Archive for: definition of advertising

Tax law, case IPPB5/423-249/10-4/PS

September 3rd, 2010, Tomasz Rychlicki

The Polish financial services company decided to increase sales of its services, by providing to clients and potential clients with different types of advertising materials bearing its logo. These materials are worth no more than 100 PLN each and are distributed to customers and potential customers during promotional events, sponsored events, as well as individual meetings.

The Company requested for individual tax interpretation. In its view, costs of these advertising materials could be included in cost of revenue. The Director of the Tax Chamber in Warsaw in its decision of 8 July 2010 case file IPPB5/423-249/10-4/PS ruled that in this case it is important to determine whether the disputed expenses are costs of advertising, or representation. The value of gifts does not decide whether these expenditures are deemed as advertising or representation. The circle of bestowed persons and the circumstances in which these materials were distributed are the most important factors.

The Director considered that the expenditure incurred on the purchase of low value advertising materials that were handed over to customers or potential customers in events such as public fairs, promotional events, etc. may be deemed as deductible costs within the meaning of Article 15(1) of the Polish Act of 15 February 1992 on the Legal Entities’ Income Tax – LEIT – (in Polish: Ustawa o podatku dochodowym od osób prawnych) consolidated text published in Journal of Laws (Dziennik Ustaw) of 2000, No. 54, item 654 with subsequent amendments.

Article 15
1. The deductible costs shall be all costs incurred in order to derive revenues, with the exception of costs referred to in Article 16(1) Costs incurred in foreign currencies shall be converted into Polish zlotys in accordance with the average exchange rates as announced by the National Bank of Poland on the date when the cost was incurred. If costs are denominated in foreign currencies, and there is a difference in the currency exchange rates between the date of entering those costs in the books and the date of payment, those costs shall be increased or reduced, as appropriate, by the differences arising from the application of the currency selling rate as at the date of payment, set by the bank, whose services were used by the person who incurred the cost, and the application of the average exchange rate as announced by the National Bank of Poland on the date of entering the costs in the books.

In the case of the transfer of gifts of higher value to selected contractors or potential contractors in order to create the best impression, the expenditures for the purchase of these gifts have representative nature, and thus are not deductible under the Article 16(1) point 28 of the LEIT.

Tax law, case I SA/Po 454/10

August 15th, 2010, Tomasz Rychlicki

The Polish company offers its partners and customers different products free of charge during its advertising actions. These are coffee and coffee machines or gadgets such as umbrellas, pens, mugs and other gifts such as shirts and other stuff with the logo of the company. The Company has considered whether this type of gratuitous transfer of goods is a transaction subject to VAT tax in accordance with article 5(1)(i) and 7(2)(3) of the Act on Goods and Services Tax – GSTA – (in Polish: ustawa o podatku od towarów i usług) of 11 March 2004, Journal od Laws (Dziennik Ustaw) No. 54, item 535 with subsequent amendments.

Article 5
1. The goods and services tax, hereinafter called “the tax”, shall be charged on:
i) supply of goods and services for a consideration in the territory of the country;

Article 7
2. The supply of goods, referred to in Article 5.1.1, shall also mean the transfer by a taxable person of goods constituting the property of his undertaking for the purposes other than those related to the undertaking operated by a taxable person, in particular:

i) transfer or use of goods for private needs of a taxable person or that of his employees, including former employees, partners, shareholders, members of a cooperative and their household members, members of decision-making bodies of legal persons, members of associations,

ii) any other transfer of goods without consideration, in particular donations

– where the amount of input tax on those transactions was wholly or partially deductible from the amount of output tax.

3. The provision of paragraph 2 shall not apply to printed advertising and informational materials, gifts of small value or samples.

The Voivodeship Administrative Court in Poznań in its judgment of 10 August 2010 case file I SA/Po 454/10 held that such transfer of goods is not subject to VAT.

