Amendments to the Federal Law on Advertising – readiness level 1

5 August 2022
Tax Messenger
Under amendments to the Federal Law "Concerning Advertising", with effect from 1 September 2022 all Internet advertising (with some exceptions) directed at Russian users will have to be marked and subsequently recorded in a special system known as the Unified Register of Internet Advertising (URIA).
Who is affected by the changes?

The new regulations affect:
  • Advertisers — the source of information about an advertised object
  • Advertising distributors — agencies, individual entrepreneurs and self-employed people who disseminate advertising on the Internet
  • Advertising system operators — persons that control resources on which advertising is placed
  • Depending on the circumstances, one and the same person might have multiple roles.

What do the changes involve?

Internet advertising must be marked "advertising" and contain a reference to the advertiser and/or a website or webpage with information about the advertiser. An identifier does not have to be obtained for:
  • email newsletters
  • push notifications for existing customers
  • a supplier-advertiser's own goods and those of related entities
  • social advertising
  • advertising distributed in television programmes/broadcasts and radio programmes/broadcasts on the Internet
The Law introduces the figure of an advertising data operator (ADO). The register of ADOs has not yet been created. The ADO will assign a special identifier (token) to advertising before it is placed on the Internet. The identifier is assigned to a specific advertisement, not to the advertised object.

What data will have to be supplied?

The relevant parties will have to provide the following information about themselves and their advertising campaign to the ADO:
  • The advertising identifier assigned by the ADO
  • A general description of the advertised object
  • The type of advertising campaign and the forms in which advertising is disseminated
  • Information on means used to disseminate advertising
  • Information on the advertiser and the advertising distributor (TIN, MSRN, address, other contact details)
  • Information on the agreement between the advertiser and the advertising distributor (subject, price, etc.)
  • Information on the performance of the agreement (content and details of the acceptance and transfer certificate)
  • Information on the target audience (age, gender, etc.)
It should be noted that this information does not have to be provided where an advertising campaign is cancelled.
Tax risks

The changes effectively give the tax authorities a new control tool which is not regulated by the Tax Code. The tax authorities will have automatic access to all information entered in the URIA and, according to guidance from Roskomnadzor (the Federal Communications Supervision Service), will not be obliged to inform taxpayers that they have accessed that information.

Firstly, a tax authority might collate information provided by the taxpayer and information contained in the URIA and use its findings, for example, to disallow advertising expenses and VAT deductions on the basis of Article 54.1 of the Tax Code.

Secondly, there is uncertainty over whether the tax authorities could disallow expenses for advertising that was distributed not in compliance with the new regulations, i.e., without an identifier (token) being assigned and without relevant information being transmitted to the URIA. On the one hand, we are aware of case law indicating that breaches of industry legislation do not affect the tax deductibility of expenses. On the other hand, the absence of information in the URIA about the distribution of particular advertising could be used by the tax authorities as an argument to assert that a transaction did not actually take place.
Issues to be addressed

  • How can accounting systems be timely configured to collect and generate reportable data if the form of reports to be sent to ADOs and then transmitted to Roskomnadzor does not yet exist?
  • How can it be checked that advertising data has been correctly submitted if responsibility for filing advertising reports lies with the advertising distributor or the advertising system operator?
  • What preparations need to be made for inquiries from Roskomnadzor, the Federal Anti-Monopoly Service and the Federal Tax Service?
  • Who is liable for breaches of the regulations for submitting information to Roskomnadzor?
How can B1 help?

The changes will affect the entire Internet advertising market. B1 experts are ready to provide the following types of assistance to advertisers, advertising distributors and advertising system operators:

Tax consulting and reporting services:
  1. Conducting a tax audit of advertising expenses with a view to preventing challenges by the tax authorities
  2. Reviewing advertising contracts
  3. Analysing the possibility of reclassifying advertising expenses as marketing expenses
  4. Building an effective system of interaction between advertiser and advertising distributor from information collection to the submission of information to Roskomnadzor
  5. Outsourced preparation of reports and development of customised solutions for the automated preparation of reports

Legal services:
  1. Legal advice on matters pertaining to current Russian advertising law
  2. Legal advice on matters relating to the new obligations of participants in advertising with respect to Internet advertising
  3. Legal analysis of specific legal arrangements to assess the risk of their falling within the scope of advertising traceability regulations
  4. Legal advice on matters concerning the protection, licensing and transfer of intellectual property in the process of creating advertising materials and conducting advertising campaigns
  5. Handling legal aspects of contractual arrangements between participants in advertising

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