It is no accident that practically there are no businesses not involved in one way or another with various kinds of sales promotion campaigns.
At the same time, sales promotions can cause considerable challenges to tax experts, since familiarity with the detailed rules governing personal income tax is not sufficient to identify the correct tax implications of promotions, but knowledge of the act on gambling operations, corporate tax, VAT, advertising, as well as other related laws is also needed. Furthermore, the proper treatment of promotions from a taxation point of view is not guaranteed in such a case either, as it is indispensable that proficiency in the statutory provisions is combined with the knowledge of “custom law,” the official and unofficial guidances, as well as the auditing practices of the tax authority.
Significant tax savings can be achieved with the careful drafting of the terms and conditions of promotions. For this reason, it is worth paying attention to the designing of such campaigns, as it makes quite a difference if a significant part of the promotion campaign is paid directly to various tax accounts of the National Tax and Customs Administration rather than actually spent on promoting sales.
To whom do we recommend our services?
- To those organising promotions regularly or even just occasionally (running sweepstakes, competitions, raffles, offering sample products or tastings, giving free gifts or rebates with products, etc.);
- To those who operate loyalty programmes based on collecting points, offer gifts for such promotions or redeem points earned in a promotion organised by others;
- To those offering gifts for promotions organised by another company;
- To manufacturers offering gifts / prizes to final consumers by way of retailers, or to retailers assisting in promotions organised by manufacturers;
- To those organising promotions for non-private person customers, or giving away gifts as incentives;
- And to all who are not certain about the tax implications of the above and similar situations.
How can we help?
- We participate in the planning process, cooperating with your marketing and financial departments in the interest of optimising the tax burdens;
- We assist in identifying the tax implications of promotions already announced or conducted (personal income tax, corporate tax, value-added tax, advertising tax, other tax and fee liabilities);
- Relying on the EU's VAT Directive and the decisions of the European Court of Justice, we optimise the VAT treatment of your promotions, and if necessary, request supporting documents from the Ministry of National Economy by way of conditional tax assessment or position letters;
- We support your company in the preparation of the comprehensive system of documentation that may be presented in the course of a tax audit;
- We review the treatment of your promotions organised earlier, assess the related risks, and make recommendations for the settling of any differences;
- We give guidance with respect to what criteria you should take into consideration in the organisation of a promotion, relying on our experiences gained in the course of tax audits;
- We provide assistance in case of promotions jointly organised / conducted with the participation of several companies in the preparation of the contractual background, or review the contracts already in place from a taxation point of view, and make recommendations on how the tax implications can be optimised with the proper configuration of the contractual background.
If you have any questions related to promotions, please contact our colleagues directly or through your Mazars tax advisor.
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