Sponsorship vs Donations in Czech Law: Tax Deductibility and Contract Risks

14.4.2026 | ARROWS law firm

From a legal and tax perspective, sponsorship and donations differ primarily in the presence or absence of consideration. A donation is a gratuitous performance, while sponsorship is a commercial relationship in exchange for advertising and promotion. This distinction has a fundamental impact on the tax deductibility of costs. Proper legal structuring of the agreement is key to legal certainty, corporate cost management, and minimizing tax risks under Czech legislation.

The photo shows a specialist discussing the distinction between sponsorship and donations.

Key tax differences and why it is not worth underestimating the contract
Tax deductibility of expenses: general framework and application to sponsorship
A gift as a tax expense and the possibility of deducting it from the tax base
Sponsorship and its tax treatment for the sponsor
Key risks and mistakes in contractual setup
Documentation and evidence: what the sponsor and the recipient must retain
VAT tax implications for sponsorship and gifts
Risks and procedures in the event of a tax authority audit
Specific issues relating to sports clubs and charitable organisations

Summary in bullet points

Fundamental difference in consideration: Sponsorship is a commercial relationship with an entitlement to promotion, whereas a gift is purely unilateral and gratuitous.
Tax deductibility for a company: Sponsorship can be claimed as a fully tax-deductible advertising expense. A gift is not an expense, but under certain conditions it reduces the tax base.
Taxation on the recipient’s side: The supported club or organisation must tax the sponsorship contribution. By contrast, a gift is often exempt from income tax.
Risk of additional assessments: The Czech tax authorities closely look for disguised gifts. If sponsorship lacks evidence that advertising actually took place, the authority will not recognise the expense.
Need for documentation: The basis for a successful defence in a tax audit is a watertight written contract and archiving of outputs (photos, websites).

Key tax differences and why it is not worth underestimating the contract

Sponsorship and a gift are assessed differently for tax purposes under Czech law. Sponsorship includes a counter-performance (advertising, visibility), whereas a gift is provided without any consideration. For the sponsor, it is a tax-deductible promotional expense. For the recipient, sponsorship is taxable income, while a gift can often be tax-exempt.

Without a clear written contract, there is a risk that the Czech Tax Authority (Finanční úřad) will challenge the tax deductibility of the costs. In practice, it therefore pays to have the contract and the related tax assessment reviewed by specialists in tax law. This may lead to sanctions and penalties for insufficient proof of the deductibility of expenses. The attorneys at ARROWS, a Prague-based law firm, specialise in drafting and reviewing contracts so that your support for sport or charity rests on solid tax foundations under Czech legislation.

Insufficiently documented sponsorship or gifts, or arrangements set up unclearly in the contract, may lead to the denial of a tax deduction, an increase in the tax base, and subsequent penalties. It is advisable to prevent these situations through high-quality legal preparation.

Legal definition of sponsorship and gifts in the Czech legal system

Sponsorship and gifts are defined in the Czech legal system in several legislative acts. The basic concept stems from various legal and tax regulations. Under Act No. 40/1995 Coll., on the Regulation of Advertising, sponsorship is defined as a “contribution provided with the aim of supporting the production or sale of goods, the provision of services, or other performance of the sponsor".

This definition emphasises that it is a contribution intended to support the sponsor’s own business or economic activities. If sponsorship “breaks” into a dispute over the deductibility of an expense or the nature of the performance, it may also be useful to know the tax rules for problematic receivables (see Unpaid B2B receivables: When can a loss from invoices be claimed as a tax-deductible expense and meet the Czech Tax Authority’s strict conditions). The sponsor is a legal entity or an individual who provides such a contribution for this purpose.

A gift, on the other hand, is regulated in [the Civil Code] and tax legislation. Under the new Civil Code, a gift is understood as a situation where the donor, under a gift agreement, gratuitously transfers ownership of an item, or undertakes to transfer an item to the donee free of charge. The donee then accepts the gift or the offer.

The key element is the gratuitous nature – a gift must not bring any counter-performance or benefit to the donor in return. It is possible to donate funds, movable or immovable property, receivables, transferable property rights, or other assets.

From a tax perspective, the primary basis is Act No. 586/1992 Coll., on Income Taxes (hereinafter the “ITA"). This act contains the key distinctions between a tax-deductible expense and the conditions for deducting gifts from the tax base.

