Official Dispatch No. 2319/CTHPH-TTHT dated August 12, 2022 of Tax Department of Hai Phong City guiding tax policy for costs related to material destruction
In case the Company (declaring VAT payment by tax credit method) is an enterprise which is enjoying corporate income tax incentives due to meeting conditions of the locality, incurring costs related to the destruction of unused materials due to changes in production strategies, the Company shall carry out as follows:
- Per invoice: For the compensation received from the customer, the Company does not have to make an invoice but makes a receipt voucher, the customer makes a payment voucher according to regulations.
- Per VAT: The Company is not allowed to deduct input VAT of destroyed materials because the materials have not been used for production and trading of goods and services subject to VAT.
- Per CIT: Because this is not the case of losses due to natural disasters, epidemics, fires or damaged goods due to out of dated, damaged by natural biochemical process changes and other force majeure circumstances therefore the value of materials destroyed will not be considered as deductible expense for CIT purpose.
Regarding CIT incentives: The company complies with the instructions in Official dispatch No. 3489/TCT-CS of the General Department of Taxation issued on September 14, 2021. Accordingly, the General Department of Taxation guides the principle that an enterprise having an investment project is entitled to corporate income tax incentives because it meets the conditions of preferential conditions in the locality, the income entitled to preferential conditions is the income arising from production and business activities of the investment project in the locality except for income not entitled to preferential conditions in accordance with the provisions of the Law on Corporate Income Tax. Income other than income arising in the locality of investment incentives, not income from production and business activities of investment projects, shall not be eligible for corporate income tax incentives.