Tax audits of promotional programs: what should businesses be aware of?

Tax audits of promotional programs are a matter of significant concern for businesses implementing discount campaigns, gift giveaways, product sampling initiatives, or other sales promotion activities. Failure to comply with regulations governing tax declarations, invoice issuance, or document retention may result in tax reassessments and administrative sanctions under current tax laws. 

I. Current issues relating to tax audits of promotional programs

Promotional programs such as discounts; free gifts; buy one, get one free campaigns; product sampling; and prize draw promotions are increasingly adopted by businesses to attract customers and increase sales revenue. However, in practice, many businesses continue to make errors in issuing invoices, declaring Value-Added Tax (VAT), accounting for promotional expenses, or maintaining supporting documents. 

Consequently, the tax authorities have focused on detecting improper tax declarations, the misuse of promotional schemes to legitimize expenses, or arrangements intended to reduce tax liabilities.

II. Concept of tax audits of promotional programs

1. What is a tax audit of promotional programs?

A tax audit of promotional programs refers to activities conducted by tax authorities to review, reconcile, and assess a business’s compliance with tax obligations relating to promotional activities, including discounts, free gifts, complimentary services, buy-one-get-one-free promotions, prize draws, and product sampling programs.

Through such audits, tax authorities examine whether the business has properly issued invoices, declared VAT, accounted for promotional expenses, claimed input VAT credits, and maintained records and supporting documents in compliance with legal requirements.

If inaccurate declarations, insufficient documents, or the misuse of promotional programs to reduce tax liabilities are identified, the business may be subject to tax reassessment and administrative sanctions in accordance with prevailing regulations.

2. Purpose of tax audits relating to promotional programs 

Tax audits of promotional activities are conducted to ensure that businesses properly declare taxes, maintain accounting records, and fulfill their tax obligations in accordance with the law. Through these audits, tax authorities can monitor:

• The issuance of invoices;
• VAT declarations;
• The determination of deductible expenses for Corporate Income Tax (CIT) purposes; and
• The maintenance of promotional program records.

In addition, tax audits assist in identifying schemes whereby promotional programs are used to conceal revenue, overstate expenses, evade taxes, or commit tax fraud.

3. Which taxes are typically the focus of tax audits of promotional programs (VAT, CIT, etc.)?

When conducting tax audits of promotional programs, tax authorities generally focus on the following taxes:

- Value-Added Tax (VAT): Reviewing the issuance of invoices for goods and services used in promotional programs, determining the taxable value, verifying eligibility for a zero taxable value, and assessing compliance with input VAT declaration and deduction requirements.

- Corporate income tax (CIT): Reviewing the accounting treatment of promotional expenses and determining whether such expenses qualify as deductible expenses when calculating taxable income.

- Personal income tax (PIT): Where promotional programs award cash prizes, goods, or high-value rewards to individuals, tax authorities may examine compliance with PIT withholding and declaration obligations.

- Invoices and accounting documents: Apart from taxes, tax authorities frequently review the validity of promotional dossiers, implementation decisions, inventory issuance records, and other supporting documents.

III. Legal regulations governing tax audits of promotional programs

1. How does current law regulate taxes applicable to goods and services used for promotional purposes?

Pursuant to Point c, Clause 1, Article 7 of the Value-Added Tax Law 2024 (as guided by Clause 2, Article 6 of Decree No. 181/2025/ND-CP), goods and services used in promotional activities conducted in accordance with commercial laws are assigned a VAT taxable value of zero. Promotional forms such as free gifts, product samples, loyalty programs, shopping vouchers, prize draws, and similar promotional activities are eligible for this treatment provided that the promotional procedures comply with applicable legal requirements. 

For discount-based promotions, the VAT taxable value is the discounted selling price applied during the duly registered or notified promotional period. If a business fails to comply with promotional regulations, the goods or services used for promotional purposes may be treated as gifts or donations and become subject to VAT based on the market value of similar goods or services at the time of supply.

Regarding Corporate Income Tax, according to Clause 2, Article 7 of the Corporate Income Tax Law 2025 concerning taxable income determination and Points a and c, Clause 1, Article 9 of the same Law, promotional expenses are deductible if they are actually incurred in connection with production and business activities and are supported by valid invoices and lawful documents.

