Handing over of goods for advertising purposes

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When running a business, you should take into account the necessity to advertise your products. Otherwise, customers will not know the existence of the company and the entrepreneur will not make a profit. Enterprises use various forms of advertising, such as press and TV advertisements or direct contact with the client. During such meetings, the company's products are often used to gain customer feedback and familiarize them with the range of products offered. Entrepreneurs have a problem whether such use of the company's goods constitutes a supply of goods and whether it should be taxed.

Supply of goods subject to VAT

Pursuant to Art. 5 of the VAT Act, goods and services tax is subject to paid supplies of goods and paid services within the territory of the country. The delivery of the goods is understood as the transfer of the right to dispose of the goods as owner. The delivery of goods also includes the free transfer by the taxpayer of goods belonging to his enterprise, in particular:

  • the transfer or consumption of goods for the personal purposes of the taxpayer or its employees, including former employees, partners, shareholders, shareholders, members of cooperatives and their household members, members of the governing bodies of legal persons, members of the association,
  • any other donation.

A transfer free of charge constitutes a supply of goods, if the taxpayer was entitled, in whole or in part, to a reduction in the amount of tax due by the amount of input tax on the acquisition, import or manufacture of these goods or their component parts.

Deliveries of goods exempt from VAT

The Act stipulates that the delivery of goods does not include gifts of small value and samples. This is the case if the transfer is made for purposes related to the taxpayer's business.

Gifts of small value are understood as goods handed over by the taxpayer to one person:

  • with a total value not exceeding PLN 100 in the tax year, if the taxpayer keeps records that allow for the identification of these persons,
  • the transfer of which has not been included in the above-mentioned records, if the unit purchase price of the goods (without tax), and if there is no purchase price, the unit production cost, determined at the time of handing over the goods, do not exceed PLN 10.

Goods used for advertising fall within the definition of a sample. According to the act, a sample is a copy of a product or a small amount of it, which allows for the assessment of the characteristics and properties of the product in its final form. The sample should meet the following requirements:

  • to promote this product,
  • not serve the purpose of satisfying the needs of the final recipient with regard to a given good, unless satisfying the needs of that recipient is an integral part of the promotion of this good and is to encourage that recipient to purchase the promoted product.

Thus, on the basis of the above-mentioned provisions, it can be concluded that the goods that are a sample or a gift, provided for the purpose of promotion and advertising, do not constitute a supply of goods and are not subject to VAT. They are only intended to persuade the recipient to buy the advertised products.

In the case of goods provided for advertising and promotional purposes, which constitute a taxable supply of goods within the meaning of the VAT Act - the output tax must be charged and shown. Pursuant to Art. 23 (1) (43b) of the PIT Act, the tax due for the consumption of goods by the taxpayer or the provision of services for the purposes of representation and advertising is in this case a tax deductible cost. Expenses for advertising products are included in column 13 of PKPiR as other expenses.