How to account for and issue invoices for gifts to employees

Instructions on how to issue invoices for gifts, how to account for gifts without collecting money such as Tet and Mid-Autumn gifts for employees, and how to record deductible expenses.

I. Do I need to create and issue an invoice for gifts to employees?

1. Do I need to issue an invoice for gifts?

Legal basis for regulations on gifts, specifically as follows:

• Excerpt from Clause 7, Article 3 of Circular 26/2015/TT-BTC: “Sellers must issue invoices when selling goods and services, including cases where goods and services are used to give, present, donate or pay in lieu of salary to employees…”;
• Excerpt from Clause 9, Article 3 of Circular 26/2015/TT-BTC: “Using invoices and documents for goods and services given as gifts for organizations that declare and pay VAT using the deduction method: For goods and services used for giving, presenting, donating, or paying in lieu of salary to employees, a VAT invoice (or sales invoice) must be issued, with all the items and VAT calculated on the invoice as an invoice for selling goods and services to customers.”

Accordingly, it can be concluded that: Goods and services given as gifts to employees must be invoiced and declared for value added tax as in normal cases.

2. How to issue gift invoices for employees

The procedure for issuing invoices for free gifts is as follows:

• Buyer information section: Enter the name of the business;
• Payment method: Because the gift is free of charge, it cannot be shown as TM/CK;
• Content section “Name of goods and services”: Add the line “Free gifts” to use as a basis for accounting for expenses;
• Unit price: Is the price of goods and services at the time of occurrence;
• The amount, VAT and total payment will be recorded as a normal invoice.

Reference: Circular 78 and Decree 123 regulating electronic invoices.

II. How to account for gifts to employees

1. In case of goods given as gifts to employees without going through the warehouse

Debit 642 – Business management expenses

Debit 133 (if any) – Deductible VAT

There are 111, 112, 331 – Cash, bank deposits, payable to suppliers

Yes 33311 – Output VAT

For example:

ABC Company directly purchased souvenirs for employees on the occasion of the company’s anniversary with a taxable value on the invoice of 20,000,000 VND, VAT of 2,000,000 VND, paid by bank deposit. 

➜ Then, the goods will be accounted for as follows: 

Debit account 642: 20,000,000 VND
Debit account 133: 2,000,000 VND

Credit account 112: 22,000,000 VND

2. In case of purchasing goods to store in warehouse, then exporting to give as gifts to employees

Debit 152, 153, 156, 211 – Materials, Tools, Goods, Fixed Assets

Debit 133 (if any) – Deductible VAT

There are 111, 112, 331 – Cash, bank deposits, payable to suppliers

Debit 642 – Business management costs

There are 152, 153, 156, 211 – Materials, Equipment, Goods, Fixed Assets

Yes 33311 – Output VAT 

For example:

Company DEF imported a batch of moon cakes to give to employees on the occasion of the Mid-Autumn Festival with a taxable value on the invoice of 30,000,000 VND, VAT of 3,000,000 VND, not yet paid to the supplier.

Then, the goods will be accounted for as follows: 

➜ When purchasing:

Debit account 156: 30,000,000 VND

Debit account 1331: 3,000,000 VND

Credit account 331: 33,000,000 VND

➜ When giving as a gift:

Debit account 642: 33,000,000

Credit account 156: 30,000,000 VND

Credit account 3331: 3,000,000 VND

3. In case of goods donated by welfare reward fund

Debt 353 – Bonus & Welfare Fund

Yes 5111 – Sales & Service Revenue

3331 – VAT payable 

Debit 632 – Cost of goods sold

There are 152, 153, 155, 156 – Raw materials, tools, finished products, goods

Reference: How to account for account 331 – Payables to sellers.

III. How to record gift expenses for employees as deductible expenses?

According to regulations, welfare expenses will be counted as deductible expenses if they meet the conditions in Clause 1, Article 6 of Circular 78/2014/TT-BTC:
“Enterprises are allowed to deduct all expenses if they meet the following conditions:
a) Actual expenses arising in relation to the business activities of the enterprise;
b) Expenses with sufficient legal invoices and documents according to regulations;
c) Expenses with invoices for purchasing goods and services each time with a value of VND 20 million or more (prices including VAT) when paying must have non-cash payment documents.”

1. For the cost of Lunar New Year gifts for employees

The documents that businesses need to have to include the cost of buying Tet gifts for employees in reasonable expenses are as follows:

• Have a sales contract (if any);
• Have gift receipt;
• Have payment documents (payment voucher or payment order);
• There is output invoice (exporting enterprise);
• List of employees receiving gifts and signed confirmation;
• Company decisions on gifts for employees;
• Financial regulations, internal spending regulations, salary and bonus regulations, collective labor agreements and employee labor contracts… at the enterprise.

2. For gift costs of moon cakes

Enterprises also prepare documents and records similar to those for Lunar New Year gifts so that expenses for moon cakes as gifts are recorded as deductible expenses;

Excerpt from Article 4 of Circular 96/2015/TT-BTC amending and supplementing Article 6, Circular 78/2014/TT-BTC stipulates deductible expenses as follows:

“Expenses of a welfare nature for employees such as: Expenses for employees’ funerals and weddings; vacation expenses; expenses for medical support; expenses for additional knowledge support; expenses to support employees’ families affected by natural disasters, war, accidents, and illnesses; rewards; expenses to support travel expenses; expenses for accident insurance, health insurance, voluntary insurance, and other welfare expenses. The total amount of the above welfare expenses must not exceed 1 month’s average actual salary in the tax year of the enterprise.”

For example:

XYZ Company buys goods as Mid-Autumn and New Year gifts for employees in the company with:

– Total cost for each individual is 2,000,000 VND;

– Total annual income of the individual is 100,000,000 VND/year;

– The actual number of working months in a year is 12 months.

➜ Thus, we have an average monthly salary of 8,333,333 VND/month.
➜ Considering that the gift expense of 2,000,000 VND is smaller than the average monthly salary of an individual of 8,333,333 VND. This expense is included in deductible expenses when determining taxable income and is deductible from VAT. However, the company will have to issue a value-added tax invoice as a regular sales invoice.

3. For gift expenses on March 8, October 20, June 1, and employee birthdays

The conditions for recording deductible expenses of gifts to employees in this case are similar to the two cases mentioned above.

However, for purchasing goods as gifts for employees on the occasion of March 8, October 20, June 1, birthdays with a value of less than 200,000 VND/person, the enterprise can summarize and make a single invoice. (According to Resolution 119/2018/ND-CP).

IV. Frequently asked questions about employee gifts