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Are the funds transferred to sports clubs operating as LLCs deductible from income?
Are the funds transferred to sports clubs operating as LLCs deductible from income?
A certain portion of the profit for 2024 was transferred by the company I founded to a district football club established in the form of a limited liability company, with the aim of supporting the development of Azerbaijani football. Can the transferred amount be deducted from income? Or is any tax incentive предусмотрed for this case under the Tax Code?
The State Tax Service under the Ministry of Economy has stated that, in accordance with the provisions of Article 106.1.18 of the Tax Code, a portion of the taxpayer’s profit for the reporting year not exceeding 15 percent, transferred free of charge for the purpose of developing science, education, healthcare, sports, and culture to enterprises, institutions, and organizations operating in these fields and meeting the criteria approved by Decision No. 88 of the Cabinet of Ministers of the Republic of Azerbaijan dated 12 March 2020, is exempt from corporate profit tax for a period of five years starting from 1 January 2024.
According to Clause 5 of the “Criteria for enterprises, institutions, and organizations operating in the fields of science, education, healthcare, sports, and culture for tax exemption purposes in accordance with Article 106.1.18 of the Tax Code of the Republic of Azerbaijan,” approved by the said Decision, the criteria for entities operating in the field of sports include being established in the form of public associations as republican sports federations (associations) or sports clubs as defined by the Law of the Republic of Azerbaijan “On Physical Education and Sport,” and the use of the transferred funds for the purposes stipulated in the constituent documents of the sports federations (associations) or sports clubs.
Based on the above, since the tax exemption under Article 106.1.18 of the Tax Code applies to funds transferred to sports clubs established in the organizational-legal form of a public association, the relevant exemption does not apply to funds transferred by a taxpayer to sports clubs whose organizational-legal form is a limited liability company.
At the same time, such expenses incurred by the taxpayer are not regarded as deductible expenses under Article 108 of the Tax Code.
The above matters are regulated by Articles 106 and 108 of the Tax Code and by Decision No. 88 of the Cabinet of Ministers of the Republic of Azerbaijan dated 12 March 2020.
A certain portion of the profit for 2024 was transferred by the company I founded to a district football club established in the form of a limited liability company, with the aim of supporting the development of Azerbaijani football. Can the transferred amount be deducted from income? Or is any tax incentive предусмотрed for this case under the Tax Code?
The State Tax Service under the Ministry of Economy has stated that, in accordance with the provisions of Article 106.1.18 of the Tax Code, a portion of the taxpayer’s profit for the reporting year not exceeding 15 percent, transferred free of charge for the purpose of developing science, education, healthcare, sports, and culture to enterprises, institutions, and organizations operating in these fields and meeting the criteria approved by Decision No. 88 of the Cabinet of Ministers of the Republic of Azerbaijan dated 12 March 2020, is exempt from corporate profit tax for a period of five years starting from 1 January 2024.
According to Clause 5 of the “Criteria for enterprises, institutions, and organizations operating in the fields of science, education, healthcare, sports, and culture for tax exemption purposes in accordance with Article 106.1.18 of the Tax Code of the Republic of Azerbaijan,” approved by the said Decision, the criteria for entities operating in the field of sports include being established in the form of public associations as republican sports federations (associations) or sports clubs as defined by the Law of the Republic of Azerbaijan “On Physical Education and Sport,” and the use of the transferred funds for the purposes stipulated in the constituent documents of the sports federations (associations) or sports clubs.
Based on the above, since the tax exemption under Article 106.1.18 of the Tax Code applies to funds transferred to sports clubs established in the organizational-legal form of a public association, the relevant exemption does not apply to funds transferred by a taxpayer to sports clubs whose organizational-legal form is a limited liability company.
At the same time, such expenses incurred by the taxpayer are not regarded as deductible expenses under Article 108 of the Tax Code.
The above matters are regulated by Articles 106 and 108 of the Tax Code and by Decision No. 88 of the Cabinet of Ministers of the Republic of Azerbaijan dated 12 March 2020.