Marketing and advertising. What the expenses are that are costs that lower the taxable income

A reader of the “Commercial Director” magazine has asked the tax law experts the following question: “Our company is optimizing the expenditure of funds in all departments. A question arose: which marketing and advertising expenses may be classified as costs that lower the taxable income? What should be taken into account in order to avoid any problems with the law?”

An expert’s recommendation

Ivan Shiyonok, Advocate of the Law Firm "YUST":

The general principles that one should follow when including any expenses in the tax base of the income tax are the requirements of clause 1 of Article 252 of the TCRF regarding the grounds and documental proof of the taxpayer’s expenses. Such requirements are fully valid for the marketing expenses. Therefore, you should strictly document all facts regarding advertising expenses and ensure the safety of the relevant documents. I recommend keeping not only the agreements with the makes and distributors of advertising, execution acts, payment documents, but also samples of advertising production, output data of advertising publications and copies of editions bearing the taxpayer’s advertising. Also, the relations of the parties in the advertising sphere are subject to the Russian advertising legislation, violation of which may also bring unfavorable consequences for the company. Let us dwell on the main issues.

Advertising should not be selective. Advertising is information distributed in any way, in any form and by any means, addressed to an indefinite number of persons and aimed at attracting attention to the advertised object, creation or maintenance of an interest in it and its promotion on the market (clause 1 of Article 3 of the Federal Law No. 38-FZ “On advertising” dated 13.03.2006). According to this legal provision, advertising is in all cases addressed to an indefinite number of persons. In practice, companies sometimes forget about this crucial trait of advertising. For example, those firms that work with clients draw up a nominal list of their contractors, among whom the advertising products will be distributed. In this situation, a tax authority may rule such advertising selective and not intended for an indefinite number of persons, and the expenses for distribution of the respective materials will not be acknowledged as advertising expenses. In order to avoid similar problems, do not indicate specific addressees of the advertising information during its distribution. If the indication of the addressee’s personal information cannot be avoided, for example – when advertising by direct mailing, mention in the marketing policy and in the decision to hold an advertising event that the addressees were randomly selected from among a large number of variants. It can also be said that sending of the advertising information to those exact persons was not due to any special causes related only to them…

The full version of the material is available in the issue No. 2/2013 of the “Commercial Director” magazine.