Deducting marketing costs

What are marketing costs, and when are they deductible?

Tax law does not have a specific category for "marketing costs." The deciding factor is whether an expense qualifies as an operating expense. It does if it is incurred for business purposes. Marketing generally meets this requirement, as it serves to acquire customers and generate revenue.

The difference between the two terms is practically relevant: "marketing costs" is a business management term, while "operating expense" is a tax law term. Therefore, marketing is not automatically fully deductible; it is only deductible to the extent that no special rule applies.

Three questions to ask before every booking:

1. Business purpose: Does the expense serve to acquire customers, increase brand awareness, or support sales?
2. Proof: Are a proper invoice, proof of service, and payment receipt available?
3. Special rule: Does it involve gifts, business entertainment, sponsorship, or a donation?

Which marketing costs are tax-deductible?

Marketing costs for the self-employed and freelancers

Freelancers and sole traders report marketing costs as operating expenses in their income surplus statement. The same principles apply as for a GmbH, with three specific exceptions.

Payment date: For income-surplus accounting, the year in which you make the payment is generally what counts. An invoice received in December that you pay in January will only reduce your profit in the following year.

VAT: If you are subject to standard taxation, you can deduct input tax from marketing invoices. As a small business owner, you cannot deduct input tax and must record the gross amount as a business expense.

Private use: If you use a profile or service for both business and private purposes, only the business portion qualifies as a business expense. This portion should be verifiable.

Difference for a GmbH: A GmbH has no private sphere. If it pays for marketing that clearly serves the private interests of a shareholder, the tax office may classify this as a hidden profit distribution. In such cases, the costs are not deductible, and further consequences may follow.

Google, Meta, and LinkedIn: Reverse Charge steps

Google Ireland Limited, Meta Platforms Ireland Limited, and LinkedIn Ireland Unlimited Company invoice companies in Germany for advertising services from Ireland. The invoice does not include German VAT. Instead, the recipient of the service is liable for the tax under Section 13b of the German VAT Act (Reverse Charge procedure).

1. Enter VAT ID: Enter your VAT identification number in your advertising account to ensure that invoices are issued without VAT.
2. Check the invoice: It should show a net amount and a note regarding the recipient's tax liability.
3. Calculate VAT yourself: 19 percent of the net amount, regardless of the fact that it is not listed on the invoice.
4. Report in the VAT return: The GmbH reports the tax itself. If it is fully entitled to input tax deduction, you deduct the same amount as input tax at the same time. As a result, there is no tax payable.
5. No EC Sales List: This only needs to be submitted by entrepreneurs who provide services to customers in other EU countries themselves, not by the recipient of an advertising service.

Correctly distinguishing between advertising, gifts, entertainment, sponsorship, and donations

Business gifts to partners: Expenses are only tax-deductible as business expenses if the value per recipient and fiscal year does not exceed €50 (Section 4 (5) No. 1 EStG, as of 2024; previously €35). This is a strict threshold: if exceeded, the entire amount is non-deductible. For companies entitled to input tax deduction, the net value is the deciding factor. Gifts must be recorded individually and separately. For higher-value gifts, flat-rate taxation under Section 37b EStG may be advisable.

Entertainment of business partners: 70 percent of reasonable costs are deductible (Section 4 (5) No. 2 EStG). Document the occasion, participants, and the invoice amount.

Sponsorship: Sponsorship expenses are business expenses if they are linked to a consideration that benefits the company in terms of advertising, such as name mentions or logo placement.

Donations: These are not business expenses and are accounted for via a separate donation deduction.

Website, agency, and influencers

Agency invoices: Ensure there is a specific description of services. Separate the fee from the passed-through media budget, as the VAT treatment may differ.

New website: Hosting and maintenance are ongoing business expenses; for a newly developed website, it must be determined whether the costs should be capitalized. Read more in our article on website and hosting costs.

Influencers and collaborations: Paid collaborations are business expenses if the service and consideration are documented. If the influencer is based abroad, the reverse charge procedure may also apply.

Calculation example: Quarterly budget of a GmbH

A GmbH spends €6,000 net per quarter on Google and LinkedIn ads (invoice from Ireland) and €4,000 net for an agency in Germany. The GmbH is fully entitled to input tax deduction.

Assuming an income tax burden of 30 percent, the calculated tax effect is €3,000. The net costs then amount to €7,000. The actual burden depends, among other things, on the local trade tax multiplier.

5 steps to properly deduct marketing costs

1. Document the occasion: Keep a record of which campaign is running and what its goal is.
2. Check the invoice: Check the issuer, the description of services, and the VAT information.
3. Separate special cases: Record gifts and entertainment expenses in their own accounts.
4. Account for reverse charge: Flag invoices from abroad for your VAT return.
5. Store receipts digitally: Accounting records must be kept (currently for eight years).

How Integral supports you with ongoing bookkeeping

Advertising debits, agency invoices, and software subscriptions end up in your accounting every month. Integral connects bank accounts and payment services directly to the tax platform so that payments and receipts come together without any manual intermediate steps. Based on your entries, the tax team prepares your VAT return and remains your point of contact for any allocation questions.

• Ongoing financial accounting
• VAT returns
• Annual financial statements
• Tax advice from qualified professionals

Frequently asked questions: Deducting marketing costs

Can I deduct marketing costs from my taxes in full?
Yes, provided they are business-related, with exceptions for gifts over €50 net per recipient, non-deductible portions of entertainment expenses, and donations.

Are marketing costs deductible for self-employed individuals and freelancers?
Yes, as business expenses in your income-surplus statement, in the year of payment.

What is the difference between marketing costs and business expenses?
Marketing costs are a business management term. From a tax perspective, the deciding factor is whether the expense is business-related and whether a special rule applies.

Do I have to pay VAT on Google Ads?
The invoice comes from Ireland without VAT. You owe the tax yourself (reverse charge) and can deduct it at the same time if you are entitled to input tax deduction.

Are LinkedIn Premium or LinkedIn Ads tax-deductible?
Yes, if used for professional or business purposes. LinkedIn also bills these from Ireland.

Are client events tax-deductible?
Event costs are business expenses. For catering, the 70 percent rule for business meals applies, and for gifts, there is a 50 euro tax-free limit.

What is the maximum value for promotional gifts?
Up to €50 net per recipient per fiscal year, recorded separately.