Advertising on the Internet: at the expense of net profit?

Pepeliaev Group explains how you should account for expenses on advertising on the Internet for taxation purposes.

We have already written about the changes concerning advertising on the Internet and the new charge for this.https://www.pgplaw.ru/analytics-and-brochures/alerts/sbor-za-reklamu-v-internete-ne-pervoaprelskaya-shutka/ On 26 March, the long-awaited drafthttps://regulation.gov.ru/Regulation/Npa/PublicView?npaID=155826 Resolution of the Russian Government appeared regarding the procedure for how such charge is to be assessed and paid. While the draft is being discussed and finalised, we will go back over what one should know about advertising on the Internet and which expenses on such advertising will have to be booked at the expense of net profit.

Starting from 1 January 2025, the following online advertising expenses will not be permitted to be deducted for taxation purposes: a) if no notice of such advertising has been given to Roskomnadzor (the Russian abbreviation commonly used to refer to the Federal Service for Supervision in the Sphere of Telecommunications, Information Technologies and Mass Communications); b) the advertising has been placed on a resource with restricted access; or c) if the owner of the resource has violated Russian legislation.

Therefore, if a company places advertising on the Internet, it is required to arrange contractual links and book the relevant expenses so as not to make an error but to ensure that only “permissible” expenses are deducted for taxation purposes. On the other hand, there is no use in booking costs at the expense of net profit if they could in any case be deducted from the tax base.

We propose addressing this issue by taking the following steps:

1.    Identify contracts that could entail (or explicitly provide for) a company’s advertising content being placed on the Internet

Essentially, it needs to be established whether the company disseminates advertising online. We have already written about the challenges of distinguishing advertising from other content (such as reference materials).https://www.pgplaw.ru/analytics-and-brochures/alerts/sbor-za-reklamu-v-internete-ne-pervoaprelskaya-shutka/ We note merely that the classification depends on multiple factors, including the methods, conditions and purposes for such information to be published.

Nor should one forget about the variety of platforms where content, if placed, is classified as "online advertising", such as messengers, mobile applications, marketplaces, social networks, and many others.

2.    Clarify with Roskomnadzor the process of how to transmit information regarding advertising

Under article 18.1 of the Law on Advertising, if information that has been placed on the Internet meets the definition of "advertising," details regarding such information must be submitted to the Unified Register of Online Advertising (in Russian, abbreviated to ‘ERIR’) through a designated entity, i.e. an operator of advertising data.Currently, Roskomnadzor has assigned the status of an operator of advertising data to seven organisations.

If there are doubts as to whether advertising data has been transferred, it will be sufficient only to check a personal accountA personal account is available to all Russian entities and individuals that are registered on the Portal of Russian Public Services, as well as to foreign companies and individuals, after they have completed the registration procedure on the website of the system in the ERIR, which will display the information in relation to which the company has entered into an agreement.Access to information relating to advertising materials (creative content) is restricted exclusively to their lawful owners (advertisers).

We remind you that one market player may delegate the obligation to submit data to the ERIR to another market player under a civil law contract. Hence, to avoid any nasty surprises, one should re-read the provisions of contracts to have a clear understanding as to which party bears the obligation. It would not go amiss to incorporate into a contract a provision regarding compensation being paid if a party fails to perform the above obligation.

Roskomnadzor and the Russian Federal Tax Service have entered into a cooperation agreement. Officers of tax inspectorates will be entitled to check an advertiser’s contracts for advertising to be placed on the Internet and determine whether information regarding advertising has been submitted to Roskomnadzor.Roskomnadzor’s Letter No. 03-72707 “On clarifications being resent” dated 20 February 2025.

3.    Determine whether advertising is placed on resources to which access has been restricted

Roskomnadzor may restrict access to online resources. It is not that difficult to obtain information regarding such resources. It only requires an official universal service on the regulator’s official website to be used to check whether access has been restricted to websites and/or webpages, the link being at: https://blocklist.rkn.gov.ru.

However, we do not recommend continuing to place content on such resources because, starting from 1 September 2025, advertising on these websites will be prohibited.For more details, please go to: https://www.pgplaw.ru/analytics-and-brochures/alerts/gosduma-prinyala-zakon-o-zaprete-reklamy-v-zapreshchennykh-sotssetyakh/ It is already at this stage worth inserting the necessary clauses in advertising agreements as well as preventing advertising from being disseminated on such resources.

If an advertiser had incurred expenses under long-term contracts before Roskomnadzor restricted access to a resource, such expenses may be deducted. This is possible if the foreign person was previously complying with the obligations stipulated by the Federal Law on the activities of foreign persons on the Internet information and telecommunications network.Roskomnadzor's Letter No. 03-72707 “On clarifications being resent” dated 20 February 2025.

The moment when the expenses were incurred will be determined according to tax accounting rules. Generally, the period that matters for agreements for advertising services is the period in which certificates for services were signed, while the actual cash flows are irrelevant.Article 272 of the Russian Tax Code Therefore, an advance payment, for instance, is not deducted as an expense.

4.    Establish whether advertising is placed on a resource whose owner violates Russian law

This concerns resources that are owned by foreign persons that operate online in Russia provided that such person has failed to perform the obligationsTo publish an electronic form on an information resource for communications to be submitted by Russian individuals and organisations, to register a personal account on the official website of Roskomnadzor, to establish a branch or to open a representative office, or to incorporate a Russian legal entity. for which article 5 of the Law provides.Federal Law No. 236-FZ “On activities of foreign persons on the Internet information and telecommunications network” dated 1 July 2021. Information on whether or not a foreign person has performed these obligations can be obtained from the public registry of foreign persons at https://236-fz.rkn.gov.ru.

We note that if, a foreign person does not meet the specified requirements, Roskomnadzor may pass a resolution prohibiting advertising of such person from being disseminated on the information resource. Consequently, advertisers will be barred from placing their advertisements on that resource (article 13(1) of the Law). It is worth mentioning that administrative liability is envisaged for a failure to comply with the above prohibitionThe fines are as follows: for individuals, from RUB 20,000 to RUB 80,000; for a company’s officers, from RUB 80,000 to RUB 300,000; and for legal entities, from RUB 500,000 to RUB 3 million. (article 14.3(9) of the Russian Code of Administrative Offences).

What to think about and what to do

We would recommend that companies revisit their template contracts and, if necessary, exclude the possibility of advertising being placed on certain resources.

Help from your adviser

Pepeliaev Group's specialists have extensive experience of providing legal support to clients in the field of legislation on advertising as well as in relation to taxes and bookkeeping.