116 Acta všfs, 2/2009, vol. 3
Public Challenges for Sports Management in
Slovakia: How to Select the Optimum Legal
Form of a Sport Club?
Právní problematika managementu sportu na
Slovensku: jak vybrat optimální právní formu
sportovního klubu?
Abstract
There are many issues to be addressed by the manager of a sports organization/club who
wishes to optimize its functioning. There are also many ways the“state”influences all entities
in a society, including the sports sector. In our paper we focus on how tax and accounting
rules and other public legislation influences the choice of legal form for a sports club. The
data come from our own experiences and research in three sport branches – football, triathlon
and orienteering. The research results are self-evident and it was unnecessary to validate
them with statistical analysis – the size of the budget and probably also the structure of
revenues are the main factors influencing the decision on the legal form of a sports club.
Keywords
public finance, sports, football, triathlon, orienteering, legal form of a sport club
Abstrakt
Manažer, který chce optimalizovat fungování své sportovní organizace/klubu, musí řešit
řadu problémů. Je také celá řada způsobů, jak „stát“ ovlivňuje veškeré společenské subjekty,
sportovní sektor nevyjímaje. V naší práci se soustředíme na to, jak daňové a účetní
předpisy a další veřejná legislativa ovlivňují volbu právní formy sportovního klubu. Údaje
pocházejí z našich vlastních zkušeností a z výzkumu ve třech sportovních odvětvích – fotbalu,
triatlonu a orientačním běhu. Výsledky výzkumu hovoří samy za sebe a nebylo třeba
je ověřovat statistickou analýzou – velikost rozpočtu a patrně také struktura výnosů jsou
tím hlavním faktorem, který ovlivňuje volbu právní formy sportovního klubu.
Klíčová slova
veřejné finance, sporty, fotbal, triatlon, orientační běh, legální forma sportovních klubů
Introduction
There are many issues to be addressed by the manager of a sports organization/club who
wishes to optimize its functioning. There are also many ways the“state”influences all entities
in a society, including the sports sector. In our paper we focus on how tax and accounting
rules and other public legislation influences the choice of legal form for a sports club.
JURAJ NEMEC, MIROSLAV NEMEC
117Acta všfs, 2/2009, vol. 3
The data come from our own experiences and research in three sport branches – football,
triathlon and orienteering.
The topic is infrequently dealt with in the sports or economics literature. Much more has
been written about the impact of taxation on the management of sport clubs. For example
there is Clark and Miller`s book (2000), and the more general Duquette (2002), and
Mahony and Howard (2001). There are also specialized articles, focusing mainly on the
football industry (Cant, 2006; Mitchie, 2005; Rowbottom, 2002; Ealey, 1997; Cheffins, 1997;
Thorpe, 1996).
Important research in the area of public financing of non-profit organizations was undertaken
by the team led by the Johns Hopkins University in Baltimore (see for example
Salamon, 1999). The research covered countries from all over the world. According to
this source, public support to the non-profit sector differs significantly across areas and
between countries. In most new European Union members from the Central Europe state
support to non-profit sport and other sectors is very important and represents about
50 % of total incomes (Raguseo, 2008).
1	 Taxation and accounting rules: What is the optimum legal form for
a Slovak sports club?
The first and not so simple task for managers of any sports club in Slovakia is to decide
about the best suitable legal form for their organization. In the current general legal environment
(http://www.statistics.sk/pls/wregis/ciselniky?kc=0056), three basic options are
available:
● 	 public body
● 	 non-profit body
● 	 company
We assume that the decision for the concrete legal form should be based on an analysis
of the following factors:
● 	 concrete local conditions,
● 	 popularity of a sport, and
● 	 the chief characteristics of the club – especially structure and size of revenues in relation
to valid tax legislation.
In the following sections we provide basic information about possible options. Then we
will test to see if there is any link between the above mentioned factors and the concrete
structure of legal forms of sport clubs in selected Slovak sports.
2	 Sports clubs as public bodies
This case is a relatively rare solution, but in some special cases (football, ice hockey and
some other popular sports) the sports club may be established as a public organization
(net budgetary organization) usually connected to a municipal budget.
118 Acta všfs, 2/2009, vol. 3
A net budgetary organization (NBO) is a legal body and subject to the public law. The main
law defining its status is the Law 303/1995 on budgetary rules. This organization can be
established by the state administration and self-government body or by a specific law.
An NBO is connected to the budget of its establisher on the net principle – revenues and
expenditures are not interconnected (all expenditures are financed from the budget of
the establisher, all revenues flow to the budget of the establisher). An NBO does not have
its own property, it only administers state property. An NBO cannot accept credits or
establish other legal bodies, and cannot undertake entrepreneurial activities. NBOs are
controlled by the Ministry of Finance, the Supreme Audit Office, the Office of Government
and the establisher (Sivák, 2007).
