Marketing expenses in company costs
Marketing and advertising is one of the basic groups of expenses incurred by companies operating on the market. Their main goal is to increase sales and recognition of the company, brand and product. The basic marketing activities include the organization of events, providing free samples and gifts, placing advertising signs or even sponsorship agreements. Each of these activities has different tax consequences. Can marketing expenses be a tax deductible cost?
Organization of events in company costs
Event agencies offer their services mainly to companies and organizations. The range of services they provide is extremely wide - from team building events, through galas, picnics and banquets, to promotional events.All these activities are aimed at creating a positive image both inside and outside the company. If the entrepreneur decides to undertake this type of company promotion, in order to correctly document the cost, he should obtain an invoice that will be the basis for accounting. In the case of taxpayers who keep a tax book of revenues and expenses, col. 13 KPiR - other expenses will be appropriate to show the cost. If the expenditure is used for a taxable activity, the entrepreneur may deduct VAT from the purchase invoice.
In order for the expense to constitute a tax deductible cost, it should be incurred in order to achieve income or to maintain or secure the source of income, with the exception of the costs listed in art. 23 of the PIT Act.
Even when a given event does not bring the intended results (e.g. gaining new customers), the taxpayer may classify this type of expense as company costs.
Free samples for potential customers
During various types of fairs, promotional events, etc., entrepreneurs decide to provide free samples. This type of event has specific consequences in terms of income tax and VAT.
Pursuant to the VAT Act, a sample should be understood as a specimen of goods, identifiable as a sample, or a small quantity thereof, which allow for the assessment of the characteristics and properties of the goods in their final form, while their handing over (handing over) by the taxpayer:
aims to promote this product and
it does not serve to meet the needs of the final recipient with regard to a given product, unless satisfying the needs of that recipient is an integral part of the promotion of this product and is to encourage that recipient to purchase the promoted product.
In the case of goods transferred for samples, they should be reclassified in the KPiR from column 10 (purchase of trade goods and basic materials) to column 13 (other expenses). As a rule, posting should be made on the basis of a statement that will detail the type of goods, their quantity and price.
If the entrepreneur knows at the time of purchase that a given product will be transferred for samples (advertising purposes), he should include it directly in column 13 of the book.
On the other hand, when it comes to VAT, in a situation where the delivered goods meet the above-mentioned definition of a sample, the taxpayer will not be obliged to tax them.
Gifts and gadgets for contractors
In order to strengthen their bond with the client, entrepreneurs often decide to give them small gifts, gifts and gadgets. Such activities occur mainly around holidays, company birthdays, etc. How do I tax such gifts?
The VAT Act defines the definition of gifts of small value. Pursuant to Art. 7 sec. 4 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 a record allowing for the identification of these persons;
the transfer of which has not been included in the records referred to in point 1, if the unit purchase price of the goods (without tax), and if there is no purchase price, the unit production cost specified at the time of handing over the goods, do not exceed PLN 10.
If the items transferred to contractors meet the requirements of the above-mentioned definition of a low-value gift, this event is not subject to VAT.
The issue is different in terms of income tax. Because the tax deductible costs include those expenses that meet the requirements of Art. 22 sec. 1 of the PIT Act:
Tax deductible costs are costs incurred in order to achieve income or to maintain or secure the source of income, with the exception of the costs referred to in article 1. 23.
At the same time, as stipulated in Art. 23 sec. 1 point 23 of the Act:
Representation costs, in particular for catering services, purchase of food and beverages, including alcoholic beverages, are not recognized as tax deductible costs.
If the given gift has the characteristics of a representation cost, it cannot be tax-deductible.
In any other situation, this expense may be a company expense that should be reported in column 13 of the ledger (other expenses). If the trader has decided to hand over his goods as a gift, he should reclassify it from column 10 (purchase of commercial goods and basic materials) to column 13 (other expenses).
Advertising signboards - tax settlement
Advertising signboards are another form of reaching customers often used by entrepreneurs. The method of settling this type of purchase depends on the value of the sign. In the case of an advertising sign, the value of which does not exceed PLN 3,500 (net - in the case of active VAT payers, gross - in the case of entities exempt from VAT), the matter is quite obvious. This is because the purchase should be shown directly as tax deductible costs, in column 13 of the KPiR (other expenses).
It may be problematic when the value of the signboard exceeds the magic amount of PLN 3,500. Then this type of purchase may constitute a fixed asset.
Sponsorship agreements as a form of marketing
In order to evoke a positive image in the eyes of current and future customers and contractors of the company, companies often decide to sponsor various types of social or local campaigns. Then both parties - the sponsor and the sponsored one, conclude a sponsorship agreement. In this type of contract, each party undertakes to perform mutual services (e.g. in exchange for financial support by the sponsor, the sponsored party undertakes to organize an event during which the sponsor's logo will be displayed).
The sponsor may include this type of expenses in tax deductible costs as advertising cost in column 13 KPiR - other expenses.
Importantly, the expenses made by the sponsor are not always included in the tax costs in their full amount. They are limited to the amount of the costs of the advertising in return.