2. Which promotional forms qualify for a VAT taxable value of zero?

Under Clause 2, Article 6 of Decree No. 181/2025/ND-CP guiding Point c, Clause 1, Article 7 of the Value-Added Tax Law 2024, the following promotional activities qualify for a VAT taxable value of zero or exclude the value of promotional goods and services from the taxable base:

• Providing free product samples or trial services;
• Giving away goods or providing services free of charge;
• Providing sales accompanied by shopping vouchers or service vouchers;
• Providing sales accompanied by contest entry forms under published rules;
• Providing chance-based promotional programs connected to the purchase of goods or services;
• Providing customer loyalty programs involving reward points, membership cards, or similar incentives;
• Providing discount promotions, for which the taxable value is the discounted selling price during the valid promotional period.

However, if promotional activities fail to comply with commercial law requirements, the promotional goods and services will not qualify for a zero taxable value and will instead be taxed as ordinary gifts or donations.

3. Is input VAT on goods used for promotional purposes deductible?

Pursuant to Point a, Clause 1, Article 14 of the Value-Added Tax Law 2024, input VAT incurred on goods and services used for the production and trading of VAT-liable goods and services is fully deductible, provided all statutory conditions are satisfied.

Accordingly, goods used in promotional programs conducted in accordance with commercial laws remain eligible for input VAT deduction as such expenditures serve the business’s taxable operations. Furthermore, under Clause 2, Article 14 of the Value-Added Tax Law 2024, businesses must possess valid VAT invoices, non-cash payment evidence where required by law, and complete promotional program documents, in order to claim input VAT deductions.

If a promotional activity fails to comply with commercial regulations or lacks adequate supporting documents, tax authorities may deny the input VAT deduction during a tax audit.

4. Procedures for tax audits of promotional programs

Pursuant to Article 22 of the Tax Administration Law 2025, tax audits of promotional programs are generally conducted through the following stages:

- Step 1. Review of tax returns

Tax authorities examine VAT declarations, invoices, supporting documents, and electronic data relating to promotional goods and services in accordance with Point a, Clause 2, Article 22.

- Step 2. Request for explanations

Under Point b, Clause 2, Article 22, tax authorities may require businesses to:

• Explain tax declaration contents;
• Supplement information and supporting documents; and
• Provide promotional program records.

- Step 3. Issuance of an on-site tax audit decision

Pursuant to Point a, Clause 3, Article 22, tax authorities may conduct an audit at the taxpayer’s premises where:

• There are signs of tax law violations;
• The business is classified as high-risk; or
• The audit is conducted under an audit plan or specialized inspection program.

- Step 4. Conducting the actual audit

The audit team compares and reviews:

• VAT invoices;
• Warehouse release slips;
• Promotional program registrations or notifications;
• Accounting records; and
• Output and input tax declarations relating to promotional goods.

- Step 5. Preparation of audit minutes and conclusions

Pursuant to Point b, Clause 5, Article 22 of the Tax Administration Law 2025, the audit team prepares tax audit minutes, identifies any violations, and reports the audit findings.

- Step 6. Tax violation handling measures

Where inaccurate tax declarations or tax law violations are identified, tax authorities may:

• Recover unpaid taxes;
• Impose tax assessments;
• Calculate late payment interest;
• Impose administrative sanctions; or
• Refer the case to investigative authorities where indications of tax evasion exist, under Point a Clause 5 Article 22.

IV. Questions regarding tax audits of promotional programs

1. Is VAT declaration and payment required for goods distributed free of charge?

Goods provided free of charge as gifts, promotional items, or complimentary giveaways must still be invoiced and declared for VAT purposes in accordance with tax regulations.

However, for goods and services used in promotional activities conducted in compliance with commercial law, the VAT taxable value is deemed to be zero under Point c, Clause 1, Article 7 of the Value-Added Tax Law 2024 (as guided by Clause 2, Article 6 of Decree No. 181/2025/ND-CP).

Conversely, if the giveaway does not comply with the legal requirements governing promotional activities, the business must declare and account for VAT in the same manner as an ordinary sale of goods.

2. Must invoices be issued for goods used in promotional programs?

Pursuant to Clause 1, Article 4 of Decree No. 123/2020/ND-CP, as amended and supplemented by Point a, Clause 3, Article 1 of Decree No. 70/2025/ND-CP, when selling goods or providing services, sellers are required to issue invoices to purchasers, including in cases involving promotional goods and services, advertising goods and services, samples, gifts, donations, exchanges, goods and services provided in lieu of salary payments to employees, and goods and services used for internal consumption as prescribed by law.

For goods and services used in promotional activities that fully comply with commercial law requirements, the VAT taxable value is determined to be zero under Point c, Clause 1, Article 7 of the Value-Added Tax Law 2024 (as guided by Clause 2, Article 6 of Decree No. 181/2025/ND-CP). If gifts or complimentary goods are provided outside the legally prescribed promotional framework, the business remains obligated to declare and account for VAT as though the goods had been sold in the ordinary course of business.

