RESPONSE TO CITIZENS -BUSINESSES.
(Chinhphu.vn) – Mr. Nguyen Hoang Giang’s company operates in the wholesale and retail fashion industry, often advertising on social networks such as Facebook. To pay for these advertising expenses, Mr. Giang’s company usually deposits money into an individual account for payment.
Starting from June 1, 2022, according to the new regulations on taxation for foreign contractors, Facebook has imposed an additional 5% VAT on advertising expenses for all individuals and businesses using this platform.
Mr. Giang asked whether it would be considered valid and eligible for VAT deduction and corporate income tax if his company continues to use an individual account to pay for advertising expenses as described above. In the case that it is not valid, what conditions are required for these expenses to be considered valid.
The Ministry of Finance responds to this issue as follows:
– Based on Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015, of the Ministry of Finance guiding corporate income tax, it is stated: “Article 4. Amendment and supplement to Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented at Clause 2 of Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) as follows: “Article 6. Deductible and non-deductible expenses when determining taxable income
1. Except for non-deductible expenses specified in Clause 2 of this Article, enterprises may deduct all expenses if they meet the following conditions: a) Actual expenses related to the production and business activities of the enterprise. b) Expenses with legitimate invoices and documents in accordance with the law. c) Expenses, if there is an invoice for the purchase of goods or services each time with a value of VND 20 million or more (including VAT) when payment is made, must have non-cash payment vouchers. Non-cash payment vouchers shall be made in accordance with the regulations of legal documents on value-added tax…”
– Based on Article 14 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance guiding the implementation of the Law on Value Added Tax (VAT) and Decree No. 209/2013/ND-CP dated December 18, 2013, of the Government detailing and guiding the implementation of some articles of the Law on Value Added Tax (amended and supplemented at Clause 10 of Article 1 of Circular No. 26/2015/TT-BTC, Article 1 of Circular No. 173/2016/TT-BTC of the Ministry of Finance), which regulates the principles of input VAT deduction.
– Based on Article 15 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance mentioned above (amended and supplemented as specified in Clause 10 of Article 1 of Circular No. 26/2015/TT-BTC, Article 1 of Circular No. 173/2016/TT-BTC of the Ministry of Finance), which stipulates the conditions for input VAT deduction: “Article 15. Conditions for deduction of input value-added tax:
1. Have legal VAT invoices for purchased goods, services, or import VAT documents, or VAT payment documents for imported goods or VAT payment documents in place of foreign contractors, according to the guidance of the Ministry of Finance applied to foreign organizations that do not have legal status in Vietnam and foreign individuals doing business or earning income in Vietnam.
2. Have non-cash payment vouchers for goods or services purchased (including imported goods) with a value of twenty million dong or more, except for cases where the value of goods or services imported each time is less than twenty million dong or the purchase of goods and services each time is less than twenty million dong according to invoices including VAT, and in cases where the business establishment imports gifts, donations of organizations and individuals abroad. Non-cash payment vouchers include payment vouchers through banks and other non-cash payment vouchers as instructed in Clause 3 and Clause 4 of this Article.
3. Non-cash payment vouchers are understood as having documents proving the transfer of money from the buyer’s account to the seller’s account at payment service providing agencies in forms of payment suitable to the current law, such as checks, payment orders or bills of exchange, payment orders, remittances, bank cards, credit cards, mobile phones (e-wallets), and other forms of payment as prescribed (including cases where the buyer pays from the buyer’s account to the seller’s account in the name of an individual business household or pays from the buyer’s account to the seller’s account in the name of an individual business household)…”
Based on the above regulations, in the case that Mr. Giang’s company incurs online advertising on Facebook:
– The input VAT on advertising expenses serving the production and business activities of the company can be fully deducted if it meets the conditions regarding the principles and conditions for input VAT deduction specified in Article 14 and Article 15 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance (amended and supplemented in Circular No. 26/2015/TT-BTC, Circular No. 173/2016/TT-BTC of the Ministry of Finance).
– Advertising expenses serving the production and business activities of the company can be included in deductible expenses when determining CIT costs if it meets the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015, of the Ministry of Finance.
In the case that the company authorizes an individual who is an employee in the company to use their personal credit card to pay for the aforementioned services to the seller, and then the company pays the individual through bank transfer from the company’s account registered with the tax authority, and if this payment method is specifically regulated in the company’s financial management regulations or a decision on delegation by the company to the individual, and if the expenses mentioned have complete records and documents proving that the services are used for the production and business activities of the enterprise, including: invoices for services in the name and tax code of the company; records related to the delegation of authority from the enterprise to the individual for payment to the seller and payment back to the enterprise; payment vouchers from the individual’s credit card to the seller, payment vouchers from the company’s bank account to the individual, then the payment method mentioned is considered to meet the conditions of non-cash payment vouchers and serves as a basis for declaration, deduction of input VAT, and inclusion in deductible expenses when calculating CIT.
The company is responsible for establishing and monitoring a list of personal credit card accounts of employees authorized by the enterprise to pay for the mentioned services using the above-mentioned payment method and provide it to the relevant authorities when necessary.
Source: Government Electronic Newspaper
30/09/2022
– To better understand VAT (Value-Added Tax) in Vietnam: please refer to: What is Value-Added Tax?
– You can find articles from the Government of Vietnam at: Articles on the Government and legal matters in Vietnam
– To gain a better understanding of CIT at VietNam (Corporate Income Tax), please read: What is Corporate Income Tax?
