The company can deduct input VAT for taxable outputs from gifts, employee gifts, and scrap sales, either fully or proportionally based on taxable revenue, depending on accounting methods.
Vietnam: VAT Deductibility on Donated or Gifted Goods
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Author: Ema Stamenković
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Content accuracy validation date:
12.11.2025
Content accuracy validation time:
08:13h
Company produces tax-exempt animal feed, so generally cannot deduct input VAT. However, it generates taxable outputs via gifts, employee gifts, or scrap sales and asks if input VAT deduction is allowed for these.
Bac Ninh Provincial Tax Department opinion:
Pursuant to Clause 1 & 2, Article 23, Decree No. 181/2025/ND-CP (July 1, 2025) on VAT Law implementation:
- Input VAT on goods/services used for taxable production/trading is fully deductible (incl. non-compensated losses of taxable goods/services or natural losses due to properties during transport).
- Input VAT on goods (incl. fixed assets)/services used for both taxable and non-taxable activities: deductible only for portion used in taxable activities.
- Must separately account for deductible vs. non-deductible input VAT.
- If separate accounting impossible: deductible amount = (revenue from taxable goods/services ÷ total revenue from all goods/services sold in period) × input VAT.
- Total revenue includes taxable + non-taxable goods/services.
Conclusion: Output VAT arises on gifts, employee gifts, scrap sales.
- If enterprise separately accounts: full deduction allowed for input VAT on taxable activities.
- If mixed use and no separate accounting: deduction calculated by taxable revenue percentage.
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