Expenses for the organization of fairs in tax costs
Entrepreneurs often take part in various conferences or trade fairs in order to establish wider business contacts. Of course, participation in such events involves certain costs that the entrepreneur must incur by sending, for example, his employees to the fair. It is important to properly classify them as advertising or representation expenses. So how should such expenses be accounted for?
As a rule, the main purpose of companies' participation in fairs is to present the goods or services they offer in order to attract new customers. Trade fairs are often aimed at enabling, for example, the implementation of a new product on the market, or establishing cooperation with other entrepreneurs from the same industry. However, participation in fairs is mainly advertising-related - encouraging potential customers appearing at the fairs to purchase products / services offered by companies presenting at such events. Most of the expenses incurred to display your products at fairs are related to advertising and may constitute tax deductible costs. If the aforementioned costs relate not to advertising but to representation, they cannot constitute tax costs.
The basic costs related to participation in the fair are expenses related to the rental of advertising space and the construction of the stand. As long as they are related to economic activity and are intended to achieve, secure or maintain a source of income, they may constitute a tax expense. The same applies to printed advertising leaflets or small gadgets with the company's logo. These costs are considered as advertising expenses.
This was considered, among others, by the Head of the Podlaskie Tax Office in the individual interpretation of May 21, 2007 (PO-II / 423/15 / AN / 07), in which he indicated that the costs incurred by the Applicant (...) expenses in the form of renting the exhibition space, building the space and its equipment and decor, printing advertising brochures and catalogs, purchasing advertising gadgets with the company's logo, purchasing other goods, such as flowers, sweets, drinks and other food products (not having the character of elegance or grandeur), generally available to fair participants, the costs of transporting the above-mentioned exhibits to the venue of the fair and the service of the stand by hostesses, constitute tax deductible expenses, as advertising expenses.
The interpretation also indicates expenses that will not constitute tax deductible costs, namely: (...) costs incurred in connection with the purchase of catering services, alcohol or other expensive gifts, not bearing the company's logo, intended for potential customers participating in the fair, should be qualified as representation costs, which are not tax deductible costs.
Accordingly, it can be concluded that all reasonable and reasonable expenses related to participation in the fair may constitute tax deductible costs. Often, however, at trade fairs, instead of (or in addition to) low-value gadgets, entrepreneurs also hand out their company's products. As a rule, tax authorities assume that the free-of-charge transfer of products manufactured by the company (e.g. electronic devices) to selected contractors is a representation, as it serves to build the company's image. Such a position would therefore preclude the tax deductibility of the gifts thus provided.
However, the Supreme Administrative Court in its judgment of 12 June 2013 (file reference number II FSK 2053/11) had a different opinion than the tax authorities. In the case at hand, the taxpayer who is a producer and distributor of lighting equipment intended for public facilities, outdoor and street lighting - on the basis of the developed regulations, intends to provide its current and potential contractors with products and commercial goods that are part of the commercial offer addressed to contractors. The court found that (...) the purpose of these activities is to constantly maintain high knowledge of the taxpayer's products by future and current contractors. Moreover, donating a product increases its market presence, and the more places it is installed, the more trust the taxpayer's products will inspire. This type of behavior of the taxpayer comes down to the presentation of its products and the creation and strengthening of their knowledge on the market. So it is not building and disseminating the image of the taxpayer but its products (...).
This issue is therefore controversial and leaves many doubts. It is certain, however, that the taxpayer may count as costs expenses related to the organization of the stand at the fair, its operation, as well as the purchase of small gifts, printing advertising leaflets or refreshments. It is important, however, that the expenses incurred are properly documented and - of course - directly related to the business.
