To: Tax Department of Bac Lieu Province

In response to Official Dispatch No.524/CT-TTHT dated May 18, 2018 of Tax Department of Bac Lieu province regarding payment for uniform of employees in vouchers by PetroVietnam Packaging Joint Stock Company (hereinafter referred to as “PPC"), below are opinions from the General Department of Taxation:

1/ With regard to vouchers:

Pursuant to Clause 7 and 9 Article 3 of Circular No.26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance providing guidelines for VAT and tax management: “7. Article is amended as follows:

a) Point b Clause 1 Article 16 (which is amended in Point 3 Clause 3 Article 5 of Circular No.119/2014/TT-BTC) is amended as follows:

“b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries (except for goods internally circulated or internally used to proceed production), the seller must issue invoices.

Pursuant to regulations provided in Clause 2 Article 20 of Circular No.39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance on guidelines for invoices: “2. In case an issued invoice is found incorrect after it is given to the buyer but before goods are delivered or services are provided, or after it is given to the buyer but before the buyer and the seller declare tax, the invoice shall be deleted; the buyer and the seller shall make a record on withdrawal of copies of the incorrect invoice.

The withdrawal record must specify the reasons for invoice withdrawal.

The seller shall cross out the copies, keep the incorrect invoice, and issue a new invoice as prescribed.”

Pursuant to Official Dispatch No.3612/TCT-CC dated August 12, 2016 of the General Department of Taxation: 2. In terms of questions concerning the receipt used in case of sale of vouchers of Vinecom Limited Liability Company (hereinafter referred to as “Vinecom LLC")

Pursuant to:

- Point b Clause 1 Article 16 of Circular No.39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance (amended in Point a Clause 3 Article 5 of Circular No.119/2014/TT-BTC dated August 25, 2014 of the Ministry of Finance)

“b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries and internal consumption (except for goods internally circulated to proceed production), the seller must issue invoices.”

- Point 1 and 2 Article 8 of Circular No.219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance providing for time for calculating VAT:

“1. For goods sale, VAT shall be calculated when the ownership or the right to use goods is transferred to the buyer, whether the payment is made or not.

2. For service provision, VAT shall be calculated when the service is completely provided or the invoice for service provision is issued, whether the payment is made or not.

Clause 1 Article 6 of Circular No.78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance (amended in Clause 2 Article 6 of Circular No.119/2014/TT- BTC dated August 25, 2014 of the Ministry of Finance) providing for deductible and non-deductible expenses for determination of taxable income:

“1. Except non-deductible expenses specified in Clause 2 this Article, the enterprise may deduct all expenses that fully satisfy the following requirements:

a) Realized expenses arise out of production and business operations of the enterprise;

b) Expenses have adequate lawful invoices and documents as required by laws

c) For expenses incurred on purchase of goods or services with invoices valued at VND 20 million or more (VAT-inclusive prices) each, non-cash payment documents are required.

Non-cash payment documents shall comply with provisions of legal documents on value-added tax. "

Pursuant to the aforesaid regulations, vouchers (Adayroi vouchers and e-vouchers) issued by Vinecom LLC are documents with monetary value that can be used as payment instruments. As for that reason, voucher issuance is not considered sale of goods or services, so it is not required to issue sale invoices and calculate value-added tax.

Business establishments which buy and use vouchers issued by Vinecom LLC for the purpose of promotion, gifting, presentation, exchange or payment as salaries to their employees are not required to issue invoices.

According to receipts of Vinecom LLC and documents related to promotion, gifting or exchange programs or payment as salaries, the expenses will be deductible if all requirements specified in Clause 1 Article 6 of Circular No.78/2014/TT-BTC dated June 18, 2014 (amended in Clause 2 Article 6 of Circular No.119/2014/TT-BTC dated August 25, 2014 of the Ministry of Finance.) are satisfied.

When business establishments buy the vouchers issued by Vinecom LLC and use such vouchers to purchase goods on the website ADAYROI.COM, Vinecom LLC shall officially transfer the ownership of the goods, issue invoices, declare VAT and determine revenues subject to corporation income tax. According to invoices issued by Vinecom LLC, the expenses will be deductible if all requirements specified in Clause 1 Article 6 of Circular No.78/2014/TT-BTC dated June 18, 2014 (amended in Clause 2 Article 6 of Circular No.119/2014/TT-BTC dated August 25, 2014 of the Ministry of Finance.) are satisfied.

If the VAT invoice issued by the seller specifies the vouchers as goods, such invoice will be considered incorrect as prescribed in Clause 7 Article 3 of Circular No.26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance and Official Dispatch No.3612/TCT-CC dated August 12, 2016 of the General Department of Taxation. As for that reason, PPC and the seller shall make a record on withdrawal of the incorrect invoice under provisions provided in Clause 2 Article 20 of Circular No.39/2014/TT-BTC mentioned above.

2/ With regard to incomes subject to personal income tax (hereinafter referred to as “taxable incomes”)

Pursuant to Point a Clause 2 Article 2 of Circular No.111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance providing guidelines for personal income tax:

“Article 2. Taxable incomes

2. Incomes from salaries and remunerations

Incomes from salaries and remunerations are incomes paid to employees from employers, including:

a) Salaries, remunerations and other amounts paid as salaries or remunerations in cash or not in cash.”

The vouchers given to employees by PPC shall be considered taxable incomes (as specified in Point a Clause 2 Article 2 of Circular No.111/2013/TT-BTC) and must be included in their personal income tax statements.

3/ With regard to costs for provision of perquisites for employees working in harmful environment:

Pursuant to regulations in Clause 2 and 5 Article 3 of Circular No.25/2013/TT-BLDTBXH dated October 18, 2013 of the Ministry of Labor, War Invalids and Social Affairs on rules for provision of perquisites:

“2. Perquisites must not be converted into cash or included in salaries.

5. The cost of perquisites shall be included in regular expenses, production and business costs of the employer, and considered a reasonable expense when calculating and paying corporate income tax under current law provisions on corporation income tax.”

Pursuant to regulations in Clause 7 Article 3 of Circular No.26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance: “7. Article 16 shall be amended as follows:

a) Point b Clause 1 Article 16 (amended in Point 3 Clause 3 Article 5 of Circular No.119/2014/TT-BTC) is amended as follows:

“b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries (except for goods internally circulated or internally used to proceed production), the seller must issue invoices.

If PPC purchases milk and provide such milk for its employees as a gift, a VAT invoice shall be issued as prescribed in Clause 7 Article 3 of Circular No.26/2015/TT-BTC mentioned above.

VAT invoices are not required in case PPC pays for perquisites provided for employees working in harmful environment. Such expense may be included in reasonable expense when calculating taxable incomes as regulated.

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