– Pursuant to Clause 1, Article 5, Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the implementation of the VAT Law and Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government detailing and guiding the implementation of a number of articles of the VAT Law, stipulating Cases of exemption declaring and paying VAT as follows:

“Article 5. Cases of exemption declaring and paying VAT

An organization or individual receives a monetary compensation (including compensation for land and property on land that is withdrawn by a competent authority), bonus, allowance, or payment for transfer of emission permit, or other revenues.

Any taxpayer that receives a monetary compensation, bonus, allowance, payment for transfer of emission permits, or other revenues must make a receipt for such revenues. The taxpayer shall make receipts for spending according to the spending purposes.

If compensation is provided in the form of goods/services, the provider of compensation must issue an invoice, declare and pay VAT as if such goods/services are sold; the recipient of compensation shall declare and deduct tax as prescribed.

Any taxpayer that receives money from another entity to provide a service such as repair, warranty, sales promotion, or advertising must declare and pay tax as prescribed….”

– Pursuant to Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance amending and supplementing Clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 2, Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) as follows:

“2. The expenses below are not deductible when calculating taxable income:

2.36. Payment of fines for administrative violations, including: traffic offenses, violations against regulations on business registration, violations against regulations statistical accounting; violations against regulations of law on taxation, including late payment interest prescribed by the Law on Tax administration, and fines for other administrative violations prescribed by law.”

Based on the above regulations, in case the Company incurs expenses related to fines or compensation due to violation of economic contracts with customers, when disbursing money, the Company prepares receipts for spending. Based on economic contracts and receipts for spending, the Company determines deductible expenses according to the provisions of corporate income tax.