It is an axiom that advertising is largely the engine of trade. This activity can bring significant profits, part of which in the form of taxes should not pass through the state budget.
However, there has been no tax under this name in the Tax Code of the Russian Federation since the beginning of 2005. Despite this, it is still relevant, but not as taxation of the promotion of business results (goods, works, services), but under other names, if advertising activity falls under other tax levies or laws of other countries.
Let's consider who in the Russian Federation must pay advertising tax in 2021, in what forms this occurs, how to correctly calculate the amount and accompany the payment with the necessary documentation. Read all about the advertising tax in modern domestic business in this article.
Advertising and laws
The main legislative acts that local governments should not contradict in terms of adopting rules regarding advertising tax:
- Tax Code of the Russian Federation (within the framework that establishes the main essential features for each tax: base, rate, payers, beneficiaries, accounting period, etc. - for the advertising tax they are all available);
- Law of the Russian Federation No. 108-F3 “On Advertising”, approved in 1995, which has been amended many times, in particular, the most recent one dates back to 2021.
REFERENCE! On the territory of Moscow, the payment of advertising tax is regulated by Law No. 59 of November 21, 2001.
This type of tax is also briefly mentioned in Federal Law No. 2118-1 of December 27, 1991 “On the Fundamentals of the Tax System in the Russian Federation,” where its rate is approved.
Approximate recommendations for calculating the amount of this tax are given in the Regulations on the procedure for calculating and paying advertising tax, approved by Letter of the Ministry of Finance of the Russian Federation dated June 2, 1992 No. 04-05-20, Federal Tax Service of Russia dated June 2, 1992 No. IL-6-04/176 and the Commission of the Council of Republics of the Armed Forces of the Russian Federation on the budget, taxes and prices dated June 4, 1992 No. 5.1/693.
All other legislative subtleties are prescribed in regional regulations, since this tax is local.
So, we can give the following definition to the advertising tax - it is a local fee taken from entrepreneurs whose expenses include expenses for promoting their own products.
VAT deduction on advertising materials considered goods
If a company transfers advertising material that is not considered a product, VAT is not charged, regardless of its value. Is it possible to apply VAT deduction to such materials?
The Ministry of Finance expressed the position that this cannot be done (Letter dated December 23, 2015 No. 03-07-11/75489). In such a situation, the condition for the deduction that it is possible only when using goods in transactions that are subject to VAT is not fulfilled. The agency believes that if the transfer of such materials does not appear subject to VAT, then a deduction cannot be applied for them.
But the Supreme Court takes the opposite point of view (Decision dated December 13, 2019 No. 301-ES19-14789). Therefore, the use of input VAT deduction on these advertising materials is legal. But you need to take into account that tax inspectors, when checking, may try to declare such an action illegal. And it is quite possible that you will have to defend your position in court.
Main categories of advertising activities
Carrying out advertising activities is any form of communicating information about your goods, services, works and other products to the public through the media (print, television, radio) or illustrative means (boards, tickers, signboards, posters, posters and etc.).
An advertiser is a legal or natural person who bears the costs of advertising activities and on whose behalf they are carried out.
Advertising producer (distributor) - a person or organization that has produced (and/or placed) advertising information on the order or instructions of the advertiser.
Advertising medium – the place and method of advertising.
The following information translated into public form does not apply to advertising:
- signs informing about the opening hours of the establishment;
- any registration of data on the rules of customer service;
- notifications and changes in location, operating hours, contacts or details of the organization;
- government notices;
- warning or prohibition notices;
- other information messages.
Features of goods for VAT purposes
In what cases does advertising material meet the characteristics of a product, the transfer of which forms an object of VAT taxation? Everything is simple - if it has its own consumer qualities, i.e. has consumer value for the recipient.
Accordingly, if the transferred property containing advertising information does not have its own consumer qualities, then it cannot be a product, which means that its gratuitous transfer cannot be considered as an operation that forms an independent object of taxation. And here the value of the purchase price of such property no longer matters.
