As part of marketing activities, businesses pursue a variety of goals. One of them is to increase recognition of certain products and to attract the attention of customers to it. A common situation is when producers of alcoholic beverages give away goods free of charge to customers in order to stimulate additional demand (for example, when buying two cans of beer, the third one is a gift).

At first glance, this situation does not pose tax risks. However, in practice, the question arises - will the transaction for the transfer of promotional goods be recognized as an object of taxation of excise duty? Let's look into it.

The object of excise taxation are[1] operations on sale of excisable goods[2]. At the same time, the gratuitous transfer of ownership of excisable goods is equated to the sale of excisable goods.

It would seem that from the above, an unambiguous answer to the question about the need to recognize the object of taxation of excise duty operations on the transfer of alcoholic promotional products can follow. However, in practice, there are some aspects that do not allow to draw such unambiguous conclusions, for example:

Whether it is possible to qualify promotional products as goods for the purposes of Articles 38 and 39 of the Tax Code. It can be assumed that promotional products do not meet the relevant characteristics because they are not actually intended to be sold as a separate product (i.e. cannot be sold outside of a promotional event);

Is it possible to qualify the transaction on the transfer of promotional products as a sale for the purposes of Article 39 of the Tax Code. It can be assumed that such a transaction will not meet the criteria of "sale", because its purpose will be advertising and attracting the attention of consumers, rather than the transfer of ownership of the goods.

At the same time, the above approach is not currently supported by the Ministry of Finance of Russia[3] and the Federal Tax Service of Russia[4]. These departments believe that when conducting a promotion campaign the taxpayer actually transfers ownership rights to excisable goods to an indefinite circle of persons participating in the promotion campaign. As a consequence, according to the legal position of the Ministry of Finance of Russia and the Federal Tax Service of Russia, the transaction on the transfer of promotional goods (alcohol products) is recognized as an object of excise taxation[5].

Given the above, we believe that in order to avoid controversial situations businesses in the planning of their activities should take into account the above position of regulatory authorities on the taxation of transactions for the transfer of promotional goods (alcoholic products).

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[1] Item 1 of Article 182 of the Tax Code of the Russian Federation

[2] For example, (1) alcoholic products with a volume fraction of ethyl alcohol over 0.5 percent; (2) beer with a normative content of the volume fraction of ethyl alcohol up to 0.5 percent inclusive; are recognized as excisable goods in accordance with paragraph 1 of Article 181 of the Tax Code

[3] This legal position is set out in the Letter dated 26.03.2014 N 03-07-15/13255

[4] The above legal position is set out in Letters dated April 15, 2014 N GD-4-3/7123@, dated April 15, 2019 N SD-4-3/7052@

[5] The above legal position is also confirmed in court practice (see, for example, case A40-14888/14).