Can a business provide cash incentives for promotional activities?

Question:

My company operates in the field of computer distribution and electronic components. To boost sales, the company plans to run a cash incentive program for customers who purchase a specific product under the following conditions: Customers who buy Product X in the fourth quarter of 2019 and achieve sales exceeding 4 billion VND will receive a cash incentive of 129 million VND. So, my question is:

1. Can I provide this cash incentive to cover legitimate expenses, or am I required to transfer it to the customer’s business?
2. If the customer receiving the cash is an individual, do they need to pay personal income tax (PIT), and how is the tax calculated and applied for individuals?

Answer:

– According to Article 6 of Circular No. 78/2014/TT-BTC dated June 18, 2014, by the Ministry of Finance (amended and supplemented in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015, by the Ministry of Finance), which provides guidance on corporate income tax (CIT), it specifies deductible and non-deductible expenses when determining taxable income subject to CIT.

– Based on Circular No. 111/2013/TT-BTC dated August 15, 2013, by the Ministry of Finance, which provides guidance on personal income tax (PIT).

– In accordance with the regulations mentioned above:

• If your company implements the promotional program in accordance with the provisions of Decree No. 81/2018/ND-CP guiding the Commercial Law on commercial promotion activities, then depending on the agreement between your company and the customer, your company can provide the cash incentive in cash or transfer it to the customer as required.
• If the customer receiving the incentive is an individual, when providing cash with a value of 10 million VND or more per transaction, your company is responsible for withholding 10% PIT on the portion exceeding 10 million VND, as stipulated in Article 15 of Circular No. 111/2013/TT-BTC issued by the Ministry of Finance. Additionally, your company should declare PIT using form No. 06/TNCN provided in Circular No. 92/2015/TT-BTC issued by the Ministry of Finance.