In order to improve sales performance and consolidate customer relationship, a beer brewing enterprise held a new product supply and business negotiation meeting in the spring of 20 10. During this period, gifts * * * consumed 500,000 yuan of purchased goods and obtained the corresponding input tax of 85,000 yuan, which has been included in business entertainment expenses. Some of these consumed goods are given to customers as gifts, and the other part is consumed during the activity. How to deal with tax issues? The following network Bian Xiao answers for you, hoping to help. Tax problems as gifts to customers In the course of activities, the purchased goods are given to customers as gifts, and the ownership of the goods has been transferred. Whether the value-added tax involved should be treated as sales. Article 4 of the Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax stipulates that the act of a unit or individual industrial and commercial household giving away goods produced by itself, commissioned for processing or purchased free of charge to other units or individuals is regarded as selling goods. If the sale is deemed to be established, the obligation to pay VAT will occur immediately. According to the understanding of this clause, the prerequisite for the establishment of deemed sales can be summarized as "giving goods to other units or individuals free of charge". Free gift means giving goods to other units or individuals for free, but in this case, the gift is not free. First of all, the free gift is more out of some emotional or other non-profit motives, and has not received any economic return from the donee. However, the business hospitality in this case is inevitable for new product supply and business negotiation, and it is also an important part of the company's business operation. The purpose is to increase future sales, not for other non-commercial purposes. At the same time, the economic nature of the enterprise and the purpose of pursuing profits determine that expenses including business entertainment expenses must be repaid through future economic business. Therefore, from the nature and motivation, the goods consumed by the business hotel in this case are paid and paid, of course, not free. Secondly, this activity is new product supply and business negotiation. In the course of the activity, a purchase and sale contract or intention is reached more or less, and there is a clear sales target. The goods consumed and their input tax can be compensated from the output tax generated by sales. Secondly, even if the sales contract is not reached, it will undoubtedly help the company's sales business, increase the sales of future products, and compensate the consumed goods and their input tax. Although these compensations are not as clear as cash on delivery in commodity trading, it cannot be denied that the price, remuneration or other economic benefits can be obtained from the donor. Finally, because the new product supply and business negotiation in this case are the scope of the company's business activities, it will inevitably lead to the increase of product sales in the future, and its related expenses are undoubtedly a part of operating costs and a direct factor to promote product value-added. Although the goods consumed are outside the value-added tax chain, the value is not in it, and eventually the corresponding output tax will be formed with the transfer of value. Therefore, it is unfair to treat the goods consumed by business entertainment expenses in this case as sales and pay VAT. To judge whether an act is recognized as sales, we should not simply look at whether the ownership of the goods has been transferred, but whether its value is out of the VAT chain and whether the amount incurred is reasonable. In my opinion, the gifts given to customers by business entertainment expenses in this case should not be regarded as sales, and there is no need to pay VAT. Taxation of goods consumed in activities If the goods consumed by business entertainment expenses in this case involve value-added tax, it should be whether the input tax can be deducted. Simply from the literal understanding of the current tax laws and regulations, the answer is no, because Article 10 of the Provisional Regulations on Value-added Tax stipulates that the input tax on purchased goods or taxable services used for non-VAT taxable items, VAT-exempt items, collective welfare or personal consumption shall not be deducted from the output tax. Article 22 of the Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax stipulates that personal consumption mentioned in Article 10 of the Regulations includes social and entertainment consumption of taxpayers. The above two clauses have been clearly defined, and there is no need to argue. The key is to look at the essence of behavior in actual operation, rather than simply implementing laws and regulations mechanically, which is also the principle that "substance is more important than form" that tax authorities have always followed. The author personally understands that the legislative principle of Article 10 of the Provisional Regulations on Value-added Tax should be that the consumption of goods in these projects ends the value-added tax chain. In this case, is the commodity consumption of business entertainment expenses like this? I think there is no end. The specific facts and reasons have been discussed in detail in the first point above, so I won't repeat them here. Since the consumption of goods has not ended the value-added tax chain, its input tax should be deductible, because the consumption of goods can bring product sales and its output tax. To sum up, in this case, the goods donated by the enterprise for business purposes do not belong to the act of giving away goods for free as stipulated in the tax law and are not regarded as sales. At the same time, the goods consumed by activities cannot be simply identified as personal consumption, and the input tax cannot be deducted. Input tax should be deducted according to the principle that substance is more important than form. The above is about this legal knowledge, I hope I can help you. If you are unfortunate enough to encounter some thorny legal problems and have the idea of entrusting a lawyer, there are many lawyers on our website who can provide services for you. We also support online selection of lawyers in designated areas, and all of them have detailed information about relevant lawyers.