The practical distinction between sponsorship and a gift is not always entirely clear, which is why numerous misconceptions and errors arise in practice. When, due to the classification of the performance (gift vs. sponsorship) or due to evidence of advertising, the matter comes into conflict with the authorities, it typically already falls within the area of commercial and court disputes. Although the law does not contain an explicit definition of sponsorship as a tax expense, its assessment is based on the general regulation in Section 24(1) of the ITA, which we address in the following section.

Tax deductibility of expenses: general framework and application to sponsorship

For an expense to be tax-deductible, it must be demonstrably incurred to generate, secure, or maintain taxable income. This rule is set out in Section 24(1) of the ITA and represents the basic filter for assessing all business expenses.

Sponsorship expenses are not explicitly listed in the act, and therefore the sponsor must prove a causal link between these expenses and the generation of income. An important factor is the sponsor’s ability to demonstrate that these are expenses incurred to generate, secure, or maintain taxable income and that the relevant sponsorship activity, including reciprocity, actually took place.

Advertising and promotion are generally tax-deductible expenses, even though they are not expressly listed in Section 24(1) of the ITA. In the case of sponsorship, this is an expense for promotion and advertising, which must be supported by evidence of actual performance.

Here we encounter the first risk point: if the sponsorship agreement does not clearly define the specific advertising or visibility, the Tax Office will likely conclude that it is a gift rather than sponsorship. Similarly strict are other “borderline” situations in contractual relationships where tax risks are addressed (cf. External suppliers versus employees: How to properly set up contractual relationships and eliminate the tax risks of disguised employment). In many cases, a gift is a tax-non-deductible expense.

It is very important to distinguish between sponsorship and representation. Representation expenses, which the law defines as expenses for “hospitality, refreshments and gifts”, are not tax-deductible costs under Section 25(1)(t) of the Income Taxes Act.

Sponsorship should be structured as an advertising and promotion expense, not as representation. If the agreement is vague, or if it suggests that it is rather a contribution without a link to promotion, there is a risk that the Tax Office will reclassify it as representation and refuse to recognize it as a tax-deductible expense.

A gift as a tax expense and the possibility of deducting it from the tax base

In principle, a gift is a tax-non-deductible expense. This means that, on its own, it cannot be included in tax-deductible costs that reduce the income tax base. However, the Czech legal system provides one important option: although a gift is not a tax expense, under certain conditions it can be deducted from the tax base as a so-called “deductible item”.

This distinction is essential and often misunderstood. A gift does not reduce the tax directly; rather, it reduces the base from which the tax is calculated.

In practical terms, if an individual taxed at the 15% rate makes a gift of CZK 10,000, they will save CZK 1,500 in tax. At the 23% rate, they would save CZK 2,300. This difference is important for entrepreneurs to understand the real amount of the tax benefit.

Conditions for deducting gifts from the tax base for individuals

Individuals, including self-employed persons (OSVČ), may deduct the value of gifts from the tax base if certain conditions are met. The first criterion is the minimum amount.

Gifts in total must exceed 2% of the tax base or amount to at least CZK 1,000 per year. If an individual donates less than CZK 1,000 in a year, or less than 2% of their tax base, they cannot deduct the gift at all.

The second criterion is the maximum limit. Although the standard limit is 15% of the tax base, due to a recent extension of legislative exceptions, the increased cap continues to apply. This means that an individual may, even for 2026, deduct gifts of up to 30% of their tax base — the only condition is that the minimum amount criteria are met.

The third criterion is the purpose of the gift. The gift must be provided to an entity and for purposes listed in the law. Typically, these include gifts for education, culture, ecology, charity and sport, the list of which can be found in Section 15(1) of the Income Taxes Act.

Support for sport is one of the purposes explicitly recognized by the law. A gift to a sports club that meets the tax conditions may therefore become a tax-recognized contribution, subject to the above percentage limits.

Conditions for deducting gifts from the tax base for legal entities

Legal entities are governed by different rules than individuals. For legal entities, the minimum value of an individual gratuitous performance is CZK 2,000.

The upper limit for deducting gifts for legal entities is normally 10% of the tax base. Here too, the exception has been extended by the legislator, and therefore companies may deduct up to 30% of their tax base in 2026. Thus, while a company cannot deduct a gift lower than CZK 2,000, the maximum possible tax saving for gifts in 2026 is three times the standard amount.

For legal entities, there is also a restriction regarding the recipient. They may provide a gift only to certain entities: municipalities, regions, organizational units of the state, organizers of public collections, or legal entities with their registered seat in the Czech Republic (foundations, institutes, associations or non-profit organizations).

