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Representation or advertising expenses?

An important factor in a business development is effective advertising, networking with customers and partners and organization of various representative events. However, the correct and consistent classification of such costs in the company's accounting is very important for correct tax calculation.

In addition, starting from year 2018, there will be a new tax calculation procedure and representation costs exceeding the threshold set in the new CIT Law, will be subject to CIT. The same appies to non-business costs.

Allocation of advertising and representation expenses to one of the above groups depends on whether a company sells goods or services, industry, justification of a direct link to economic activity or compliance with tax regulations.

Therefore, we advise to develop an internal accounting methodology in the company to establish a correct and consistent approach for classification of the expenses in acompany's accounts and avoid errors in tax calculations.

What are the benefits of high-quality internal accounting methodology for representation and advertising costs for a company? 

  • A description of arrangement for planning advertising and representation expenses, it accounts and write-offs (cost eligibility and responsibilities).
  • Possible tax savings if some of costs are still classified as non-business or representation expenses due to precaution. while it can be classified as business expenses of economic nature.
  • Saving time of accountant and other employees.
  • It can serve as supporting document for costs classification applied in a company’s accounting during tax audits and disputes with tax authorities.
  • All possible advertising, representation and similar expenses will be listed and classified in the methodology.
  • It can be used as a reference guide for preparation of additional internal supporting documents specified in tax regulations for relevant expenses.

In case we can help you, please contact our advisory specialists.


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