Sometimes there is a need to cooperate with journalists as part of business activity. This is particularly the case when we want to promote a new product in the media by coordinating and editing the notes of cooperating journalists. For this purpose, a number of expenses called PR (Public Relations) costs are incurred.
These costs may include expenses such as:
- costs of events (e.g. press conferences);
- transport costs for journalists;
- advertising gadgets issued to them;
- accommodation and meals related to promotional events.
As it is commonly known, in order to include all promotional activities as tax-deductible costs, in the perspective of the authorities, they must be treated as advertising expenses, not entertainment expenses, because under Article 16 sec. 1 point 28 of the Polish CIT Act, these are not considered tax-deductible costs.
In the opinion of our team, such PR costs are tax costs, because they fall within the definition of advertising. The concept of advertising should be understood as broadly as possible and taking into account current market trends, customer needs and expectations.
In marketing, there is a concept of the so-called AVE (Advertising Value Equivalent) – it is an index of the effectiveness of PR projects, the value of advertising in a given medium compared to the area of materials on a given topic in print media or the duration in electronic media.
When determining whether PR costs are tax costs, it is worth referring them to AVE. In most cases, it is the case that entities conducting business activity save expenses on paid advertising materials, due to the fact that the value of PR costs is lower than AVE. This is tantamount to achieving the same effect at a lower cost, and thus such action should be considered purposeful.
Therefore, not only do PR costs contribute to increasing revenue, but they are also cheaper than an alternative form of promotion, which contributes to the optimization of the business.
The correctness of such an approach was confirmed by the Director of the National Tax Information in an individual interpretation of 22 January 2020, file reference number 0114-KDIP2-2.4010.487.2019.2.AS:
“Taking into account the presented description of the case and the tax law provisions applicable in the present case – including the general premises determining the recognition of a specific expense as tax-deductible costs specified in Article 15 sec. 1 of the said Act and the specific nature of the Applicant’s business, in relation to the >>image<< issues indicated in the application, including the positive perception of the Applicant’s brand products, it should be noted that expenses incurred in the strict sense related to the service of the journalists’ stay, as well as photographic documentation of the journalists’ stay, which will be provided to the journalists in order to use the photographs in press publications, as well as by the Applicant for its own advertising purposes:
- accommodation of journalists in a hotel,
- meals during the journalists’ stay,
- rental of a coach used to transport journalists from Warsaw and back, as well as local journeys during their stay on Y.,
- accommodation in the hotel of the independent consultant referred to above,
- rental of one hotel room, which will be used by employees as a warehouse for storing things necessary to handle the event and personal items,
- occasional gifts, i.e. cosmetics manufactured by the Applicant, from the latest product offer,
- photographic documentation of the journalists’ stay, which will be provided to the journalists in order to use the photographs in press publications, as well as by the Applicant for its own advertising purposes,
- use of private cars by employees for business purposes related to the operation of the project
- – should be treated in the same way as advertising.
In the light of the above, it should be stated that all expenses incurred by the Company for the organization of the above-mentioned workshops contribute to a visible extent to generating revenues or maintaining or securing a source of revenue, therefore they meet the basic premise resulting from Article 15 sec. 1 of the Polish Corporate Income Tax Act – the Company may include them in full as tax-deductible costs.”
The same position was expressed in the individual interpretations of the Director of the National Tax Information of date:
- 21 October 2013, file reference number IPPB5/423-460/12/13-5/S/JC;
- 10 August 2015, file reference number ITPB3/4510-215/15/AW;
- 27 April 2017, file reference number 0112-KDIL5.4010.1.2017.1.AO.