This conclusion is confirmed both by officials (letters of the Ministry of Finance of Russia dated December 23, 2015 No. 03-07-11/75489, dated October 23, 2014 No. 03-07-11/53626, dated September 19, 2014 No. 03-07-11/46938), and and courts. Thus, in paragraph 12 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated May 30, 2014 No. 33 o.
Let's give examples. Advertising materials that do not meet the characteristics of the product are booklets, leaflets, catalogs, postcards, notepads, calendars that contain advertising information (Resolution of the Moscow District Arbitration Court dated March 29, 2017 No. F05-3154/2017 in case No. A40-94917/2016 ).
Examples of advertising materials that meet the characteristics of the product are, in particular:
- electric shavers, electric kettles, ashtrays, knives, DVD players (Resolution of the Arbitration Court of the Moscow District dated June 20, 2018 No. F05-8543/2018 in case No. A40-117346/2017, which was determined by the Supreme Court of the Russian Federation dated October 15, 2018 No. 305-KG18- 15882 was refused transfer for review);
- advertising souvenirs (including diaries, calendars, gift sets, baseball caps, T-shirts, balls, lanterns, tea sets, umbrellas, canes, gift books, metal cases, 3Q hard drives, etc. with your logo) (Resolution of the Arbitration Court Court of the West Siberian District dated September 27, 2017 No. F04-3736/2017 in case No. A46-838/2017, which was refused to be transferred for review by Decree of the Supreme Court of the Russian Federation dated December 22, 2017 No. 304-KG17-19340).
By the way, you can safely deduct the “input” VAT paid as part of the cost of promotional gifts (letter of the Ministry of Finance of Russia dated June 4, 2013 No. 03-03-06/2/20320). Therefore, if the goods were purchased from VAT payers, then when distributed for advertising purposes and VAT is calculated, the tax burden for VAT as a result of this operation will be zero (VAT calculated = VAT deducted).
Who will have to pay advertising tax and who will not?
Payers of this type of tax payment are individuals and/or legal entities of any form of ownership or department that carry out advertising activities regarding their products. The activity must meet the following criteria:
- the advertised products must be the property of the advertiser;
- the advertiser as an entrepreneur must be registered in the territory of the relevant constituent entity of the Russian Federation.
NOTE! If a foreign citizen has registered his business activity in the territory under the jurisdiction of the Russian Federation, the advertising tax applies to him to the same extent as to Russian citizens.
Do not pay advertising tax:
- organizations conducting political campaigns (campaigning is not formally classified as advertising activity);
- persons whose advertised products or services are promoted without the purpose of making a profit;
- rehabilitation and adaptation centers;
- social and charitable organizations.
FOR YOUR INFORMATION! The taxpayer can be not only the advertiser himself, but also his principal - the organization that carries out advertising activities for him.
In this case, funds in the amount of the tax payment are added to the amount of payment for these services under the contract. Responsibility for non-payment or errors remains with the advertiser.
1) Taxes of the author-developer of the application
As last time, let's start with the most interesting thing - a single author who receives income from the results of his creative activity.
Current legislation does not require registration as an individual entrepreneur if a citizen receives income from the use of his own works. Computer programs are protected by copyright as literary works. Hence the conclusion
: Any methods of using the software that generate income for the author do not fall under the definition of entrepreneurial activity.
But there is a significant nuance: by “using” software we mean disposing of the rights to it from the point of view of copyright
. In other words, the author’s receipt of income under a software license agreement is not related to the implementation of entrepreneurial activities.
As a result, at the end of the financial year, the author only needs to submit an income tax return, indicating the proceeds from the sale of his applications on Google Play and paying 13% personal income tax on them. At the same time, it does not matter to the author where and how Google pays taxes on such income and what commissions it withholds.
It should be remembered that the considered option only applies when selling your own software
. In other words, the author, if necessary, must confirm the exclusive rights to such software.
