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Newsletter | February 2016, Issue 1
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Tax
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Pharmaceutical Company’s Money Spent on Product Presentations – Advertisement or Entertainment Expense?
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Our client, the plaintiff pharmaceutical company, had deducted expenses associated with product presentations as advertisement expenses (including meals to doctors at hospitals).
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Tax Authorities’ Decision & Rationale
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However, the tax authorities argued, that such expenses should be treated as entertainment expenses spent to establish good relationship with the doctors, their customers.
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Further, the authorizes reasoned that these types of expenses are generally not deductible under the tax law, and thus, for corporate income tax purposes, did not allow the company to deduct expenses in excess of the statutory tax deduction limit for entertainment expense.
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Appeal to the Tax Tribunal
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The company appealed the assessment to the Tax Tribunal, which ruled that the expenses at issue are not entertainment expenses.
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Rather, the Tax Tribunal opined that these expenses should be treated as tax deductible expense of the company, since the expenses are related to the marketing and sales of the pharmaceutical product.
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Specifically,
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Product presentations are necessary to market specialty medicines to doctors and other healthcare providers.
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Products presentations are means of delivering drug’s efficacy, as well as results of clinical trials, to doctors.
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Product presentations covered other topics of interest to doctors.
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Product presentations were held within the limits permitted under the Pharmaceutical Affairs Law, etc.
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Back to Main Page
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