3. Can a business be sanctioned for failing to retain complete promotional records and supporting documents?

Businesses are responsible for maintaining complete records and supporting documents relating to promotional programs for tax declaration, tax finalization, and tax audit purposes.

Pursuant to Point p, Clause 2, Article 37 of the Tax Administration Law 2025, taxpayers are obligated to provide complete and accurate records and documents upon request by tax authorities, furnish explanations, supplement information, and comply with tax administration decisions.

In addition, Decree No. 41/2018/ND-CP provides administrative fines for violations relating to accounting documents and document retention, including:

• A fine ranging from 5,000,000 VND to 10,000,000 VND for damaging or losing accounting documents during their period of use (Point g, Clause 2, Article 8);
• A fine ranging from 5,000,000 VND to 10,000,000 VND for incomplete retention of accounting records (Point a, Clause 2, Article 15);
• A fine ranging from 5,000,000 VND to 10,000,000 VND for damaging or losing accounting documents during the statutory retention period (Point b, Clause 2, Article 15);
• A fine ranging from 10,000,000 VND to 20,000,000 VND for destroying accounting documents before the expiration of the mandatory retention period (Point a, Clause 3, Article 15).

4. What is the statute of limitations for tax audits relating to promotional activities?

Pursuant to Point a, Clause 3, Article 22 of the Tax Administration Law 2025, tax authorities are entitled to conduct tax audits where there are indications of tax law violations or if the taxpayer falls within the scope of planned or thematic audits.

For promotional activities specifically, tax laws do not provide a separate statute of limitations for tax audits. In practice, tax audits are generally linked to the statute of limitations applicable to administrative tax sanctions and tax record management periods prescribed by tax administration laws.

Furthermore, according to Point d, Clause 6, Article 22 of the Tax Administration Law 2025, the time limit for conducting a re-audit is two (02) years from the date of signing the audit conclusion or the administrative fine decision relating to tax administration.

5. What sanctions apply if taxes relating to promotional activities are incorrectly declared?

Where a business incorrectly declares taxes relating to promotional activities, administrative sanctions may be imposed depending on the nature and severity of the violation.

Specifically, if the incorrect declaration results in an underpayment of tax or an overstatement of tax exemptions, reductions, or refunds, the business may be sanctioned for making inaccurate tax declarations that lead to a tax shortfall. In addition, the business will be required to pay the outstanding tax amount together with late-payment interest in accordance with applicable regulations.

Furthermore, businesses may take additional sanctions for:

• Improper use of invoices or supporting documents relating to promotional programs;
• Failure to issue invoices for promotional goods;
• Incomplete retention of records; or
• False or misleading tax declarations.

Pursuant to Point d, Clause 3, Article 8 of Decree No. 41/2018/ND-CP, failure to prepare accounting documents for economic or financial transactions when they arise may result in a fine ranging from 20,000,000 VND to 30,000,000 VND.

In addition, Point a, Clause 2, Article 15 of Decree No. 41/2018/ND-CP provides that incomplete retention of accounting documents may be subject to a fine ranging from 5,000,000 VND to 10,000,000 VND.

Therefore, businesses implementing promotional programs should ensure proper invoice issuance, accurate tax declarations, and complete retention of records and supporting documents in order to avoid tax reassessments and administrative sanctions.

V. Why should you seek legal advice from NPLaw regarding tax audits of promotional programs?

Promotional programs often have a direct impact on invoices, VAT obligations, deductible expenses for Corporate Income Tax purposes, and accounting documentation requirements. If tax declarations are inaccurate or supporting records are inadequately maintained, businesses may face tax reassessments, administrative sanctions, or classification as high-risk taxpayers during tax audits.

By utilizing NPLaw’s advisory services, businesses will receive assistance with:

• Advising on legal regulations concerning taxation, invoicing, and promotional activities;
• Reviewing promotional records and supporting documents prior to tax audits;
• Guiding the proper declaration of VAT and Corporate Income Tax (CIT);
• Advising on the correction of errors relating to invoices, supporting documents, and tax declarations;
• Assisting with explanations and communications with tax authorities upon the issuance of a tax audit decision;
• Representing and protecting the lawful rights and interests of businesses throughout the process of resolving tax-related violations.

The information provided above is for reference purposes only. Should you require detailed legal advice regarding a specific matter, please contact NPLaw for immediate consultation.