Time to determine turnover to calculate taxable income

Tue, 21 Feb 2023 10:25:00  |  Print  |  Email   Share:

Mr. Tran Minh Hai's company specializes in providing technical design services and producing graphic images, advertising TVCs for real estate projects. After signing the contract, the investor usually makes an advance to secure the contract performance and requires the company to issue an invoice for the advance.

However, there were a number of invoiced advances incurred in the fiscal year, but Mr. Hai's company had not yet provided services at the end of the fiscal year.

Pursuant to Clause 2, Article 9 of Decree No. 123/2020/ND-CP of the Government: "In case the service provider collects money before or during the service provision, the time to issue an invoice is the time of payment (excluding the case of collecting a deposit or advance to secure the performance of the contract) providing services: accounting, auditing, financial and tax consulting; valuation; survey, technical design; supervision consultancy; construction investment project formulation)".

So, if his company has issued an invoice for the advance, does it have to calculate the revenue in the period and be subject to corporate income tax in the fiscal year? According to Circular No. 200/2014/TT-BTC, the above-mentioned advance is not recorded to account 3387 - unrealized revenue.

In case if the above items are not included in the revenue in the period, his company still records it on account 511 and when finalizing tax, how does he adjust the revenue in the period or handle it?

The Ministry of Finance responded to this issue as follows:

Conditions for revenue recognition

In Article 2 of Circular No. 200/2014/TT-BTC, "This Circular provides guidance on the recording of accounting books, the preparation and presentation of financial statements, and does not apply to the determination of tax obligations of enterprises for enterprises to the State budget".

In Clause 2, Article 57 of Circular No. 200/2014/TT-BTC stipulating that enterprises do not record into account 3387- unrealized revenue received in advance from buyers but enterprises have not provided products, goods, service.

At Point b, Clause 1.3, Article 79 of Circular No. 200/2014/TT-BTC stipulates:

"b) An enterprise only recognizes revenue from service provision when the following conditions are satisfied at the same time:

- The revenue can be measured reliably. When the contract stipulates that the buyer is entitled to return the purchased service under specific conditions, revenue is recognized only when those specific conditions no longer exist and the buyer is not entitled to return the service provided;

- The enterprise has or will receive economic benefits from the transaction of providing such services;

- Identify the part of work completed at the time of reporting;

- Determine the costs incurred for the transaction and the cost to complete the transaction to provide that service.”

In Clause 5, Article 78 of Circular No. 200/2014/TT-BTC stipulates:

"5. The time and basis for recording accounting revenue and taxable revenue may vary depending on each specific situation. Taxable turnover is only used to determine the amount of tax payable by law; the revenue recorded in the accounting books for the preparation of financial statements must comply with accounting principles and, depending on the case, not necessarily equal to the amount recorded on the sales invoice".

Thus, for the purposes of bookkeeping, preparation and presentation of the financial statements, the amount advanced by the customer to his company before providing the services to the customer will not be eligible to recognize revenue to reflect in account 511 - revenue from sales and provision of services and is not recorded to account 3387 - unrealized revenue but only recorded to the credit side of account 131- receivables from customers.

Enterprises may only record revenue from providing services to account 511 when simultaneously satisfying the conditions specified at Point b, Clause 1.3, Article 79 of Circular No. 200/2014/TT-BTC.

Time to determine taxable turnover

Issuing VAT invoices to customers:

According to his case, based on Clause 2, Article 9 of Decree No. 123/2020/ND-CP dated October 19, 2020 of the Government, the service that the company provides to customers is not required to issue an invoice when receiving an advance from the customer but his company has issued the invoice, so please contact the tax office for specific instructions.

About the time of determining the taxable revenue for services provided to customers: In Clause 2, Article 8 of Decree No. 218/2013/ND-CP dated December 26, 2013 of the Government detailing and guiding the implementation of the Law on Corporate Income Tax stipulates: "The time to determine revenue for calculating taxable income for services is the time when the service is provided to the buyer or the service invoice is issued."

Thus, based on the above provisions, in case the time of determining the company's taxable revenue is different from the time of recording the accounting revenue reflected in account 511 to prepare the financial statements, request your company to comply with the provisions of Vietnamese Accounting Standard No. 17 - CIT (Corporate Income Tax ) collection and adjustment of related criteria on the CIT finalization declaration to determine the enterprise's tax liability to the state budget in accordance with tax laws.



By: Translator: LeAnh-Bizic/According to Chinhphu.vn (Government Newspaper).


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