There are some advantages, but many disadvantages in choosing this legal form for a Slovak
sports club. The main advantage is short term stability of revenues, as the level of
subsidy from the municipal budget is normally stable across an election period (4 years).
However, there is no long term stability, for the political structure of a municipal assembly
may change, and there are cases where a new mayor endangers the continued existence
of a club. Municipal budgets may also have problems providing enough finance to balance
top clubs in important sports1
, especially recently when the allocation system has
switched from subjective to program allocation.2
From the viewpoint of taxation, this legal form is simple. The budget is balanced. Any
surplus has to be returned to the municipal budget, and except for employees there are
no tax obligations for the club. Current accounting rules also allow for simplified cash accounting,
but for all public bodies a change to accrual accounting is expected.
Clearly this legal form of sports club would only work in local environments where the
mayor or municipal assembly was ready to provide resources.
3	 Sports clubs as non-profit organizations
According to the relevant legislation, the (formal) third sector in Slovakia comprises the
following types of organization (Kuvikova, 2006):
A: Associations – legal persons with physical or legal persons as their members. Associations
are established by the decision of the founding group and are registered by the
Ministry of the Interior.
B: Foundations – purpose based funds, based on monetary and non-monetary activities
that are for the public interest. The existing legislation defines possible areas for the use
of foundation resources, such as protection of human rights, humanitarian activities, environmental
activities, health, and education.
1	 There are many examples of very successful municipal sports clubs facing big problems because of insufficient
subsidies from the municipal budget – for example the ice hockey clubs in Zilina and in Banska Bystrica,
and the women´s basketball club in Ruzomberok.
2	 From 2008 all municipalities are obliged to use program budgeting, the implementation of this rule is realised
in several phases.
119Acta všfs, 2/2009, vol. 3
C: Non-investment funds – nonprofit legal persons whose associated financial funds that
shall be used for public interest activities- namely activities in areas of cultural and human
heritage and values; environment; maintenance of natural and cultural values and protection
and development of health and education.
D: Non profit organizations delivering public services – legal persons that deliver public
services in the following areas – cultural and human heritage and values, environment,
humanitarian activities, education of children and youth, social and health care.
From this list it is obvious that sports clubs can choose only one legal non-profit form –
an association. This form has several advantages, as associations are not subject to any
specific state regulation and have free use of their own funds. Their business activities are
not limited. The following main general legislative rules are important for associations
(Kuvikova, 2006):
a)	 Associations are free to realize business activities, but must keep separate accounts
of their own and business activities.
b)	 Surpluses from business activities are first subject to income tax, and the subsequent
net revenue can be used for financing their own activities. The income tax exemption
for organizations with net incomes below 300 000 Slovak crowns (Sk) was abolished
in 2007.
c)	 Associations without business activities and with turnover below a defined level3
can
keep simplified cash accounting books.
d)	 Associations can be registered to benefit from the system of tax assignation (originally
1 % for physical persons; but from 2004 2 % from the tax obligations of legal
and physical persons). In 2005 almost 1 billion Slovak crowns were transferred to the
third sector via this channel (http://www.rozhodni.sk), and 12 % of legal and physical
persons elected to allocate their contributions for associations in sport.
e)	 Associations can receive tax exempted donations, but from 2007 donations cannot
be deducted by donors from their tax base or their tax obligations.
The list of main legal rules for associations indicates that especially before 20074
, this
legal form was potentially effective for smaller clubs with limited turnover and only small
business type revenues.
3	 3 mil. Sk in 2008.
4	 The new social democratic Slovak government elected in 2006 decided to abolish some tax exemptions and
tax advantages for associations, using the argument that such special rules provide too many opportunities
for the shadow economy. It also attempted to abolish the system of tax assignation, but had to abandon
this goal after large scale protests from the civil society.
120 Acta všfs, 2/2009, vol. 3
4	 Sports clubs as companies
Sports clubs can be also established with the legal form of companies, on the basis of the
Business Code 513/1991. Companies are legal bodies of a business character with their
own property and are fully financially independent. The main advantage of this legal form
in sport is the possibility to cover the costs of sporting activities out of the business revenues.
Only the final economic outcome of the company is subject to income taxation, so
clearly the main task for the financial manager of such a club is to balance the budget to
avoid income tax. On the other hand, sport clubs as companies (limited or shareholder)
have to fulfill the same duties as any other business person, including using accrual accounting
books, and paying VAT if their turnover is the limit.
It is apparent that a company form may work for large clubs in popular sports with many
sponsors5
and other large business incomes.
