Official Dispatch No. 32593/CTBDU-TTHT dated December 26, 2024, issued by the Binh Duong Tax Department regarding offsetting of liabilities

by KMC Consulting Company Limited

In cases where the company has receivables from customers while also incurring payables to foreign customers, if the contract or contract appendix between the company and the customers specifies an offset payment method, and the parties have a record of data reconciliation and confirmation of offset payment, such transactions are considered non-cash payments.

This payment method serves as the basis for the company to:

  • Account for deductible expenses when determining Corporate Income Tax, as stipulated in Article 4 of Circular No. 96/2015/TT-BTC.
  • Declare and deduct input Value-Added Tax (VAT) in accordance with Clause 10, Article 1 of Circular No. 26/2015/TT-BTC.

Conditions for Deductible Expenses When Determining Corporate Income Tax (Article 4, Circular No. 96/2015/TT-BTC):

  • Actual Expenses Incurred: Expenses must directly relate to the production and business activities of the enterprise.
  • Legitimate Invoices and Documents: Expenses must be accompanied by valid invoices and documents as prescribed by regulations.
  • Non-Cash Payments: For expenses valued at 20 million VND or more, payment must be made via bank transfer or other non-cash payment methods, with supporting payment documentation.

Conditions for Input VAT Deduction (Clause 10, Article 1, Circular No. 26/2015/TT-BTC):

Offset of Liabilities Between Purchased and Sold Goods/Services:

  • Requires a reconciliation record and confirmation of offset payment.
  • The contract must clearly specify the payment method.

Offset of Liabilities Through a Third Party:

  • Requires a three-party agreement and a loan/borrowing contract or bank transfer documentation.

Authorization for Payment via a Third Party:

  • Payment must be stipulated in the contract and supported by bank transfer documents.

For more detailed information about this or related Tax support, please don't hesitate to contact us.