On May 25th ,2020, Hanoi Tax Department issued Official Letter No. 40840/CT-TTHT. Whereby:
In case that the Company authorizes the distributor to carry out a sales promotion program in the form of “Buying product X to get an extra product Y for free” as stipulated in provisions of the law of commercial on sales promotion in the form of goods gifting, as the distributor shall issue the invoice. This invoice must contain the name and quantity of the goods, clearly state that the extra goods are promotional and the price for VAT calculation is zero.
In case that the Company makes payment to the distributor of goods for the sales promotion program, during the payment process, the distributor must issue VAT invoice(s) at the rate of 10%. If the distributor is a VAT payer in the form of tax credit method, or using the sale invoice and determining the amount of payable tax (on %) on the revenue as stipulated if the distributor is the VAT payer under the direct method.
For the promotional expenses paid by the Company to the distributor that meets the condition in Article 4 Circular No. 96/2015/TT-BTC on June 22nd ,2015, issued by The Ministry of Finance, it will be deducted for the Company when determining corporate income taxable income.
