Demonstration of expenses for marketing events
To demonstrate the tax deductibility of marketing expenditures, it is necessary to prove that the marketing event in question actually took place, as well as when it took place, its scope, price and who was involved. The tax administrator often applies this check when evidence is difficult to find or retrieve. Therefore, remember to tell your marketing department to prepare and archive documentation to avoid potential problems.
It is a good strategy to systematically collect documentation related to the entire marketing event. This includes orders, correspondence, contracts, video recordings, stock records, photo documentation and delivery reports. It should be clear from the documentation that this is a specific event that cannot be confused with another event. If there is a direct link to the revenue you earn, do not forget to record it. The cost of a promotional event should not be clearly disproportionate to the scope of performance that we record as having been received.
Various promotional items or samples are also often provided in connection with marketing events. In this case, it is not always necessary to comply with the maximum limit of CZK 500 without VAT for advertising and promotional items, but it is necessary to show a sufficiently strong link with the proceeds of the subsequent sale of goods or services. When providing samples of goods, it is important to document that they have been distributed to those who are presumed to be potential buyers. Otherwise, the cost of the samples provided is not tax deductible and it is necessary to deduct VAT from the price at which it could be obtained.
It is clear from the case law of the Supreme Administrative Court (e.g. Judgment No. 2 Afs 44/2003-73) that it cannot be inferred from the provisions of Section 24 (1) of the Income Tax Act that expenditures must always be materially reflected in the income tax of the taxpayer. Thus, there is necessarily a direct proportional relationship between expenditure and revenue. The meaning of that provision, however, is that expenditures incurred for that purpose must be involved.
If the relationship between the marketing costs and taxable income is not properly documented – or if representation costs are incurred – all or part of the costs may be assessed under Section 25 (1) (t) as tax-ineffective. It is often difficult to determine where marketing ends and representation begins. In practice, therefore, part of the costs in the case of marketing events will probably be assessed as non-taxable, e.g. appearances by artists or athletes at a promotional event, etc.
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