Question:
In 2015, during the Mid-Autumn Festival and Lunar New Year, our company purchased gifts for customers, with complete invoices and payment made through a bank. Can these expenses be considered reasonable and eligible for corporate income tax calculation?
Answer:
– In accordance with Circular No. 219/2013/TT-BTC dated December 31, 2013, issued by the Ministry of Finance, which provides guidance on value-added tax (VAT), Clause 3, Article 7 stipulates the calculation of VAT as follows: “For products, goods, and services (including those purchased externally or produced by the business itself) used for exchange, gifts, rewards, payments in kind, or remuneration, the VAT amount is calculated based on the price of similar or equivalent products, goods, or services at the time these activities occur..”‘
-In Article 14, Clause 5 of the regulation, it stipulates the principle of deducting input value-added tax (VAT) as follows: “The input value-added tax on goods (including goods purchased externally or produced by the enterprise) used for giving, gifting, promoting, advertising, in various forms, to serve the production and business of goods and services subject to VAT, shall be deductible.”
– Based on Article 4 of Circular No. 96/2015/TT-BTC dated June 26, 2015, issued by the Ministry of Finance, amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC (as amended and supplemented in Article 2 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC), it is as follows:
“Article 6. Deductible and Non-deductible Expenses in Determining Taxable Income
1. Except for non-deductible expenses specified in Clause 2 of this Article, enterprises may deduct all expenses if they meet the following conditions:
a) The expenses are actually incurred in connection with the production and business activities of the enterprise.
b) The expenses are supported by valid invoices and legitimate documents as prescribed by law.
c) For expenses that involve purchasing goods or services and the value of each transaction is equal to or exceeds 20 million Vietnamese Dong (inclusive of VAT) and payments are made through non-cash payment methods, there must be corresponding payment vouchers.
Non-cash payment vouchers shall be made in accordance with the regulations of legal documents on value-added tax….”
In the case where the company, in the year 2015, purchases goods to give to partners or customers to serve the production and business activities of the company, when delivering or gifting these goods, it is required to issue invoices and declare and pay value-added tax (VAT) as if selling goods to customers. However, this expenditure for gifts shall be accounted for as deductible expenses when determining taxable corporate income (if it satisfies the conditions for deductibility).