Trade mark law, case III SA/Wr 499/08

January 30th, 2009, Tomasz Rychlicki

The Voivodeship Administrative Court in Wrocław in its judgment of 28 January 2009 case file III SA/Wr 499/08 held that the powers of sanitary authorities include the power to control of foodstuffs also in terms of their marking and labeling. According to article 120 of the Polish Act of 30 June 2000 on Industrial Property Law – IPL – (in Polish: ustawa Prawo własności przemysłowej) of 30 June 2000, published in Journal of Laws (Dziennik Ustaw) of 2001 No 49, item 508, consolidated text of 13 June 2003, Journal of Laws (Dziennik Ustaw) No 119, item 1117, with subsequent amendments, the trade mark is protected as a whole regardless of its composition. So questioning the legality of a trade mark that was made by the State Sanitary Inspection, with the assumption that part of the label of foodstuff is a registered trademark, lead to an unacceptable invasion of the powers reserved by law for the Polish Patent Office. Indeed, such action of SSI would, in fact, “prohibit” the use of a trade mark, while the State Sanitary Inspection cannot encroach on the powers reserved by law for other state authorites.

Article 120
1. Any sign capable of being represented graphically may be considered as trademark, provided that such signs are capable of distinguishing the goods of one undertaking from those of other undertakings.

2. The following, in particular, may be considered as trademarks within the meaning of paragraph (1): words, designs, ornaments, combinations of colours, the three-dimensional shape of goods or of their packaging, as well as melodies or other acoustic signals.

3. Any references in this Act to:
(i ) trademarks shall also mean service marks,
(ii) goods shall mean, in particular, industrial or handicraft goods, agriculture products or natural products, such as, in particular, waters, minerals, raw materials, as well as, subject to Article 174(3), services,
(iii) counterfeit trademarks shall mean identical trademarks illegally used or trademarks which in the course of trade can not be distinguished from the trademarks registered for the goods covered by the right of protection,
(iv) earlier trademarks shall mean the trademarks applied for registration or registered basing on the earlier priority.

A situation where an entrepreneur has advertised tea, using only, image of cannabis-like leaves cannot be considered as advertising of narcotic drugs or psychotropic substances. In this case, it was not a promotion of any other substances prohibited by the law because, there was no name of any specific drug or psychotropic substance. Moreover, this issue goes beyond the competence of the State Sanitary Inspection.

The cassation complaint was rejected by the Supreme Administrative Court in its judgment of 31 May 2010 case file II OSK 832/09.

Advertising, case SA/Ka 2976/95

December 20th, 2005, Tomasz Rychlicki

The Supreme Administrative Court in a judgment of 8 April 1997, case file SA/Ka 2976/95 held that advertising is any activity aimed at promoting the sale of goods and services or other use of the goods and services. Advertising is the dissemination of information about the goods, their quality, values, places and possibilities for their acquisition, praising someone or recommending something in the press, radio, television, means (such as posters, captions, advertisements, etc.) used for this purpose. Advertising should be considered as activities aimed at the development of demand through the improvement of knowledge of future purchasers of the goods or services, their characteristics and purpose to encourage them to purchase goods or services from this, and not the other economic entity.

Advertising, case I SA/Sz 2000/00

February 24th, 2005, Tomasz Rychlicki

The Supreme Administrative Court in its judgment of 18 April 2001, case file I SA/Sz 2000/00, published in the electronic database Lex no. 48952, held that the term, “advertising is carried out in the media or publicly in any way”, means that such public advertising is directed to an unidentified customer or client, is indefinite, but universal in the sense of local or national or supranational scope. According to the SAC public means of advertising other than by the mass media, is a way of advertising way characterized by commonness, publicity, general availability, and are destined for (or to) all, depending on how it was expressed.

Advertising, case I SA/Gd 409/96

February 17th, 2005, Tomasz Rychlicki

The Supreme Administrative Court in its judgment of 10 December 1997, case file I SA/Gd 409/96, held that the nature of public or non-public advertising is always determined by its recipients. Non-public advertisement is expected to be addressed only to a specific recipient. Any form of business promotion sent to an anonymous pool of potential consumers/recipients is deemed as public advertising.