Official Dispatch 346/TCT-DNNCN 2022 tax declaration and payment for sales bonuses and commercial discounts

The General Department of Taxation received Official Dispatch No. 16/HTVT-VP dated June 25, 2021, from Vietnam Tax Consultants' Association, Official Dispatch No. 675/7/21/JCV-CV dated July 30, 2021, from Japfa Comfeed Vietnam Limited Company, and Official Dispatch No. 09-082021/CJV dated December 15, 2021, from CJ Vina Agri Co., Ltd., for the instructions on tax declaration and payment on behalf of customers who are presumptive tax-applying households for sales bonuses and commercial discounts, and has the following comments:

1. Regarding commercial discounts

- According to the Accounting Standard No. 14 - Turnover and other incomes, which was promulgated under the Ministry of Finance's Decision No. 149/2001/QD-BTC dated December 31, 2001:

“Commercial discount means a reduction of the listed price granted by the selling enterprises to the buyers of large volumes of goods.”

- Point c Clause 1 Article 81 of the Ministry of Finance’s Circular No. 200/2014/TT-BTC dated December 22, 2021, on guidelines for accounting policies for enterprises, stipulates that:

“Article 81. Account 521 - Revenue deductions

1. Accounting principles

….

 c) Commercial discount means a reduction of the listed price granted by the selling enterprises to the buyers of large volumes of goods. The seller performs accounting for commercial discount according to the following principles:

- In case the value-added tax (VAT) invoice or bill of sale shows commercial discounts to buyers that are the deduction from the amount payable by the buyer (the selling price recorded in the invoice is the price deducted commercial discount), enterprises (sellers) do not use this account, revenue from sales price is recorded according to the price deducted commercial discount (net revenue). ”

2. Regarding tax policies for commercial discounts

- According to Point dd Clause 5 Article 7 of the Government’s Decree No. 126/2020/ND-CP dated October 19, 2021, detailing a number of articles of the Law on Tax Administration:

“dd) When paying bonuses or supports for achieving a target turnover, sales promotions, commercial discounts, or other supports, in cash or in kind, to business households or business individuals paying taxes by the tax presumption method, organizations shall declare and pay taxes thereon for these individuals under regulations.”

- Clause 22 Article 7 of the Ministry of Finance’s Circular No. 219/2013/TT-BTC dated December 31, 2013, guiding the implementation of the Law on Value-Added Tax and the Government’s Decree No. 209/2013/ND-CP of December 18, 2013, detailing and guiding a number of articles of the Law on Value-Added Tax, prescribes that:

“22. The taxed price of goods and services specified in Clauses 1 thru 21 of this Article covers revenues and surcharges earned by business establishments in addition to goods and service prices.

In case a business establishment offers a commercial discount for customers (if any), the taxed price is the discounted price. In case the commercial discount is based on the quantity and sales of goods or services, the discounted amount of goods sold shall be adjusted on the goods and service sale invoice upon the last purchase or in the subsequent period. In case the discounted amount is recorded when the discount program (period) ends, the establishment may issue an adjustment invoice, enclosed with a list of serial numbers of invoices which need to be adjusted, the adjusted amounts and tax amounts. Based on the adjustment invoice, the seller and buyer shall declare adjustments to sale and purchase turnovers and input and output tax amounts.”

- Pursuant to Clause 1 Article 10 of the Minister of Finance's Circular No. 40/2021/TT-BTC dated June 1, 2021, providing guidance on value-added tax, personal income tax, and tax administration for business households and business individuals:

“Turnover amounts liable to VAT and those liable to personal income tax (PIT) for business households and business individuals are tax-inclusive turnover amounts (in case such amounts are liable to taxes) generated in a tax period, including sales turnover, processing remuneration, commissions, and charges for service provision from goods production and service provision activities, including also bonuses and support amounts for achievement of sales turnover targets, sales promotion, commercial discounts, payment discounts, supports in cash or in kind; price subsidies, surcharges, extra charges and additional levies generated by such households and individuals under regulations; compensations for contract breaches and other compensations (only included in PIT-liable turnover amounts), and other turnover amounts generated by such business households and individuals, regardless of whether such amounts have been collected or not.”

3. Regarding tax rates applicable to the distribution and supply of goods by business individuals

- According to Clause 2 Article 1 of the Ministry of Finance's Circular 26/2015/TT-BTC dated February 27, 2015, providing guidance on value-added tax and tax administration in the Government’s Decree No. 12/2015/ND-CP of February 12, 2015, detailing the Law Amending and Supplementing a Number of Articles of the Tax Laws and amending and supplementing a number of articles of tax decrees, and amending and supplementing a number of articles of the Ministry of Finance’s Circular No. 39/2014/TT-BTC of March 31, 2014, on goods sale and service provision invoices:

“3a. Fertilizers are organic and inorganic fertilizers such as phosphate fertilizer, nitrogenous fertilizer (urea), NPK fertilizer, mixed urea, potash; microbial fertilizer and other fertilizers;