A sports club that has the legal form of a commercial company established for the purpose of doing business may not automatically meet these conditions – it depends on its legal structure and the purpose for which it was established.

It is key to emphasize that [the gift may ultimately not be taxed at the recipient at all if it is a gift of funds provided gratuitously and the recipient is a non-profit organization]. This is precisely why, from a tax perspective, gifts differ from sponsorship, where the recipient taxes the received amount as income from business activity.

Sponsorship and its tax treatment for the sponsor

When it is contractually clearly established between the parties that it is sponsorship with a specific consideration (advertising, visibility, promotion), it is, from the sponsor’s perspective, a tax-deductible expense.

The essence of sponsorship is the support of a non-profit event, person or organization in the form of financial or in-kind support, but with an exchange in the form of promotion.

If a sponsor provides CZK 50,000 to support a sports tournament and, in return, receives placement of its logo on all promotional materials, jerseys, websites and posters, this is an advertising and promotion expense that is tax-deductible.

The key rule is: mere publication of the donor’s name, business name or logo is not considered consideration, even if the value of the provided contribution is expressly stated next to it.

It would be a tax expense only if, at the same time as this publication, there is promotion of products or support for the sale of goods or services. Merely mentioning the company name as a sponsor is not enough – it must be genuine promotion aimed at supporting sales or increasing brand awareness.

It is very important that the sponsor has written documentation proving that the consideration actually took place.

If a company provides CZK 100,000 for a sports event but cannot prove photos with the logo on a banner or the media partner’s content on the event website, there is a risk that the Tax Office will assume it is a gift without consideration.

Such an undocumented gift could later be classified as a tax-non-deductible expense. One of the most common practical risks is therefore insufficient documentation of the consideration actually provided.

Sponsorship expense versus a gift for the recipient

From the recipient’s perspective, sponsorship and a gift are taxed entirely differently. If the recipient receives a sponsorship contribution under an agreement that clearly sets out the consideration (advertising, visibility), it is taxable income that the recipient must tax as income tax. In practice, for a recipient that is a non-profit organization, the same tax rule applies as for other services it provides.

Income from providing advertising services is always taxable income, including for non-profit organizations. This means that when a sports club receives CZK 50,000 for placing a company’s logo on jerseys and promotional materials, it must tax this income. The expenses for these services, on the other hand, are tax-effective from the sponsor’s perspective and can be deducted from the tax base.

By contrast, if it is a gift, for the recipient it is not taxable business income, but rather gratuitous income, which in many cases is exempt from income tax. A sports club that receives a gift of CZK 50,000 without any consideration does not have to tax the gift if it uses the money in accordance with the statutory conditions for the exemption (typically for its main sporting activity).

Key risks and mistakes in contractual arrangements

Practical reality shows that the difference between sponsorship and a gift is very often blurred in practice—sometimes intentionally, sometimes through carelessness. Attorneys from ARROWS, a Prague-based law firm, repeatedly see cases where entrepreneurs are surprised by the Czech Financial Administration’s requests for retroactive adjustments to tax returns because the sponsorship was not properly documented or was not clearly defined as an advertising expense.

Most common mistakes in sponsorship contractual arrangements

The first common mistake is insufficient specificity in the contract. The contract states “sponsorship contribution of CZK 100,000 to support the tournament”, but does not include a detailed list of specific consideration. This means that later it is not clear what exactly the recipient was supposed to provide. There is then a risk that the Czech Financial Administration or a judge will conclude that it is a gift, especially if the consideration did not in fact take place or was not sufficiently evident.

The second mistake is using vague terms such as “sponsorship gift”. The combination of the words “sponsor” and “gift” is a contradictio in adiecto—sponsorship is by definition an exchange with consideration, whereas a gift is without consideration. It is therefore recommended to use terminology in the contract text that is consistent with tax categories. If it is an exchange involving advertising, the contract should be called a “sponsorship agreement” or an “advertising agreement”, not a “gift”.

The third mistake is the complete absence of a written contract. Although Czech law does not require written form for a sponsorship agreement to arise, from a tax perspective the absence of a contract is a fundamental risk. Without a written contract, it is very difficult to prove what the parties’ mutual obligations were, and therefore the Czech Financial Administration can easily deny that it is sponsorship at all.

The fourth mistake is insufficient documentation of the consideration actually provided. The contract may provide for placement of the logo on the tournament’s websites and jerseys, but photos, website screenshots, or other evidence are missing. In such a case, the Czech Financial Administration will rightly ask whether the consideration actually took place.

