In order to apply a unified approach assessing impact of marketing services on determining the income taxation object and value-added tax credit, there is a recommended algorithm of actions for the taxpayers to obtain individual tax consultation.
In case of ignorance or ambiguous interpretation of norms of tax legislation regarding taxation of marketing services operations, the taxpayer may request individual tax consultation, which will help to avoid errors and tax risks.
Currently, there is a practice that conducting control and verification measures of the taxpayers who purchase such services, the controlling authorities do not confirm expenses and tax credit for the specified operations.
Sub-paragraph 14.1.1721 Paragraph 14.1 Article 14 of the Tax Code of Ukraine № 2755-VI as of 02.12.2010 (with changes and additions) (hereinafter – Code) stipulates that individual tax consultation is explanation of the controlling authority provided to the taxpayer regarding practical use of certain norms of tax and other legislation, control over compliance with which is entrusted to the controlling authority, and registered in the Unified register of individual tax consultations.
Upon the taxpayers’ request in a paper or electronic form, the controlling authority specified in Sub-paragraph 41.1.1 Paragraph 41.1 Article 41 of the Code has to provide them with free individual tax consultations on the practical application of certain norms of tax and other legislation, control over compliance with which is entrusted to such controlling authority, within 25 calendar days following the date of receipt of such request by this controlling authority (Paragraph 52.1 Article 52 of the Code).
Paragraph 52.1 Article 52 of the Code provides for a number of obligatory requisites that must be included in application for individual tax consultation by the taxpayer.
Individual tax consultations are not provided for application from the taxpayer that does not meet requirements specified in Paragraph 52.1 Article 52 of the Code, but a response is sent under signature of the head (deputy head or authorized person) in a paper or electronic form according to the procedure and terms provided for by the Law of Ukraine "On citizens’ appeals".
Paragraph 52.4 Article 52 of the Code stipulates that individual tax consultations may be provided orally, in a paper and electronic form. Individual tax consultations provided in a paper or electronic form are subject to registration in the Unified register of individual tax consultations and posting on the official website of the central executive body implementing state tax policy, without indicating the name (surname, first name, patronymic) of the taxpayer, code according to the Only state register code of enterprises and organizations of Ukraine (registration number of the account card) and tax address. Access to the specified data in the Unified register of individual tax consultations and official website is free of charge and open.
Individual tax consultation is of individual essence and may be used exclusively by the taxpayer to whom such consultation is provided (Paragraph 52.2 Article 52 of the Code).
In addition, the taxpayer may appeal to the court’s order approving general tax consultation or individual tax consultation provided to such taxpayer in a paper or electronic form as a legal act of individual action, which, in the opinion of such taxpayer, contradicts norms or content of relevant tax or levy (Article 53 of the Code).
Sub-paragraph 14.1.108 Paragraph 14.1 Article 14 of the Code determines that marketing services (marketing) are services that ensure functioning of the taxpayer’s activities in the market research sphere, promotion of product sales (works, services), pricing policy, organization and management of product movement (works, services) to the consumer and after-sales service of the consumer within framework of the economic activity of such taxpayer.
Marketing services include, among others: services for placing the taxpayer’s products at sales points, studying services, researching and analyzing consumer demand, entering the taxpayer’s products (works, services) into sales information databases, services for collecting and distributing information about products (works, services).
To carry out marketing activities, the company must conduct comprehensive market research, analyze market, market segment, product position, develop marketing mix (marketing complex), etc.
The main condition for taking into account costs of marketing services and including such amounts in the tax credit is their documentary confirmation and connection of such costs with the taxpayer’s business activities.
The following documents may be used as a confirmation of the actual receipt of marketing services:
- marketing service contracts and annexes thereto (subject of the contract with a clear description of marketing services, terms of service provision indicating the term, scope and method of performance, areas and objects of marketing research, in particular, research of demand for this product and information about potential consumers and research of potential opportunities for carrying out purchase and sale of the marketing research object in a certain territory, research of required sales volume and search for buyers, study of the needs and effectiveness of conducting advertising campaign for this product, cost and payment procedure, rights and obligations of the parties;
- acts of performed works/services with a specific list of provided services, place and date of their provision, as well as indicating how their result is expressed, how receipt of such services is related to the payer’s economic activity, signed by both parties with obligatory requisites of the primary documents and cost;
- reports on completed work (analysis of competition between the largest manufacturers in the whole and retail sales markets and assessment of the competition level, main market development trends, price change dynamics, product (goods) range, pricing policy, analysis of import and export of products (goods) and their impact on the market, potential consumers and quantitative indicators (market capacity) of planned sales, forecast sales plan, risk assessment, financial plan, project effectiveness analysis, forecast profitability level, project payback period, conclusions and recommendations based on the research results);
- other primary documents (media plans, reports on advertising campaigns, photo and video reports on events, documents on expenses, correspondence with the contractors, etc.);
- additional supporting documents and information regarding the use of such services (customer reviews, analysis of the effectiveness of marketing activities, documents confirming the use of marketing materials in business processes and substantiation of their economic feasibility, etc.).
Taking into account above specified, it should be noted that in order to take into account costs of marketing services calculating taxation object, it is necessary to provide a comprehensive and sufficient evidentiary base and its proper registration with primary documents, other documentary confirmation of the provision results of such services, economic feasibility and proof of the direct connection of these costs with the taxpayer’s economic activities and compliance with tax requirements.
Availability of individual tax consultation to the taxpayers regarding marketing services operations, combined with appropriate evidentiary base, will ensure legality of their actions and facilitate unobstructed interaction with the controlling authorities during control and audit activities.