Feeds for cattle, poultry, aquatic animals, and other animals, including processed or unprocessed products, such as rice bran, dregs, oil cakes, fish meal, bone meal, shrimp meal, and other types of animal feeds, animal feed additives (such as premix, active ingredients, and carriers) prescribed in Clause 1 Article 3 of the Government’s Decree No. 08/2010/ND-CP of February 5, 2010, on management of animal feeds, and Clauses 2 and 3 Article 1 of the Ministry of Agriculture and Rural Development’s Circular No. 50/2014/TT-BNNPTNT of December 24, 2014;”

- Pursuant to Point l of Appendix 1 - List of business lines subject to VAT, PIT based on a percentage of turnover for businesses households and businesses individual, of the Ministry of Finance's Circular No. 40/2021/TT-BTC dated June 1, 2021:

“1. Distribution and supply of goods

4. Regarding the effect of the responsibility of tax declaration and payment on behalf of taxpayers

Clause 5 Article 20 of the Ministry of Finance's Circular No. 40/2021/TT-BTC dated June 1, 2021, stipulates that:

“5. Organizations making tax declaration and payment on behalf of presumptive tax-applying households in accordance with Point dd Clause 5 Article 7 of the Government’s Decree No. 126/2020/ND-CP of October 19, 2020, shall make tax declaration and payment on behalf of presumptive tax-applying households in accordance with the guidance of this Circular from its effective date.”

5. Regarding sale promotion under the Commercial Law

- Pursuant Article 92 of the Commercial Law No. 36/2005/QH11 dated June 14, 2005, of the National Assembly:

“5. Selling goods or providing services together with prize-contest entrance tickets to customers, for purpose of selecting prize winners according to the rules and prizes already announced.

6. Selling goods or providing services together with opportunities for customers to participate in games of chance, the participation in which comes after the purchase of goods or services and the winning of prizes depends on the luck of participants according to the rules and prizes already announced.”

6. Regarding tax policies for prize winnings from promotions

- Point b Clause 6 Article 2 of the Ministry of Finance's Circular No. 111/2013/TT-BTC dated August 15, 2013, stipulates that:

“6. Incomes from prize winning

Incomes from prize winning are prizes won in cash or in kind by individuals in the following forms:

b) Sales promotion prizes in all forms for goods or service purchase in accordance with the Commercial Law.”

- Pursuant to Article 15 of the Ministry of Finance's Circular No. 111/2013/TT-BTC dated August 15, 2013:

“Tax bases for income from prize winning include taxed income and tax rate.

1. Taxed income

Taxed income from prize winning is the prize value exceeding VND 10 million received by a taxpayer upon each time of prize winning, regardless of the number of times of receiving prize money.”

- Point g Clause 1 Article 25 of the Ministry of Finance's Circular No. 111/2013/TT-BTC dated August 15, 2013, stipulates that:

“1. Tax withholding

Tax withholding means that income payers calculate and withhold payable tax amounts from incomes of taxpayers before paying incomes, specifically as follows:

…..

g) Income from prize winning

Prize payers shall withhold personal income tax before paying prize money to prize winners. To-be-withheld tax amounts are determined under Article 15 of this Circular.

Pursuant to the above-mentioned provisions and instructions, tax policies applicable to the commercial discounts and promotions shall be as follows:

- Regarding commercial discounts:

In cases where the Company engaged in the production of livestock and poultry feed provides commercial discounts to customers who are business households paying taxes by the presumption method and purchase goods in large volumes, including those in the production business sector (who purchase feed for breeding rather than resale and are not eligible for tax exemption as direct agricultural producers), the Company is only required to declare and pay PIT on behalf of the presumptive tax-applying households at the PIT rate of 0.5%.

Business households and business individual shall be responsible for providing accurate information regarding their tax calculation method to organizations in order to declare and pay taxes on their behalf if they are presumptive tax-applying households. The tax office shall, based on tax declaration data, invoices, and supporting documents from taxpayers, manage risks in such cases.

The tax declaration and payment on behalf of presumptive tax-applying households specified at Point dd Clause 5 Article 7 of Decree No. 126/2020/ND-CP dated October 19, 2020, has been effective since August 1, 2021 (the effective date of Circular No. 40/2021/TT-BTC).

- Regarding promotions:

If an organization conducts a promotional program in compliance with Clause 5 and Clause 6 Article 92 of the National Assembly's Commercial Law No. 36/2005/QH11 dated June 14, 2005, any monetary or in-kind prizes received by presumptive tax-applying households, which exceed VND 10 million are considered taxable personal income. Organizations responsible for disbursing the promotional prize must withhold tax in accordance with the guidance set forth in Article 15 and Point g Clause 1 Article 25 of Circular No. 111/2013/TT-BTC dated August 15, 2013, issued by the Ministry of Finance.

The General Department of Taxation hereby informs for implementation./.