The simplest confirmation method is state registration of computer programs with Rospatent. Based on the results of registration, a Certificate is issued, which clearly indicates the copyright holder and author. In this case, they must match 100%. Until it is proven that another person indicated in the Certificate will be considered the author and copyright holder of the program.
Other options for systematically generating income based on the use of software can be classified as entrepreneurial activity. What does this include? For example, displaying Google AdSense ads in an application may be considered advertising services
. With this method of monetizing applications, we recommend that the author register as an individual entrepreneur and withdraw income from Google AdSense to the individual entrepreneur’s bank account with all the resulting tax obligations.
What amounts is this tax calculated on?
The tax base for this type of municipal payments is a specific figure indicating the expenses of a company (or individual entrepreneur) allocated to advertising activities designated as such in the legislation. Expenses considered advertising:
- assets spent on the development, production and placement of advertising products ordered from the advertising manufacturer and placer;
- finances that resulted in the purchase of materials and independent production of advertising or participation in it;
- investment of funds in promotion from another entrepreneur (organization), that is, the help of sponsors.
These types of expenses include not only material expenses, but also deductions for depreciation and wages.
The following expenses are not included in the advertising tax base:
- payment for permission to an advertising campaign;
- funds spent on informing about a future promotion.
Working through intermediaries
If you do not want to monitor changes in legislation and do advertising yourself, you can contact an advertising agency. As a rule, they work under an agency or commission agreement. There are advantages to working with agencies:
- Possibility of full provision of PUDs
- The ability to reflect advertising costs in accounting and tax accounting and include them in the costs taken into account for taxation, and, as a result, tax optimization
- Prompt transfer of funds to advertising accounts
- The agency will fulfill tax obligations for VAT and NDI independently
- A higher level of trust in the advertiser, which directly affects the effectiveness of the advertising campaign.
The downside of working with agencies is the additional commission they will charge for their services.
How to calculate the amount of advertising tax
The calculation procedure is no different from other tax levies: the numerical indicator of the tax base must be multiplied by the rate, which for this tax is unchanged and amounts to 5%. Cost data is taken from accounting records. They are written off as expenses that reduce the income tax base, some in full, and some only in the amount of 1% of revenue. VAT is excluded from funds spent on advertising.
IMPORTANT! If payment for advertising activities was made not in rubles, but in foreign currency, then to calculate the tax it is necessary to re-evaluate the currency balances, that is, convert the figures into rubles at the current exchange rate of the Central Bank of the Russian Federation.
Payment deadlines
Subtleties regarding deadlines are established by municipal (regional) legislation. Typically, the period for calculation, payment and submission of the declaration is:
- for legal entities – quarter;
- for individuals – a year.
Tax payment
What is this? The income that a foreign organization received for the provision of advertising services is subject to tax on the income of foreign organizations (Article 189 of the Tax Code).
How to count?
- NDI tax base = total amount of income in favor of a foreign organization
- Income tax rate - 15%
- Formula for calculating NDI: amount of income * 15%
- For example, you paid 100 BYN, in which case NDI = 100 * 15% = 15 BYN
How to pay? NDI should be withheld from funds owed to the foreign organization and transferred to the budget. In practice, it is often not possible to withhold tax. It is permissible to transfer taxes to the budget from your own funds.
When to serve? Payers submit a tax return on NDI no later than the 20th day of the month following the quarter in which obligations to pay NDI arise, and pay no later than the 22nd day of the same month.
When taxing the income of a foreign company, one should also be guided by the provisions of international agreements concluded with Belarus: unless otherwise provided by international agreements, then the provisions of these agreements are applied.
Responsibility for tax violations
Legally significant violations of advertising tax payment, entailing tangible consequences, may be the following:
- Incorrect calculation of the tax amount, resulting in arrears.
- An error resulted in an overpayment.
- Failure to make this payment on time.
- Failure to submit a tax return or submit it late.
In the first and second cases, the entrepreneur has a decade to correct the inaccuracy, then penalties will be calculated (in case of arrears) or the excess amount can no longer be returned or offset (in case of overpayment).