5	 Testing reality: what determines the legal form of Slovak sports
clubs?
To test our conjecture that sports managers choose the legal form of their clubs on the basis
of identifiable criteria, we examined some representative sports. Football was chosen
as representative of “big” sport. Orienteering and triathlon represent “small to medium”
sports. The selection of sports was mainly based on the authors` opportunities to gather
data through personal contacts, as sport clubs have no obligation to provide public information.
All data were obtained by direct field research undertaken in 2007 and 2008.
Football
There are a plethora of football clubs, so we selected representative samples. The first
sample is all clubs belonging to the First/Premier League in the 2007/2008 season. The
second sample is all clubs from the highest regional level: III. League in the Banska Bystrica
region and the final sample is all clubs from the highest local level: “First class” level in
Banska Bystrica district.
First/Premier League
All Slovak first league football clubs are companies. Their annual turnover is between
40 – 100 mil. Sk6
. Revenues are predominantly from commercial activities. The assumption
that clubs in popular sports with large turnovers and a prevalence of “business type”
revenues will decide to function as private companies is reflected in this sample.
Third League in the Banska Bystrica region
Table 1 provides all the basic data about the legal status and budgets of clubs at this level.
The financial data are still very approximate. All but one club are associations, and there
are no municipal clubs in this sample, though one such club does play one level lower, in
the IV. League of the district.
5	 We distinguish between donors (providing donations from income net of tax) and sponsors (ordering – advertisement
– services paid from running costs before income tax has been reduced).
6	 These clubs were not willing to provide any more concrete information.
121Acta všfs, 2/2009, vol. 3
Table 1: Football clubs in the Third League in the Banska Bystrica region
Name Legal form Budget (estimated in SKK)
FK Rakytovce 85 Association 1 mil. – 5 mil.
MFK Lokomotíva Zvolen Association 1 mil. – 5 mil.
ŠK Kremnička Association 1 mil. – 5 mil.
Kinex Bytča Association 1 mil. – 5 mil.
Družstevník Lipt. Štiavnica Association 1 mil. – 5 mil.
MFK Nová Baňa Association 1 mil. – 5 mil.
Sokol Dolná Ždaňa Limited company 1 mil. – 5 mil.
Družstevník Valča Association 1 mil. – 5 mil.
Baník Veľký Krtíš Association 1 mil. – 5 mil.
METAL SERVIS Králiky Association 1 mil. – 5 mil.
MŠK Námestovo Association 1 mil. – 5 mil.
FTC Fiľakovo Association 1 mil. – 5 mil.
Tatran Krasno nad Kysucou Association 1 mil. – 5 mil.
Cementáreň Lietavska Lúčka Association 1 mil. – 5 mil.
ŠK Javorník Makov Association 1 mil. – 5 mil.
MŠK Kysucké Nové Mesto Association 1 mil. – 5 mil.
Source: own research.
Table 2: Football clubs in the “Fist Class” level in Banska Bystrica district
Name Legal form Budget (estimated in SKK)
OFK Slovenská Ľupča Association bellow 500 000,Družstevník
Priechod Association 400 000,ŠK
Hronec Association bellow 200 000,Družstevník
Jasenie Association bellow 300 000,Tatran
Čierny Balog Association bellow 200 000,MIER
Mýto pod Ďumbierom Association 400 000,Družstevník
Baláže Association bellow 150 000,ŠK
OPL Poniky Association bellow 300 000,Mladosť
Lučatín Association 120 000,Slovan
Beňuš Association bellow 150 000,ŠK
Heľpa Association bellow 200 000,Partizán
Osrblie Association 120 000,Sokol
Braväcovo Association 250 000,Tatran
Harmanec Association bellow 200 000,Source:
own research.
122 Acta všfs, 2/2009, vol. 3
“First class” level in the Banska Bystrica district
Table 2 provides comparative data for the lowest district level clubs. The club budgets are
relatively very modest, and all clubs` legal form is that of an association.
Triathlon
There are 64 registered clubs in the triathlon federation (www.triathlon.sk). All of them
have the legal form of an association. The clubs` annual budgets are mostly below 1 mil.
Sk. The exceptions – up to 2 mil. Sk. in special years – are due to good sponsors or significant
income from tax assignations. The proportion of commercial revenues in all clubs is
small to almost zero. This sample is consistent with our conjecture that sports with limited
popularity, small budgets and limited “business type” revenues would choose the legal
form of association.
Orienteering
There are 24 registered clubs in the triathlon federation (www.orienteering.sk). All of them
have the legal form of association. The annual budget of all clubs is normally bellow 1 mil.
