Accounting for Gifted Goods: Essential Tax Regulations Businesses Must Know

Date: 2026.02.07

In the course of business operations, gifting goods to customers, partners, or employees is a very common practice: customer appreciation, Lunar New Year gifts, promotional gifts, internal gifts, etc.
However, if accounting and tax declarations are not handled correctly, businesses may face risks such as disallowed expenses, back taxes on VAT and CIT during tax finalization.

This article will help you understand and correctly apply the proper accounting treatment for gifted goods in accordance with current regulations, while optimizing allowable costs for businesses.

1. What are gifted goods from an accounting and tax perspective?

Gifted goods are goods that a business issues from inventory without collecting payment, used for the following purposes:

– Gifting customers or partners

– Gifting employees (welfare benefits)

– Serving promotional and customer care activities

📌 Important note:
Although no payment is collected, from a VAT and accounting perspective, these transactions are still considered internal consumption or gifting activities, not “tax-exempt inventory issues”.

2. When goods are given as gifts, is it mandatory to issue an invoice?

According to regulations on invoices and Value Added Tax (VAT):

– Enterprises are required to issue an invoice when goods are given as gifts or donations.

– On the invoice:

+ Record the selling price excluding VAT (based on market price or the company’s normal selling price)

+ Calculate and declare VAT in the same way as for normal sales transactions.

📌 Failure to issue an invoice or issuing an incorrect invoice → may result in tax reassessment and administrative penalties.

3. VAT on gifted goods: How should it be handled correctly?

・Gifted goods used for VAT-taxable production and business activities

When goods are given as gifts to customers, partners, or used for VAT-taxable business activities, enterprises should note the following:

– Output VAT must still be calculated and declared upon gifting the goods, similar to a normal sale transaction.

– Input VAT on gifted goods is deductible if all statutory conditions for VAT deduction are met (valid invoices, non-cash payment for invoices of VND 20 million or more, and use for VAT-taxable production and business activities).

📌 Important note:
Many businesses mistakenly believe that “gifted goods with no revenue do not need VAT declaration.”
👉 This understanding is incorrect and may lead to VAT reassessment during tax inspections or finalization.

・Gifted goods not used for VAT-taxable production and business activities

For cases where gifted goods are not related to VAT-taxable business activities, such as:

– Gifts to individuals unrelated to business activities

– Goods given for the personal use of the business owner

👉 Input VAT on these expenses is not deductible.
The incurred input VAT must be included in expenses or added to the value of the goods, depending on each specific case.

4. Can the cost of gifted goods be treated as deductible expenses for Corporate Income Tax (CIT) purposes?

Expenses related to gifted goods are deductible when determining taxable CIT income if the following conditions are met:

– The expense serves the enterprise’s production and business activities.

– There are valid invoices and supporting documents in accordance with regulations, including:

+ Purchase invoices for goods and services

+ Properly issued invoices for gifted goods

+ Valid payment documents (especially for high-value transactions)

– The expense does not exceed the prescribed limits (if subject to statutory caps at the relevant time).

📌 Important note:
If invoices or supporting documents are missing, or the business purpose cannot be substantiated, the cost of gifted goods will be disallowed during CIT finalization, even if the expense actually occurred.

5. Proper accounting treatment for gifted goods in accordance with accounting standards

🔹 When issuing goods from inventory as gifts

Record the following:

– Cost of goods sold

– Output VAT payable

Common accounting treatment:

– Reduce inventory value

– Recognize selling expenses or administrative expenses (depending on the purpose of the gift)

🔹 Distinguishing purposes to allocate expenses to the correct accounts

6. Accounting entries for gifted goods by account

🔸 Case 1: Goods are purchased, recorded in inventory, then later gifted

✔️ Step 1: Upon purchasing goods and recording inventory, the accountant records:

– Debit Account 156, 133 / Credit Account 111 (or 112/131)

📌 If the goods are not used for VAT-taxable business activities, input VAT is not deductible and should not be recorded in Account 133.

✔️ Step 2: When issuing goods as gifts, based on the issued invoice, record:

– Debit Account 641 (or 642, 622, 623, 627) / Credit Account 156, 3331

📌 Notes:

– No revenue is recognized

– Output VAT is directly recorded as an expense

🔸 Case 2: Goods are purchased and gifted immediately without being recorded as inventory

✔️ Entry 1: The accountant records:

– Debit Account 641 (or 642, 622, 623, 627), 133 / Credit Account 111 (or 112, 331)

✔️ Entry 2: Upon issuing the invoice for the gifted goods, record:

– Debit Account 641 (or 642 / 622 / 623 / 627) / Credit Account 3331

7. Common mistakes that lead to tax reassessment

⚠️ Many enterprises make the following mistakes:

– Failing to issue invoices for gifted goods

– Not declaring output VAT

– Deducting input VAT even when goods are not used for business activities

– Incorrect expense classification or insufficient supporting documents

– Combining gifted goods with general expenses without proper documentation

👉 These are common issues closely scrutinized during tax audits and inspections.

8. What should enterprises do to gift goods in compliance with the law and ensure tax safety?

✅ Tax-safe checklist:

– Have an approved gifting policy or decision

– Issue invoices fully and correctly

– Declare VAT in the correct tax period

– Record expenses based on the correct purpose and account

– Maintain clear and complete supporting documentation

💡 If an enterprise frequently gives gifts, it should:

– Standardize accounting and tax procedures

– Conduct periodic reviews to mitigate risks during tax finalization

9. Conclusion

Gifted goods in enterprises are not merely external expenses or employee benefits, but mandatory accounting and tax transactions that must be handled correctly in accordance with regulations—from invoice issuance and VAT declaration to expense recognition.

In practice, even a small mistake or omission may expose enterprises to risks such as:

– Expenses being disallowed during CIT finalization

– Additional VAT assessments and penalties

– Administrative sanctions for invoice and tax compliance violations

Conversely, by understanding and applying the regulations correctly from the outset, enterprises can:

– Proactively control tax risks

– Ensure clear and transparent accounting records

– Recognize legitimate expenses and optimize financial efficiency

👉 Therefore, properly understanding and applying the correct accounting treatment for gifted goods not only ensures legal compliance, but also supports structured and sustainable financial management in the long term.