Is VAT deductible for input invoices of goods used as gifts in Vietnam?

Is VAT deductible for input invoices of goods used as gifts in Vietnam?

In Clause 3, Article 7, Circular 219/2013/TT-BTC has regulations on VAT calculation prices as follows:

Taxable prices

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3. Taxable prices of the goods and services (whether bought externally or not) used as gifts, donations, or substitute for wages are the taxable prices of the same kinds or equivalent goods and services at the same time.

Example 22: Unit A manufactures electric fans and exchange 50 fans with company B for steel. The selling price (tax-exclusive) is 400,000 VND/fan. Taxable price = 50 x 400,000 VND = 20,000,000 VND.

Taxable prices of the invitations (complimentary) to art performances, fashion shows, beauty pageants, and sports competitions permitted by competent authorities are zero (0). The organizer of the show or competition is responsible for the quantity of invitations and recipients before the show or competition takes places If the organizer charges these invitations, the organizer shall incur penalties prescribed by tax laws.

Example 23. Company X is permitted by a competent authority to hold a beauty pageant. Apart from the tickets that are sold, company X also sends invitations to some VIPs. The list of recipients is printed on these invitations. When declaring VAT, taxable price of the invitation is zero (0). If tax authority finds that company X collect money on these invitations, company X shall incur penalties prescribed by tax laws.

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In Clause 1 and Clause 5, Article 14 of Circular 219/2013/TT-BTC, there are regulations on rules for deducting input VAT as follows:

Rules for deducting input VAT

1. Input VAT on goods and services serving the manufacture or sale of goods/services subject to VAT shall be deducted in full, including non-refundable input VAT on damaged goods.

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5. Input VAT on the goods (whether purchased externally or produced by the taxpayer) used as gifts, used for sale promotions or advertising serving the manufacture of sale of taxable goods may be deducted.

6. The VAT paid under a decision on tax imposition made by a customs authority shall be deducted in full, unless penalties for tax avoidance are imposed by the customs authority.

Thus, input invoices for goods used as gifts for customers are deductible if the following conditions are met:

(1) Expenses for purchasing goods as gifts arising in connection with the production and business activities of the enterprise.

(2) Have enough legal invoices and documents according to the provisions of law.

Is VAT deductible for input invoices of goods used as gifts in Vietnam? (Image from the Internet)

When importing goods used as gifts to customers, does it require an invoice of over 20 million in cash to deduct VAT in Vietnam?

In Clause 2, Article 15, Circular 219/2013/TT-BTC, amended by Clause 10, Article 1, Circular 26/2015/TT-BTC, there are regulations on conditions for input VAT deduction as follows:

Conditions for input VAT deduction

1. Legitimate VAT invoices for purchases or receipts for payment of VAT on imported goods, or receipts for payment of VAT on behalf of foreign organizations that do not have Vietnamese legal status and the organizations and individuals, and the foreigners that do business or earn income in Vietnam.

2. Proofs non-cash payments for the purchases (including imported goods) that cost VND 20 million or more, except for the imports that cost below VND 20 million each, purchases that cost below VND 20 million inclusive of VAT, and imports being gifts, donations from overseas entities.

Receipts for non-cash payments include bank transfer receipts and other receipts for non-cash payments prescribed in Clause 3 and Clause 4 of this Article.

Thus, importing goods as gifts to customers does not require an invoice of over 20 million in cash to be able to deduct VAT in Vietnam.

Who can register voluntarily for application of tax deduction method in Vietnam?

At Point b, Clause 4, Article 7 of Decree 209/2013/ND-CP, regulations on registered business establishments voluntarily applying the tax deduction method include:

b) Business establishments registering voluntarily for application of the tax credit method include:

- Enterprises and cooperatives that are operating with annual turnover of less than billion VND from goods sale and service provision and fully observe regulations on accounting, invoices and documents as prescribed by the law on accounting, invoices and documents;

- Enterprises that have just been established from investment projects of business establishments which are operating and pay value-added tax under the credit method;

- Enterprises and cooperatives that have just been established and perform investment and procurement of fixed assets, machinery, equipment; foreign organizations and foreigners conducting business in Vietnam under contractor contracts, contractor sub-contracts as guided by the Ministry of Finance;

- Other economic organizations that can account the input and output value-added tax.

c) Foreign organizations and individuals supplying goods and services for prospecting, exploring and developing and exploiting oil and gas; their taxes are declared and paid on behalf of them, under the credit method, by the Vietnamese party.

In case where business establishments have activities of purchasing, selling, processing gold, silver or gems, they must separately account these activities for the application of the method of calculation of tax based directly on added value specified at Clause 1 Article 8 of this Decree.

Best regards!