Today, when the release of new products, the companies often organize presentations. In this way they advertise a new product and are happy to celebrate that event for potential buyers. How to organize such an event, reflect in the accounting and what tax consequences to expect – in the following.
Organizational moments
It should be noted that the most common expenses for the presentation are:
- room rental;
- organization of a buffet;
- organization of cultural and entertainment program.
To make a presentation at the proper level, it is necessary to arrange it as an advertising campaign. Such an event should be conducted in order to increase the number of customers, expand the circle of business partners, and, consequently, is related to obtaining income in the future.
In addition, it is necessary to properly document the costs. It should be prepared:
- order of the company head to conduct an advertising action in the form of a presentation;
- a promotional plan and cost estimates for its implementation;
- list of invited business partners (real and potential);
- primary documents confirming the incurred expenses (invoices, acts, etc.);
- reports on the performance of the action and the implementation of the cost estimate.
Accounting
In accounting, the costs of conducting a presentation should be reflected as an advertising campaign. Such expenses will be included in sales expenses on account 93 “Expenses on sales” during the period of their implementation.
Taxation
Taxation rules for presentation of the income tax do not differ from the rules of accounting. That is, all the expenses of a presentation conduction that is included in the cost of accounting, automatically reduce the object of taxation of the income tax. This applies both to low-income and high-income people. The point is that there are no reservations in attributing the expenses of such measures to the Tax Code of Ukraine (hereinafter – TCU).
Personal Income Tax, Unified Social Contribution, War Tax
The object of taxation of the personal income tax (hereinafter – PIT) does not arise for partners and clients who will be invited to the presentation. The reason is simple: in this case, it is impossible to determine the income of each person, that is, incomes are non-personalized. Therefore, there is no need to withhold the PIT and the war tax (hereinafter – WT). The tax authorities agree with it (category 103.02 ZIR).
Also, there is no object for the collection of the unified social contribution. The costs incurred in organizing such activities do not belong to the wage fund and are impersonal.
VAT
The amount of “incoming” value-added tax (hereinafter – VAT) paid during the implementation of all expenses for the organization of a festive presentation can be included in the tax credit of the company. The right to a tax credit will be incurred in the presence of supporting documents (tax invoices registered in the Unified Register of Tax Invoices (hereinafter – URTI), other documents stipulated in para. 201.11 of TCU). Such requirements are set forth in para. 198.3 and 198.6 of TCU.
Since the presentation can be linked to business activity, that is, it is carried out for the interest of customers and partners in the acquisition of products, then it is not necessary to adjust VAT obligations in this case. To associate such an event with a business activity, it should be designed as a promotion action.
If it is not done, there may be problems with VAT. Tax authorities can recognize such a transaction as a non-economic and can require a refund of the tax credit received when purchasing goods for presentation, by accruing “compensating” tax liabilities in accordance with sub-para. “г” of para. 198.5 of TCU.
If the presentation is not documented as a promotion action, it is better to calculate “compensating” tax liabilities not later than the last day of the reporting (tax) period in which the presentation to be held. It will be necessary to do this by drawing up a consolidated tax invoice (hereinafter – TI).
The following should be indicated in this document:
- in the upper left side of TI – type of reason “13” (use of production or non-productive assets, other goods/services in non-business activities), and put the code of the consolidation “4”;
- in the column “Receiver (buyer)” – the proper name;
- in the line “Individual Tax Number of the Recipient (Buyer)” – the conditional tax reference number “600000000000”;
- in the “nomenclature” of gr. 2 of sec. Б – details of TI (number and date of their drawing up), which relate to the incoming tax credit for the goods/services used during the celebration. This TI should be registered in the URTI in the general order in due time.
The “compensating” tax liabilities should be accrued only on the amount of “incoming” VAT, which fell into the tax.
