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CSR, Advertising and Representation – Can They Be Tax-Deductible Expenses?

Although expenses for corporate social responsibility (CSR), advertising and representation serve to build a positive image of the company, differences in their nature and purposes may determine whether they will be recognized as tax-deductible costs.

What costs can be considered tax-deductible?

According to the principle in the Income Tax Law, tax-deductible costs are those incurred to earn revenue or to preserve or secure a source of revenue. However, there are exceptions, and one of them is representation costs.

Tax-deductible costs are those incurred to earn revenue or to preserve or secure a source of revenue

Costs of representation – what is worth knowing?

Although the concept of “representation” is not defined in the regulations, numerous interpretations and case law indicate that it should be understood as expenses for building a positive image of the company.

Expenses for catering services, the purchase of food or beverages, including alcoholic beverages, in fact, cannot be considered tax-deductible costs, as they relate to the general image of the company, and not to the promotion of specific goods or services.

Advertising vs. representation – where does the line lie?

Unlike representation, advertising and marketing expenses can usually be included in tax-deductible costs. Advertising is aimed at promoting specific products, brands or services, which distinguishes it from representation, which is aimed at the overall image of a company.

CSR and deductible expenses – how to qualify them?

Corporate Social Responsibility (CSR) expenses can be considered deductible if they can be shown to be related to earning, preserving or securing a source of revenue. To prove this, it is worth supporting with documentation, such as internal policies, company regulations or complete project documentation.

Corporate Social Responsibility (CSR) expenses can be considered deductible if they can be shown to be related to earning, preserving or securing a source of revenue.

VAT and representation expenses – can they be deducted?

Although representation expenses are not tax-deductible costs, VAT regulations do not disqualify them as a basis for input tax deduction, as long as the expenses are related to the performance of VAT-taxable activities.

However, it should be remembered that input VAT on catering services (with the exception of the purchase of prepared meals for passengers by taxpayers providing passenger transportation services) and lodging (with the exception of those purchased for resale and taxed to that taxpayer in accordance with the rules indicated in the VAT regulations) is not deductible.

Have doubts? Consult the experts

If you have questions about the qualification of expenses for CSR, advertising and representation as deductible expenses, contact us. Our law firm will help you dispel any doubts and ensure compliance with current regulations.

Author team leader DKP Legal Ewa Lewicka
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