Stamp Duty Declaration must be submitted by the sponsor.
  17. Finally, the differences between advertising spending and sponsorship spending should be stated in terms of tax liability.In fact, these two very close concepts differ in terms of tax liability.Sponsorship spending differs from advertising spending, which is not directly related to the acquisition of commercial gain or whose relationship cannot be measured, and whose social purpose is prominent expenditures and which are directly related to the acquisition of commercial gain.
  18. Due to processes including advertising and promotional purposes in addition to the sponsorship activities, on the expenditure side, indicated in the agreement between the sponsor and sponsored athlete, or the Sports Club and the like to be provided in accordance with, as it is possible to parse advertising and sponsorship expenditures.Because advertising expenditures are made on behalf of the company in order to provide commercial benefits.However, sponsorship should be done gratuitously.For this reason, advertising expenditures are taxed by the relevant authorities differently than sponsorship expenditures.