Công văn 488/TCT-CS

The General Department of Taxation received the Official Dispatch No. 129-12/PVN dated November 13^th 2012, the Official Dispatch No. 81-12/CV-PV dated August 13^th 2012, and the Official Dispatch No. 19-12/CV-PV dated May 02^nd 2012 of Panasonic Vietnam Co., Ltd (PVN), enquiring about the value-added tax and enterprise income tax on discounts, and the Official Dispatch No. 13047/CT-TTr3 dated May 31^st 2012 of the Department of Taxation of Hanoi (DTH), reporting the settlement of tax of PVN. After obtaining opinions from units affiliated to the Ministry of Finance and sending reports to the Ministry of Finance, the General Department of Taxation hereby gives its opinions about this issue as follows:

- Point 1.1 Section VIII of the Circular No. 161/2007/TT-BTC dated December 31^st 2007 of the Ministry of Finance, guiding the implementation of 16 Accounting standards, promulgated in the Decision No. 149/2001/QĐ-BTC dated December 31^st 2001, the Decision No. 165/2002/QĐ-BTC dated December 31^st 2002, and the Decision No. 234/2003/QĐ-BTC dated December 30^th 2003 of the Minister of Finance specifies that:

“1.1. Revenue accounting:

The revenue derived from transactions and events are determined under agreements between the enterprise and the seller or the user. It is equal to the reasonable value of the amounts that have been or will be collected, after deducting the trade discounts, price reductions, and value returned goods.”

- Accounting standard No. 14 – Revenue and other incomes, promulgated in the Decision No. 149/2001/QĐ-BTC dated December 31^st of the Minister of Finance specifies that:

“Trade discount is a reduction in prices when an enterprise sells a large amount of goods to a customer;

Payment discount is a reduction in prices made by the seller when the buyer pays off before the contractual deadline.

Goods discount is the reduction in prices of goods due to their inferior quality, incorrect specifications, or obsolescence.”

- Point 5.5 Section IV Part B of the Circular No. 120/2003/TT-BTC dated December 12^th 2003, Point 5.5 Section IV Part B of the Circular No. 32/2007/TT-BTC dated April 09^th 2007 of the Ministry of Finance specify that:

“5.5. When discounts on goods and services are written on an invoice, the invoice must specify the discount rate or percentage rate, the sale price exclusive of VAT (discounted sale price), VAT and total amount inclusive of VAT.

If the discount is given when the sales of goods or services reach a certain level, the discounted price of the sold goods shall be adjusted on the sale invoice of the latest purchase or the next period. The invoice must specify its number and the reduced amount. If the customer stops buying goods, the trader shall issue a note of payment to the customer as prescribed”.

- According to Point 1.1, Section I, Part B of the Circular No. 129/2008/TT-BTC dated December 26^th 2008::

1.1.For goods and services sold by the trader or producer, taxable values of goods and services are the sale prices exclusive of VAT. For goods and services subject to special excise duty, taxable values of goods and services are the sale prices inclusive of special excise duty and exclusive of VAT.

The taxable prices of goods and services include the surcharges, apart from the charges collected by the trader, except for the surcharges and fees that the trader must pay to the State budget. If the trader gives a price reduction or trade discount to a customer (if any), the prices for VAT calculation are the discounted prices.

- Point 2.5 Section IV Part B of the Circular No. 129/2008/TT-BTC dated December 26^th 2008 of the Ministry of Finance, guiding value-added tax, states: “2.5. When goods and services are discounted, the sale invoices must specify the discounted prices, VAT, and the total amount inclusive of VAT.

If the discount is given when the sales of goods or services reach a certain level, the discounted price of the sold goods shall be adjusted on the sale invoice of the latest purchase or the next period. The invoice must specify its number and the discounted amount”.

According to the reports sent by the DTH and the Official Dispatch No. 129-12/PVN dated November 13^th 2012 sent by PVN: from 2006 to 2010, PVN has given rewards for annual revenue by giving discounts on revenue if the distributors reach their target, and fast payment discounts (including immediate payment discounts for customers that make payment ahead of schedule or immediately, and payment discounts within 7 – 15 days from the purchase date for customers that defer payment).

Pursuant to the regulations above, when giving discounts to customers:

- PVN may deduct the trade discounts (discounts on the sales that reach a certain level) that are given directly when issuing invoices from the revenue when calculating VAT, and provide adequate invoices and documentation proving the reduction in revenue and the missing of cash due to such discounts.

- PVN must not deduct payment discounts (including fast payment discounts and immediate payment discounts) from its revenue when calculating VAT.

- Point 2.21 Section III Part B of the Circular no. 134/2007/TT-BTC dated November 23^rd 2007 of the Ministry of Finance, and Point 2.19 Section IV Part C of the Circular No. 130/2008/TT-BTC dated December 26^th 2008 of the Ministry of Finance, guiding the enterprise income tax, specify that in non-deductible expenditures when calculating incomes subject to enterprise income tax, the trade discounts (on the sales of goods) are already deducted from revenues when calculating VAT and enterprise income tax, and therefore, these expenditures must not be included in deductible expenses when calculating income subject to enterprise income tax.  If the expenditures on supporting costs and expenditure on payment discounts have adequate invoices and documentation, they shall be included in deductible expenses when calculating income subject to enterprise income tax, and the maximum rate shall apply.

DTH is requested to inspect the actual conditions of PVN in accordance with legislative documents.