Deductibility of Sponsorship Expenses and Donations for Corporate Tax
Sponsorship Expenses and Donations
Sponsorship expenses and donations made by corporations will be considered for deduction in determining the corporate tax base, as described below.
If donations or aid are not made in cash, the cost or recorded value of the donated goods or rights, or, if that value is not available, the value determined by the tax authority’s assessment committees will be used.
Since sponsorship expenses and donations are considered as expenses in the records at the time of the expenditure or donation, they should be deducted from the corporate tax base, provided the corporation’s profits are sufficient, and shown separately on the tax return, as these expenses are not legally accepted expenditures.
Sponsorship Expenses
Sponsorship expenses related to amateur sports under Law No. 3289 (Youth and Sports General Directorate Organization and Duties) and professional sports under Law No. 3813 (Turkish Football Federation Establishment and Duties) can be deducted as follows:
- Amateur Sports: 100% of the sponsorship expenses.
- Professional Sports: 50% of the sponsorship expenses.
Sponsorship expenses differ from advertising expenses as they are not directly related to obtaining commercial profits but focus more on social objectives.
Expenses considered as sponsorship include:
- Rental fees for fields, halls, or facilities for official sports organizations,
- Costs for athletes’ food, travel, and accommodation,
- Cost of sports equipment,
- In-kind and cash expenses for sports facilities approved by the Youth and Sports General Directorate,
- Transfer fees for athletes,
- In-kind and cash payments as bonuses to athletes or sports personnel based on sports competition results.
Expenses that provide direct commercial benefit, such as placing emblems or marks on sports fields, athletes’ clothing, or sports equipment for promotional purposes, are considered advertising expenses.
Expenses that combine both sponsorship and advertising purposes can be separated into sponsorship and advertising costs, provided this is specified in the contract and aligns with common practices. For instance, if a corporation sponsors an athlete and also uses the athlete for company advertising, the advertising expenses can be separated from the transfer fee and treated as advertising costs.
Sponsorship Regulations
Sponsorship practices are regulated by the Sponsorship Regulation published in the Official Gazette dated 16/6/2004. Individuals and legal entities can become sponsors of federations, sports clubs, or athletes according to the procedures and principles outlined in this regulation.
According to Article 8 of the Regulation, a written contract must be made between the sponsor and the sponsored party, outlining both parties’ rights and obligations. The contract must include specified information.
The Regulation does not have specific provisions for documenting in-kind or cash support given to sponsored entities. However, the terms “document” for sponsorship and advertising services, “cash support” for monetary payments, and “in-kind support” for goods and services are defined.
Article 12 of the Regulation states that the sponsorship amount can be directly spent by the sponsor or deposited into the sponsored party’s account. Expenses related to this amount will be subject to the applicable regulations of the sponsored party.
If cash support is deposited into a bank account, the receipt or bank slip provided by the bank will serve as proof of donation. The bank slip must state that the payment is for sponsorship purposes.
If the cash support is handed over directly, a receipt from the receiving party will be accepted as proof of donation.
For in-kind support:
- A detailed invoice must be issued for goods delivered to the sponsored party, indicating the sponsorship purpose and detailed information about the goods.
- If in-kind support is donated by the sponsor, a receipt should be provided, specifying the value, type, and quantity of the donated items.
Invoices must be signed by the receiving party or their legal representatives.
Donations or aid without a receipt cannot be deducted.
Sponsorship expenses, whether in cash or in-kind, can be deducted in the year they are made.
There is no requirement to submit additional documents with tax returns for these sponsorship deductions.
Entities must not have tax debts to be eligible for sponsorship and should obtain a certificate of no tax debt from the tax office and submit a copy of the sponsorship contract to the tax office.
If sponsors do not pay their tax debts for the periods they sponsored, the tax office will notify the Youth and Sports Provincial Directorate in the area immediately.
Source: Corporate Tax Law
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