A recent tax ruling (Ref. 0111-KDIB2-1.4010.66.2025.2.ED) issued for a plastic packaging manufacturer addresses the scope of marketing expenses eligible for the expansion relief, clarifying which trade fair and promotional costs may be deducted and which, despite the taxpayer’s arguments, fall outside the scope of the relief.
The tax authority adopted a narrow, literal interpretation of the provision, confirming the deductibility of only certain categories of expenses incurred by entrepreneurs.
The case concerned a company that manufactures plastic packaging. As part of its business operations, it has incurred – and plans to continue incurring – expenses aimed at increasing sales revenue from its products. These products are manufactured directly by the company and sold to unrelated entities. The newly developed products may differ from existing ones in terms of technical or material properties or production techniques.
To support its sales growth, the company intends to participate in trade fairs, incurring expenses such as employee accommodation and meals, travel costs, booth construction, preparation of advertising materials, and catering in the form of refreshments for booth visitors. These were all classified by the company as trade fair expenses. Additional planned expenses included sponsorship contracts with athletes, website SEO services, rental of advertising space (classified as promotional costs), costs of preparing documentation (e.g. employee remuneration or payments to third-party auditors), and direct marketing efforts (e.g. salaries for sales staff, travel costs for fuel or train tickets).
In its application for a tax ruling, the company asked whether the above expenses could be considered costs incurred to increase sales revenues from products, as defined in Article 18eb(7) of the CIT Act, thereby making them eligible for the deduction referred to in Article 18eb(1).
The company argued that all the indicated expenses fall within the eligible categories set out in the provision.
In response, the tax authority partially agreed. It interpreted the provision strictly, noting that tax relief provisions must not be interpreted broadly. It confirmed the eligibility of several trade fair-related costs, including accommodation and meals for employees, air travel, preparation of promotional materials, rental of exhibition space, booth construction, and catering for booth visitors.
However, it excluded the deductibility of certain expenses, such as the scholarship for the athlete and car travel costs for employees. According to the CIT Act, only the cost of air travel for employees is eligible as a deductible travel expense – costs related to car or train travel are not mentioned. The authority also rejected the inclusion of documentation-related expenses and direct marketing costs.