Sponsoring. A smart move or not?

With sponsorship you invest money or materials in a project, programme, or person. For example, supplying clothing for a local fashion show, paying the venue hire for a regional debating society, or allowing your staff to work for a national arts event. The sponsored party always does something in return because without a service in return, you are making a donation. Something in return could be visibility for your business through an advertisement or social media post, or your logo on work clothing.

Advantages

Sponsorship gives you brand awareness and a positive image. And it is tax deductible.

Brand awareness

By placing your logo or name on a billboard, t-shirt, or a glass of champagne, more people see and hear your company name. 

Improving your image

Sponsorship can improve your image. People who see your logo or name link your business to what you are sponsoring, so make sure it fits your business. 

Sponsorship is tax deductible

If you sponsor as an entrepreneur in exchange for publicity, the sponsorship costs are 100% tax deductible. This concerns business sponsorship for brand awareness, the introduction of a product or brand, and personnel recruitment.

Disadvantages

Sponsorship also has disadvantages.

Investment

Sponsorship costs time and money. Especially if you take a professional approach.

Results are difficult to measure

The results are not always clear, so you do not always know what the sponsorship delivered.

An unclear image

Pairing your business with the wrong partner can confuse your image. 

Risk of reputational damage

When the sponsored party gets negative coverage in the news or on social media, it can damage your business's reputation. 

Frequently asked questions about sponsorship

1. Is sponsorship always tax deductible?

Sponsorship is deductible as a business expense when there is a business consideration in return, such as visibility for your company. If this is not the case, it is considered a donation. Donations are only tax deductible under certain conditions. For example, the donation must go to a recognised charitable cause.

2. Do I have to charge or pay VAT on sponsorship?

Yes, when the recipient provides a service in return, VAT is payable. And with sponsorship, there must always be a service in return.

3. How do I prevent sponsorship from being seen as a donation?

If, for example, you sponsor a music school with instruments, they must always provide something in return. For example, they could mention your logo on their brochures or on the sponsorship page on their website. If this does not happen, it is considered a donation. In this case, you cannot deduct the costs from your tax.

4. How do I legally record agreements?

Draw up a sponsorship contract that you both sign. In a sponsorship contract, you include agreements about:

• Services in return, such as your company name in social media posts or your company logo in a theatre company's programme booklet.
• Costs for sponsorship and any advertising material.
• Results, such as the number of visitors to your website or the number of purchases after a sponsored event.
• Duration of the collaboration, for example a quarter or a year.
• Division of tasks, such as designing, printing, or displaying advertising material.

5. How do I prove that sponsorship is business-related?

As an eenmanszaak, you may, for example, sponsor your child's football club. Make sure that the sponsorship has a business purpose and that you have proof of the service in return. In this situation, the Netherlands Tax Administration may be particularly critical in checking whether it is a gift. So, make sure you have a sponsorship contract that includes the agreements, including the service in return, and take photos of the visibility and results delivered.