What if my company wants to sponsor sports team or event?
You are generally welcome to sponsor sports team, clubs, other non-profit organizations. The question is, is it tax deductible?
Swedish Tax Agency says so: If the sponsor benefits from it with a good image and “goodwill deed”, then the sponsorship is regarded as a gift and is not tax deductible.
In order this to be tax deductible, the company should receive something in return. And those returns should have market-worth, comparing to other advertisement costs. To determine what would be qualified as a “return” is quite complicated. For an example: what is the worth of an advertisement sign of the sponsoring company, what is the worth of it if it is shown in TV? If, for an example, the sponsorship is about helping to rent rooms or ticket production, the marketing worth of this is easier to determine and can therefore considered to be qualified as tax deductible sponsor-fee for the company.
Further, Swedish Tax Agency specifies the size of sponsoring company as a key-playing role here, pointing out that a smaller company can hide private costs of the board and their family members behind the sponsorship.
There are exceptions where the “return” is not required. For example, if there is a strong connection between the sponsoring company and the sponsored team / organization, or if the sponsoring means also that you organize a client-activities in connection with that. This is categorized as representation, which means that the deductible part is limited.
We recommend getting a written agreement with every sponsoring event, describing what the expectations are (if there are returns expected, be specific so they can be connected to the tax-deductible costs). Also, spare all documentation, tickets, invitations, anything that has your logo on, etc.
So long story short – sponsoring gives you no right to tax deduct the cost unless the situation falls onto the specific circumstances described above.