Documentation and evidence: what the sponsor and the recipient must retain

Proper documentation is key to ensuring the tax acceptability of sponsorship. Czech law requires that the taxpayer be able to prove every expense that they claim was incurred in connection with taxable income. This means that the sponsor should retain the following documents:

The first and most important document is the contractual documentation. The contract should contain a clear identification of both parties, the subject matter, the scope of the consideration, and deadlines, with signatures.

The second document is proof of payment—an invoice, bank statement, or transfer confirmation. The proof of payment must clearly document that the funds were actually transferred.

The third and very important document is documentation of the consideration actually provided. In practice, this means photos, website screenshots, newspaper or magazine clippings, social media records, or reports from a media monitoring service.

These documents prove that the logo was indeed placed and visible. If it is for a longer period, the documentation should be time-specific so that it is clear during which periods the promotion was visible.

The fourth document may be a confirmation from the recipient—for example, an email or letter in which the recipient confirms that it has fulfilled its obligations under the contract. Such confirmation is not automatically necessary, but in the event of a tax audit it can become very useful as additional evidence.

The recipient (a sports club or charitable organisation) should also keep thorough documentation. It should retain the contract and confirmation of receipt of the funds.

In the case of sponsorship, also documents showing that it actually provided publicity or advertising under the contract. For a gift, it should have proof of receipt and, if applicable, written confirmation for the donor for tax return purposes.

VAT tax implications for sponsorship and gifts

The issue of value added tax (VAT) adds another layer of complexity to the topic of sponsorship and gifts. While income tax focuses on whether an expense is tax-deductible and whether the tax base increases, VAT focuses on whether it is a taxable supply and what right to deduction the provider (or the recipient of the service) has.

Sponsorship and VAT

When a sponsor provides funds and receives promotion (advertising) in return, from a VAT perspective it is the provision of a service—specifically, an advertising service. The provision of advertising is, under the Czech VAT Act, generally considered a supply of services subject to the standard VAT rate of 21%. The recipient of the sponsorship contribution (e.g., a sports club) thus becomes the provider of the advertising service and should charge and remit VAT on that service.

In practice, this means that when a sports club receives CZK 100,000 excluding VAT from a sponsor for logo placement and promotion, the club should calculate VAT on this amount, i.e., CZK 21,000, and remit it to the state. The sponsor can then deduct this input VAT if it meets the conditions for entitlement to deduction.

However, there is an important exception for non-profit entities. If the recipient is a non-profit organisation (e.g., a sports club registered as an association) that was not established for the purpose of doing business, it may be entitled to VAT exemption for certain activities.

Specifically, Section 61(d) of the Czech VAT Act provides that the supply of services closely related to sport or physical education by legal persons that were not established for the purpose of doing business, to persons who carry out sporting activities, is exempt from tax without the right to deduction.

However, we must be careful here: the exemption applies to services closely related to sport provided to the athletes themselves, not to advertising provided to commercial entities. If a club provides advertising, it is a service that is not closely connected to sport itself, and therefore the exemption does not apply and it must be subject to VAT.

Gift and VAT

For gifts, the situation is different. A gift constitutes a gratuitous supply, and the provision of a purely financial gift is not, under the VAT Act, subject to tax (it is not a taxable supply). This means that a financial gift should not be subject to VAT. When a company provides CZK 100,000 as a gift without any consideration, no obligation to account for VAT arises on that amount.

However, there is an exception here as well. If the gift concerns goods (not money) that were previously purchased by the donor and in respect of which the donor claimed a VAT deduction (e.g., it purchased goods with VAT and now donates them), this constitutes use of assets for purposes unrelated to the carrying out of an economic activity. In such a case, it is treated as a deemed supply of goods for consideration, and output VAT must be accounted for on the donated item.

An important exception is the rule for advertising or promotional items: if the supplier provides an advertising or promotional item (e.g., a T-shirt with its logo) whose acquisition cost excluding tax does not exceed CZK 500, and does so in the course of its economic activity, it is not regarded as a supply of goods and no VAT is accounted for on it.

Risks and procedures in the event of a tax authority audit

When the Czech Financial Administration (Finanční úřad) carries out a tax audit, one of the typical topics is verifying the legitimacy of individual tax-deductible expenses. Sponsorship and gifts often become the subject of audits because these are categories of expenses where businesses frequently make mistakes.

Most common findings by the tax authority

The Czech Financial Administration typically focuses on situations where sponsorship is contractually vague. If an audit finds that the agreement does not contain a clear definition of the consideration, there is a risk of a finding that it is a gift and therefore a tax-non-deductible expense.

