Declare & deduct VAT when issuing invoices for gift goods

What are promotional and gift goods? What are the regulations on VAT calculation, declaration, deduction and how to issue invoices for promotional and gift goods? fdiinvietnam.com will help you answer in this article.

I. Legal basis

• Circular 219/2013/TT-BTC;
• Decree 123/2020/ND-CP;
• Commercial Law 2005;
• Decree 81/2018/ND-CP.

II. Regulations on issuing invoices for gifts and promotional goods

In terms of implementation, promotional goods and gifts are both expressed through the provision of a quantity of goods and services “free” to customers by the enterprise. However, the tax policy applied to promotional goods will be different from that of gifts.

1. Regulations on how to issue invoices for gifts and promotional goods

Clause 1, Article 4 of Decree 123/2020/ND-CP stipulates: Enterprises must issue invoices when selling goods, providing services, including cases of giving away, promotions, advertising, samples, paying in lieu of salary and internal consumption (except for cases of internal circulation of goods to continue the production process), issuing loans, lending, returning goods.
➥ Thus, in cases of giving away, donating, or promoting, enterprises must issue invoices clearly stating the criteria as in a regular sales invoice, and clearly stating “Free gifts” or “Free promotional goods”.
Note :

• In the case where a company purchases goods using a welfare fund to purchase goods from outside for non-business purposes, according to tax guidance documents, this amount of money does not need to be invoiced, and input VAT cannot be deducted and cannot be counted as expenses when determining corporate income tax.
• Promotional goods are items that businesses use to give away, reward or provide free of charge to customers for the purpose of trade promotion, increasing sales and are managed based on the principles of the 2005 Commercial Law and Decree 81/2018/ND-CP. Before implementing a promotion, businesses need to find out whether the promotional program is in accordance with the provisions of the Commercial Law and whether it is required to notify the Department of Industry and Trade or not?

>> See more: Regulations on issuing and not issuing VAT invoices.

2. Determine the VAT price for gifts and promotional goods

2.1. For gifts
According to Clause 3, Article 7 of Circular 219/2013/TT-BTC, it is stipulated that: In case products, goods, services (including those purchased from outside or produced by the business establishment itself) are used as gifts, the VAT price of the goods and services is determined according to the price of the same or equivalent goods and services at the time of the transaction.
Example 1:
Enterprise A organizes a customer appreciation event on the occasion of its 10th anniversary. According to the plan, Enterprise A will send its partners and customers 15 gift baskets with a value of VND 5,000,000/basket.
⇒ The VAT price of the total gifts is: 15 x 5,000,000 = VND 75,000,000.
Note : 
In case the organization gives away invitations (the invitation notes that no fee is collected) for performances, competitions… permitted by competent state agencies according to law, the VAT taxable price of this activity is determined as zero (0).

2.2. For promotional goods
According to Clause 5, Article 7 of Circular 219/2013/TT-BTC, it is stipulated that: In case the products, goods and services used in promotional activities meet the provisions of the commercial law, the VAT taxable price is determined to be zero (0). In case of failure to comply with the provisions of the commercial law, the enterprise must still declare and pay tax on these items as goods and services used for gifts.
➥ Thus, if the promotional program is subject to notification of activities to the Department of Industry and Trade, the company must carry out this procedure and be approved by the Department of Industry and Trade where the promotional program takes place before being able to issue a promotional invoice with a taxable price of 0.
Example 2:
Enterprise A organizes a promotional activity of buy 1 get 1 free for perfume products one week before Valentine’s Day. The unit has registered the promotion program with the Department of Labor for a period of 1 month, the total promotional goods are 300 million VND.
⇒ When issuing a sales invoice, the taxable price of the gifted product will have a value of zero.

3. How to declare invoices for gifts and promotions

3.1. Gifts
➤ Donor:

• Input declaration: When purchasing goods and services for gift giving activities: Enterprises declare these purchase invoices and vouchers in indicators 23, 24, 25 on declaration form 01/GTGT ​​as normal purchases of goods if they meet the conditions for deduction.
• Output declaration: When exporting goods and services as gifts: Enterprises declare the value of goods and services sold and VAT on declaration form 01/GTGT ​​(tax rate corresponding to the items listed on the document) as normal sales.

How to declare invoices and documents for example 1, section II is as follows:
When a business purchases goods and services, the business makes a purchase declaration:

When a business exports goods and services as gifts, the business must declare the sales:

Note :
When declaring, there will be a discrepancy in revenue between the accounting books and the VAT declaration because on the books, the enterprise records the cost, while on the declaration, the value of goods sold (revenue) is recorded. It is necessary to pay attention to donated goods for explanation when necessary.

➤ Recipient of the gift:
The recipient does not have to pay, so there is no payment document to qualify for input VAT deduction, so there is no need to declare the invoice for the gift.

3.2. Promotional goods
Promotional goods and services that meet the conditions under the commercial law, with a taxable value determined as zero (0), do not need to be declared. However, if the promotional goods and services do not meet the requirements under the commercial law, they must be declared similarly to the donated goods and services mentioned above.

III. Some related questions about gift invoices, no collection