the amount of donations has dropped significantly / Article / LSM.lv

Two years ago, the Latvian sports community took to the streets and launched a massive campaign “I support sports”. The reason for this activity was the drop in donations from entrepreneurs as a result of tax reform. The activities of the movement ended with the adoption of a government declaration. Among the promises is a review of sports funding.

Currently, the sports community has remained calmer, but almost all sports federations surveyed by LTV emphasize a significant drop in donations.

Linda Medne, Secretary General of the Latvian Automobile Federation (LFA), points out: “The tax reform affects the commissions operating in the Latvian Automobile Federation and their work. It has had a significant impact on both the number of competitions and the participation of athletes, as the total drop in donations over the last two years has reached around 50%. ”

2018 was especially difficult for the Latvian Athletics Union (LVS), which was the first time when the new procedure came into force. Last year the picture was better, but not all the donations received were for the overall development of the sport. LVS Secretary General Dmitrijs Milkevics LTV said:

“Most of the donations only go through us, because they are targeted donations to athletes.”

Last year, the Latvian Luge Sports Federation (LKFS) did not receive anything in donations, but the restrictions of the international federation, correspondence with the State Revenue Service (SRS) about doing business in associations and also the pandemic made it more difficult to attract advertisers.

There has also been a decline in bobsleigh, but advertising revenues have increased, and the form of cooperation with individual donors has changed legally. Barter transactions, such as clothing, transport, publicity events, also play an important role.

The amount of donations has also significantly decreased in the Latvian Cycling Federation. Its CEO, Tom Marx, estimates the decline at 70%.

At one time, when donating to public benefit organizations, entrepreneurs received an income tax rebate of 75%, but not more than 20% of the total amount of corporate income tax. Why was this procedure changed?

One of the reasons not publicly highlighted is the partial return of donations to donors, which was especially committed by sports organizations.

Zintis Ekmanis, Secretary General of the Latvian Bobsleigh and Skeleton Federation (LBSF), did not deny such strange offers.

Representative of the Ministry of Finance Ilmārs Šņucins LTV pointed out that the decisive factor was the essence of the reform with the aim of companies, because if companies pay small taxes to the state, then they will not be able to share these taxes with others. The relief cannot be so great.

There are three ways for companies to donate and not pay corporate income tax at the same time:

You can donate an amount not exceeding 5% of the net profit, you can also donate 2% of the amount paid in the previous year’s wages, the third option is to donate up to 20% of the amount of taxes payable by the state if the profit is distributed in dividends.

Although there are more opportunities to donate, entrepreneurs donate less because they no longer have to pay corporate income tax if the profits are invested in the development of the company. Such regulation is unfavorable for sports, according to the representatives of federations. Ekmanis emphasizes that there must be a support system so that entrepreneurs are interested in maintaining sports.

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