In such a case, the Czech Financial Administration will increase the tax base by the value of the sponsorship contribution and, on that basis, calculate the additional tax due.

A second typical finding is the absence or insufficiency of documentation proving that the consideration actually took place. If a sponsor claims that its logo was placed on jerseys but cannot prove it with any photograph or other evidence, the Czech Financial Administration will consider it a fictitious expense and will again increase the tax base.

A third finding is exceeding the limit for gifts. If a legal entity provides and claims in its tax return gifts exceeding 30% of its tax base (applicable for 2026), the Czech Financial Administration will reduce the deduction so that this statutory limit is strictly complied with, and will assess the difference.

A fourth finding is a mismatch between the tax return and the accounting records. If sponsorship appears as a gift in the accounting records but as an advertising expense in the tax return, the Czech Financial Administration will raise questions about consistency and credibility.

How to defend yourself in an audit: practical steps

The first and most important step is to have correct and consistent documentation. If you have an agreement, payment records, and photographs or other evidence of the consideration provided, you will be fine in most cases. The attorneys at ARROWS, a Prague-based law firm, recommend keeping all documentation in order and well organised so that it is easily accessible in the event of an audit.

The second step is to consult an expert before taking a tax position. If you are not sure whether it is sponsorship or a gift, contact an attorney and a tax adviser. They will help you correctly classify the transaction and ensure that it is properly documented and filed.

The third step, if the Czech Financial Administration is already conducting an audit and a finding has arisen, is to contact an attorney immediately. They can assist you with representation in dealings with the Czech Financial Administration, preparing submissions, and, if necessary, filing an appeal.

The attorneys at ARROWS, a Prague-based law firm, have experience with such representation and know the procedures of the Czech Financial Administration, which will help you achieve the best possible outcome.

Possible issues	How ARROWS can help (office@arws.cz)
Vague or missing agreement : The Czech Financial Administration will not be sure whether it is sponsorship or a gift and will refuse to recognise the expense.	ARROWS attorneys will prepare clear and tax-compliant contractual documentation. It will unambiguously define the rights and obligations of both parties, the specific scope of promotion, and deliverables.
Insufficient documentation of the consideration : Although the agreement refers to promotion, there is no evidence (photos, website screenshots, media outputs) that the consideration actually took place.	ARROWS helps with organising and archiving documentation. It prepares lists of services performed and verifies that all records are in order for a potential tax audit.
Mixing up categories : Sponsorship is presented as a “sponsorship gift” or as representation/entertainment, leading to incorrect tax classification.	ARROWS correctly classifies the transaction in accordance with tax law. It ensures proper accounting entries and the tax return and guides clients to use the correct terminology.
Exceeding gift limits : A legal entity provides gifts exceeding 10% of the tax base (for 2026) without realising that the excess portion will not be tax-deductible.	ARROWS monitors compliance with the limits for individual years. It alerts you as you approach the threshold and helps plan gifts so that they comply with the law.
Tax audit by the Czech Financial Administration : The authority challenges the tax deductibility of sponsorship and requires retroactive adjustments to the tax return.	ARROWS represents the client in dealings with the Czech Financial Administration. It prepares submissions, manages the dialogue with the authority, and, if necessary, files an appeal or represents the client in court proceedings.

Specific issues concerning sports clubs and charitable organisations

Sports clubs and charitable organisations are the most common recipients of sponsorship contributions and gifts. From their perspective, it is important to understand how such received funds are taxed and what obligations arise from them.

Tax treatment of sponsorship income for a sports club

If a sports club receives a sponsorship contribution with clearly defined consideration in the form of promotion, it is income from providing an advertising service. Such income is always subject to income tax, regardless of whether the club is a non-profit organisation or a commercial company. The club must therefore report the income in its tax return and tax it.

If the club is a non-profit organisation (e.g., an association), income from economic activity (providing advertising services) is subject to corporate income tax. The club must therefore report the income in its tax return and tax it.

Tax treatment of gift income for a sports club

If a club receives a gift without any consideration in return, the situation is different. The gift may be exempt from income tax if the statutory conditions are met.

Specifically, if the gift is in the form of money or an in-kind contribution and was provided for an approved tax purpose (e.g., sport), and the recipient is a non-profit organisation, then the gift is usually not taxed.

