Tax consequences for the placement of unlabeled advertising

The Ministry of Finance of the Russian Federation is currently actively working on amendments to the Tax Code, which will restrict the rights of companies to recognize expenses on advertising on the Internet for the purposes of reducing profits tax if such advertising is not marked and information about it is not submitted to Roskomnadzor.

The essence of the changes is the following – if a company does recognize such expenses, the tax authority will recognize them as unreasonable and impose additional income tax, fines and penalties.

Example: A company using the general system of taxation, which implies payment of income tax at 20%, did not mark advertising for 1 million rubles. In this case, the tax authority will impose an additional charge of 200 thousand rubles of profit tax and a fine of 500 thousand rubles for the lack of labelling.

The law on labelling of online advertising came into force on September 1, 2022. A year lates, fines for the lack of labelling became effective: for individuals – up to 30 thousand rubles, for officials – up to 100 thousand rubles, for legal entities – up to 500 thousand.

Also, since March 2022, the social networks Instagram and Facebook, which were highly demanded by advertisers, have been blocked in Russia. After that Russian companies began to remove links to their profiles in these media from their official websites, but they did not completely stop their advertising presence and activity.

At the same time, the law on advertising labelling, which came into force in September 2022, does not give an unambiguous answer to the question of the need to label advertising on banned resources. Opinions of the agencies controlling the implementation of the law are divided. At the end of August 2023, the Federal Antimonopoly Service (FAS) clarified that banned networks are outside the legal field and advertising in them does not fall under the regulation of Russian law. But already in November 2023, Roskomnadzor demanded that advertising in blocked social media be labelled and that such campaigns be registered in the Unified Internet Advertising Registry.

The new requirements are expected to become an additional lever for compliance with advertising legislation, as well as an incentive for businesses to place advertising on domestic advertising platforms.

Representatives of the business community have asked the Ministry of Finance to postpone the tax changes until 2025. However, there are reports that the amendments may be submitted to the State Duma and adopted as early as the end of 2023 and they will come into force in 2024.