Sk., and there is only one club that may slightly exceed this sum in“good”years. Most clubs
do not have important sponsors or commercial activities. Again this sample is consistent
with our conjecture that sport with limited popularity, low range budgets and limited
“business type” revenues would decide for the legal form of association.
Conclusions
Our paper investigated interesting issue where sports management and public finance
intersect. It focused on the impact of tax and accounting rules and other public legislation
on the choice of the legal form of sports clubs. Three sports were included in the research
sample – football, triathlon and orienteering. The research results are self-evident and it
was unnecessary to validate them with statistical analysis – the size of the budget and
probably also the structure of revenues are the main factors influencing the decision on
the legal form of a sports club.
References
Allen, R.; Tomassi, D. (2001). Managing Public Expenditure. Paris: SIGMA OECD.
Cant, S. (2006). Value-based management. Financial Management, April 2006. pp.
33 – 34.
Cheffins, B. R. (1997). UK football clubs and the Stock Market: past developments and
future prospects. Company Lawyer, Vol.18. No.3. March 1997. pp. 66 – 76.
Clark, B.; Miller, L. (2000). Taxation and Sport in Australia. Sydney: Federation Press.
Duquette, G. H. (2001). Managing Organizations for Sport and Physical Activity: A Systems
Perspective. Journal of Sport Management 16(4), October 2002.
Ealey, J. (1997). Net profit football- the financial game. International Accountant, Autumn
1997. pp. 6 – 9.
Filadelfiová, J.; Dluhá, M.; Marček, E.; Košičiarová, S. (2004). Recognition of
the Third Sector in Slovakia. Bratislava: SPACE.
Flynn, N. (1997). Public Sector Management. London: Prentice Hall.
Jones, B. (1997). Financial Management in the Public Sector. London: McGraw-Hill, 1997.
Kuvíková, H. (2006). Rozvoj MVO za pomoci zdrojov EÚ. Banská Bystrica: EF UMB.
123Acta všfs, 2/2009, vol. 3
Kuvíková, H. (2004). Neziskové organizácie v Európskej Únii. Banská Bystrica: EF UMB.
Mahony, D. F.; Howard, D. R. (2001). Sport Business in the Next Decade: A General
Overview of Expected Trends. Journal of Sport Management 15(4), October 2001.
MEDVED et al. (2007). Zaklady verejnych financii. Bratislava: Sprint.
Mesa 10 (2004). Sprava o plneni uloh a sucasnom stave sportu v Slovenskej republike
a o pripravovanych opatreniach na skvalitnenie a sprehladnenie financnych tokov a legislativnych
aktivit na zlepsenie podmienok pre mladeznicky, regionalny a vrcholovy sport
a sport pre vsetkych. Bratislava: MESA10.
Mitchie, J. (2005). The corporate governance of professional football clubs in England.
Corporate Governance. Vol. 13. No. 4. July 2005. pp. 517 – 531.
Ochrana, F. (2003). Verejna volba a rizeni verejnych vydaju. Praha: Ekopress, 2003.
Raguseo, D. (2008). Factors influencing the size of the non-profit welfare sector among the
EU countries. Banska Bystrica: UMB.
Rowbottom, N. (2002). The application of intangible asset accounting and discretionary
policy choices in the UK football industry. British Accounting Review. Vol. 34. No. 4.
December 2002. pp. 335 –355.
Salamon, L. M.; Anheier, H. K. (1994). The Emerging Sector. The Nonprofit Sector in
Comparative Perspective – An Overview. Baltimore: Johns Hopkins University.
Salamon, L. M.; Anheier, H. K. (1998). The Emerging Sector Revisited. A Summary. Baltimore:
Johns Hopkins University.
Salamon, L. M. (1999). Global Civil Society: Dimensions of the Non-profit Sector. Baltimore:
Johns Hopkins University.
Sivak, R. et al. (2007). Verejne financie. Bratislava: Iura Edition.
Thorpe, D. (1996). Taxman 1, Football 0. Tax Journal, No. 370. 5 September 1996. pp.
7 – 8.
World Bank, World Development Indicators 2007, www.worldbank.com
Wright, G.; Nemec, J. (2002). Public Management in the Central and Eastern European
Transition: Concepts and Cases. Bratislava: NISPAcee.
www.education.gov.sk
www.statistics.sk
www.orienteering.sk
www.triathlon.sk
Contact address/Kontaktní adresa
prof. Ing. Juraj Nemec, CSc.
Faculty of Economics, Matej Bel University Banska Bystrica, Slovakia
(juraj.nemec@umb.sk)
doc. PaedDr. Miroslav Nemec, PhD.
Faculty of Humanities, Matej Bel University Banska Bystrica, Slovakia
(nemec@fhv.umb.sk)