This is significantly more advantageous for clubs than sponsorship, because no income tax is paid on the proceeds. That is precisely why clubs sometimes “invent” gifts instead of entering into contractual sponsorship arrangements—to avoid recognising taxable income. However, this is exactly the kind of situation the Czech Tax Authority seeks to uncover during audits.

Obligations of a charitable organisation when receiving a gift

Charitable organisations (foundations, public benefit organisations, etc.) have additional obligations related to accepting a gift. [They should issue a gift confirmation to the donor, which can then be claimed in the tax return].

This confirmation is a very important document for the donor and should be provided either immediately after payment or after the end of the tax period (calendar year) for all gifts made in the given year.

The charitable organisation should also keep records of gifts so that it can prove at any time who provided the gift, in what amount, and for what purpose. In the event of an audit, it should be able to produce these documents.

The lawyers at ARROWS advokátní kancelář can help charitable organisations set up proper documentation and processes to ensure compliance with Czech law.

Final summary

The difference between sponsorship and a gift is vast from both a legal and tax perspective, yet in practice these terms are often dangerously confused. While sponsorship is a commercial transaction with clear consideration (advertising) and can be claimed as a fully tax-deductible expense, a gift is a purely gratuitous transfer that can only reduce the overall tax base within strict statutory limits.

The key to a safe tax approach is always a precise written agreement supplemented by clear evidence that the promotion actually took place. If the agreement is vague, lacks a specific list of advertising deliverables, or even uses misleading terms such as a “sponsorship gift”, the Czech Tax Authority will, with a high degree of probability, reclassify the advertising expense as a non-deductible gift, which typically results in additional tax assessments and severe penalties.

However, incorrect structuring of these relationships does not only create tax risks. Poorly drafted agreements may lead to the transaction being absolutely invalid, court disputes with the supported entity, or unnecessary reputational harm if expectations regarding your visibility are not met.

Do not leave support for sport or charity to chance. The lawyers and tax specialists at ARROWS advokátní kancelář have extensive experience in preparing and reviewing sponsorship and gift agreements so that they stand up safely to any audit. For a consultation and proper set-up of your agreements, contact us at office@arws.cz.

FAQ: Most common questions about sponsorship, gifts, and their tax treatment

1. What does it mean that a gift “reduces the tax base”?
You do not deduct the gift directly from the final tax, but from the tax base from which the tax is calculated. For example, if at a 15% rate you donate CZK 10,000, your tax base is reduced by that amount and you will actually save CZK 1,500 in tax (at a 23% rate, CZK 2,300). For an exact calculation and tax strategy, contact ARROWS advokátní kancelář at office@arws.cz.

2. What is the minimum amount of a gift for it to be deductible for tax purposes?
Individuals (including self-employed persons) may deduct a gift if its value is at least CZK 1,000 per year, or exceeds 2% of the tax base (it is sufficient to meet one of the conditions). For legal entities, the condition is that the value of each individual gift must be at least CZK 2,000. Smaller amounts cannot be deducted.

3. Can I deduct an unlimited amount of gifts from tax?
No, the law sets an upper limit. However, thanks to the extension of legislative exceptions, in 2026 both individuals and legal entities may deduct gifts up to a generous 30% of their tax base. If a company has a tax base of CZK 500,000, it can deduct up to CZK 150,000 in gifts. Anything above this limit will no longer reduce the tax base. We will be happy to help you monitor the limits at ARROWS.

4. What happens if the Czech Tax Authority finds out that I provided sponsorship without a written agreement?
Without an agreement and evidence, it is difficult to prove that it was an advertising expense. The Czech Tax Authority will therefore, with the highest probability, reclassify the transaction as a gift. If that gift does not meet the strict statutory conditions, the authority will not recognise your tax-deductible expense, will assess additional tax, and will impose penalties. For the preparation of watertight agreements, it is therefore better to contact office@arws.cz.

5. Can the recipient of the gift also deduct it for tax purposes?
No, only the donor deducts the value of the gift from the tax base. The recipient does not deduct anything—on their side it is gratuitous income, which may moreover be fully exempt from income tax (if the conditions for public benefit purposes are met).

6. Is there a difference in tax treatment between a sponsorship contribution to a sports club and to a charitable organisation?
The basic tax principle is the same in both cases: sponsorship with advertising constitutes taxable income for both organisations, while a gift without consideration may be exempt income. Differences arise only in specific tax regimes and the details of exemptions depending on the recipient’s particular legal form (association vs. foundation, etc.). For a safe assessment of a specific transaction, contact ARROWS advokátní kancelář at office@arws.cz.

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