The cost of complex advertising services from the perspective of the SAC – a turn for the better?

The Supreme Administrative Court (“SAC”), in its current judgment No. 21 Afs 94/2025 of 12 September 2025 (the “Judgment”), dealt with the issue of the burden of proof from the point of view of whether it is reasonable to require the tax entity to prove each individual case of promotion of the company’s (tax entity’s) logo in the case of complex advertising services.

First, it is important to note that this ruling is in significant conflict with previous, often repeated case law of the Supreme Administrative Court, which we have also discussed in our articles (for example article 1, article 2 or article 3), where in recent years the demands for evidence in the case of proving the provision of advertising services have been steadily increasing, both on the part of the tax administrator and the Supreme Administrative Court.

The current Judgment, at paragraphs [24] to [35], takes a new view, stating that it would be unreasonable to require the taxpayer to prove perfectly the supply of each individual part of the advertising service. In the opinion of the SAC, it is generally sufficient if it proves the existence of the advertising presentation and that it was indeed broadcast within the essential parameters of the agreed scope. Furthermore, the SAC stated that these facts can be proven, for example, by witness testimonies of the tax entity’s employees or photographs of advertising taken at different places and times.

Selected parts of the Judgment:

• the tax entity entered into contracts on promotion and advertising (hereinafter referred to as “the Contracts”) which contained formal deficiencies;
• The subject of the Agreements was the promotion of the tax entity’s logo at basketball club games;
• The contracts included, among other things, the possibility of promoting the logo on LED panels during matches, banners, jerseys, placing the logo on TV spot screens or displaying the logo in online TV broadcasts;
• The taxpayer submitted in evidence summaries of the advertising performance, where the summaries contained information about the promotion of the logo, including photographs [the logo on (i) LED screens located next to the field, (ii) on player jerseys, (iii) on paper banners located in the home arena, (iv) on a screen above the playing area, (v) in television broadcasts, etc.];
• The tax authorities faulted the tax entity for failing to prove all advertising transactions, for example (i) the display of the logo on LED panels at the playing field during 17 of 21 matches in 2017, (ii) the placement of the logo on TV spot screens and paper banners during all matches played, (iii) the display of the logo on TV broadcasts in 6 of the agreed 12 broadcasts in 2018; and assessed corporate income tax on the tax entity;
• The Municipal Court in Prague agreed with the conclusions of the tax authorities that the tax entity had not proved the implementation of advertising and promotion in the entire scope specified in the annexes to the Contracts;
• the case reached the Supreme Administrative Court, which concluded:
  • the taxpayer has proved both the existence of the advertising presentation and that the advertising was actually carried out within the essential parameters of the agreed scope and form;
  • the tax authorities, on the other hand, focused on a detailed analysis of individual forms of advertising and examined whether the taxpayer had submitted evidence for each individual advertising service, precisely in accordance with the scope specified in the Contracts;
  • However, the tax entity did not have such an obligation – the advertising performance to which the evidence related constitutes a “representative sample” from which it can be concluded that the complainant’s logo was promoted in the agreed form for the agreed period of time and that the advertising performance therefore met the essential parameters of the Contracts;
  • the taxpayer sustained the burden of proof and proved the actual performance of the advertising, even though it did not have photographs or other records of the performance of all forms of advertising and promotion from each basketball game played;
  • a business is an independent and continuous activity on one’s own account and responsibility with the intention of making a profit – the purpose of a business, on the other hand, is certainly not the unlimited collection of documents and contacts with potential witnesses for the purpose of possible tax proceedings in the future;
  • a taxpayer cannot reasonably be required to make and keep “perfect” documentation of the advertising before each game and for the duration of each game, as required by the tax authorities and erroneously approved by the Municipal Court in Prague;
  • the decisive factor is whether the advertisement has been implemented within the essential parameters of the contractual agreement.

The SAC further states in the Judgment that it does not dispute that tax entities must act in such a way as to have documents necessary for possible future tax proceedings, even though such documents may not be relevant to them in private law relations.

In the conclusion of the Judgment, the SAC also emphasises that the above conclusions cannot be generalised to the effect that the actual performance of the agreed performance or performance in breach of the contractual agreement is always sufficient for the expenses to be tax deductible.

Although it is still the taxpayer’s responsibility to keep proper and conclusive records to prove the tax deductibility of costs and to bear the burden of proof, the current SAC ruling gives taxpayers hope that there should not be an unlimited obligation to collect and record evidence. In the light of the Judgment, it can be concluded that the requirement to prove all the services provided in the case of complex advertising services is disproportionate, and in some cases ultimately administratively impracticable.

If you have any additional questions, please do not hesitate to contact any of our experts.