At the same time, the application for consideration for deduction of discounts must have the seller’s announcement of discounts.
Accordingly, in case a company applies for subtraction of discounts for imported goods from taxable value but in the sale contract having no specific discount conditions and the application having no the seller’s announcement of discounts, the subtraction shall not be considered.
One of the new points of this Decree is the supplement of 2 new principles of sales promotion, in particular: Customers are not required to give up, refuse or exchange goods and services of other traders or organizations; the lottery results must not be used as a foundation to determine the prize winner or to present and reward bonuses in sale promotion program (Article 3).
In addition, businesses are not allowed to conduct sales promotion in multi-level form if they do not register multi-level marketing activities (Article 4).
Promoted products must not include wines, lottery, cigarettes, breast milk substitutes, medicines for human use, examination and treatment service, education service and goods and services that have been banned from circulation in Vietnam. Particularly, wines, lottery, cigarettes, curative medicines for human use are also not used as promotional products of other goods, services (Article 5).
Money can also be used as promotional merchandise, except for sales promotion conducted in the forms: provision of sample goods or services; discount and sale of goods or provision of services together with coupons (Clause 3 Article 5).
Regarding maximum value of promotional product, the promotional value of a unit of promoted product must not exceed 50% of the price of such promoted product unit. However, for time-limited sales promotion (effective within certain frame of hours, days, weeks, months or seasons) or concentrated sales promotion programs, the limit shall be 100% of the value of the promotional product (Article 6).
This Decree takes effect from July 15th, 2018 and replaces Decree No. 37/2006/ND-CP dated April 4th, 2006.
Accordingly, in case a company presents gifts to its customers for the purpose of serving production and business in accordance with provisions of commercial law, the expenditures on gifts shall be recorded as reasonable expenses when determining income liable to enterprise income tax.
Upon giving the gifts to customers, the company has to still create invoices and fully calculate value added tax as if the goods are sold to customers (Clause 7, Clause 9 Article 3 of Circular No. 26/2015/TT-BTC).
However, in case the company buys gift vouchers of supermarkets to present customers, the gift vouchers are valuable papers equivalent to money, used as a payment instrument rather than goods, the company shall not issue invoices other than payment vouchers for making cost accounting.
According to Clause 10 Article 3 of Decree No. 65/2013/ND-CP, incomes from gifts are subject to personal income tax (PIT) only include gifts that are securities, capital holdings, real estate and other assets subject to ownership registration. Accordingly, in case the company gives gifts (goods, gift vouchers) to individual customers, if the gifts are not assets that must be registered for ownership, the company shall not deduct PIT.
In contrast, if the payment discounts are paid to individuals who are goods sale agents, 1% VAT on such payment discounts shall be calculated and withheld. Regarding this issue, the General Department of Taxation has provided guidelines in Official letter No. 1162/TCT-TNCN dated March 21st, 2016.
Accordingly, in the case the company engages in selling cars, its parent company authorizes to award the Vietnamese prizewinner the prize (a car) in a contest held by the parent company; when the company awards the prize, it shall deduct PIT on the prize at the rate of 10% with regard to the prize in excess of 10 million VND
However, with regard to the making account of expenses related to this program, because it was held outside Vietnam (it was not registered with a Department of Industry and Trade), it is not related to production and business activities of the Company, the expenditures arising related to the prize award are not allowable to be included in reasonable expenses.
Accordingly, with regard to the “payment discount” and “customer support meeting turnover”, when the enterprise pays these amounts to the individuals, it must deduct 1% PIT according to the provisions in Point 4 Annex 01 of Circular No. 92/2015/TT-BTC and declare the payment made on behalf of the individuals under Form No. 01/CNKD
For the “trading discount” offered for an agent, it is exempt from PIT according to the guidelines provided in Official letter No. 4447/TCT-TNCN dated October 27th, 2015. PIT shall not be deducted in this case
With regard to the expenditure which is “sale promotion award”, PIT shall be deducted in accordance with the guidelines provided in Official letter No. 3929/TCT-TNCN dated September 23rd, 2015. Accordingly, the award’s value (regardless of in kind or in cash and if it is in cash, regardless of whether it is subject to ownership registration or not) shall be subject to PIT. The taxable value is the amount beyond VND 10 million; the amount under VND 10 million is exempt from tax.
Accordingly, if a company pays “payment discount” (it belongs to the subjects not liable to VAT under Clause 1 Article 5 of Circular No. 92/2015/TT-BTC) to an individual who is the goods sale agent, it shall declare and deduct 1% PIT of behalf of such individual
The company shall use the declaration form No. 01/CNKD issued together with Circular No. 92/2015/TT-BTC and write the phrase “Declare on behalf of” in front of the phrase “The taxpayer”, then the declarant shall sign and stamp the company’s seal therein. On the tax calculation dossier, the tax receipt is still presented that the taxpayer is the business individual.
Official Letter No. 1868/CT-TTHT - Regarding trade discount, payment discount ( 4-Mar-2016) According point 2.5 Annex of Circular No. 39/2014/TT-BTC, in the case a company offers trade discount for its customer, based on a certain turnover gained in a month, quarter, year, under the economic contract signed between the two parties, the discount offered for the sold goods shall be adjusted on the invoice for goods sale, service provision of the last purchase or subsequent purchase. If the discount is offered after the sales promotion is over, an adjustment invoice shall be made accompanying by the list specifying the numbers of the invoices that need adjusting and the adjusted payment amount and tax read more
In addition, according to this Official letter, with regard to customers without having the sale contract, the trade discount is also accepted provided that it is complied with the provisions of commercial laws (the sales promotion is registered with a Department of Industry and Trade or the Ministry of Industry and Trade)
Another case, when the company signs a contract on goods sale with the agreement on offer of payment discount for a customer who makes early payment, then the Company shall base on the sale contract having the agreement on payment discount and payment document of the discount amount to account it into deductible expenses.
However, according to this Official letter, in case an enterprise sells goods under contracts to individuals or agents attaching the trade discounts (directly deducted from invoices), which are not agent commissions or sale promotion prizes from promotion programs, PIT is exempt in this case, regardless of the buyers who are agent individuals or non-agent individuals.