How To Avoid Commercial Bribery In Sales Rebates

Sales rebate and rebate is a common commercial promotion behavior. In order to stimulate the enthusiasm of downstream distributors or customers, enterprises will return to sellers or customers according to a certain proportion of sales volume after the number or amount of products purchased by distributors or customers reaches a certain scale.

There are various forms of rebate, such as cash rebates, physical rebates, price discounts, and future purchase quotas.

From the legal nature, it can be divided into two kinds: price discount and physical discount.

The handling of price discounts is relatively simple.

The risk is also small.

As stated above, there are two ways to deal with the issue of invoicing for discounts: one is to sell the same price on the same invoice at the time of sale, the other is to make a rebate after the invoice has been issued, or to make the discount rebate after the period, then the seller can write out the scarlet invoice for the cancellation of the income according to the relevant provisions of the invoice.

Sales rebates are mainly in the latter case, which requires sellers to write out red letter invoices to write off revenue and reflect discounts.

There is a clear legal basis for this practice. The Circular of the State Administration of Taxation on the issue of special invoices for the red letter value-added tax on taxpayers' discount discount acts ([2006]1279) stipulates that after the taxpayers sell the goods and issue special invoices to the purchasers, the buyers will purchase a certain amount of goods within a certain period of time, or, because of the decrease in market prices, the sellers will give the buyers the corresponding price concessions or compensatory discounts.

The seller can issue special invoices for red value-added tax in accordance with the relevant provisions of the current provisions on the use of VAT invoices.

In practice, enterprises often confuse rebate (discount) and service charge.

Service fees and sales rebates are not necessarily linked to sales volume and sales volume. It is common for the downstream dealers to provide certain services to the suppliers, such as advertising and promotion fees, exhibition fees, management fees and so on. The downstream dealers should include the service charge as the sales revenue, invoke the service fee, and pay the sales tax.

The supplier should pay the service charge as the expense.

If the enterprise confuses the rebate (discount) and the service charge, causing incorrect accounts, or invoicing errors, it may be considered to constitute a risk of commercial bribery arising out of "out of the books". In practice, there is a similar case that the business sector has been investigated as a commercial bribery case.

The return rebate may be more common in reality. For example, if a customer buys ten devices in one year, he will send one free, or buy a certain amount of equipment free of charge, spare parts and so on.

Because enterprises are not familiar with relevant laws and regulations and financial treatment, there is greater risk of rebate in physical discount form.

Many enterprises have non-standard operation, for example, the donated objects are not invoiced, only the circulation from the warehouse is issued, and the donated goods are not accounted for as sales.

As described in another article in this series, anything that does not accurately enter accounts may be considered "out of the book" and constitutes commercial bribery.

How to standardize the operation of rebate in the form of physical discount? The key point is to use discounted safe ports to treat physical discounts as price discounts.

- for free objects, the provider should be accounted for as a sales item and be included in the sales discount at the same time. The recipient should also include the free material in the corresponding subjects such as inventory, fixed assets, etc.

- the sales and sales discounts should be truthfully reflected in the invoice.

- the relevant contracts should accurately describe the related physical rebate arrangement.

Let's analyze a case: a pharmaceutical company is a pharmaceutical manufacturer, and a pharmaceutical company is a distributor of the drug in a province.

In 2009, pharmaceutical companies purchased about 900 thousand bottles of medicine from pharmaceutical companies.

During the year, pharmaceutical companies and pharmaceutical companies signed the memorandum of cooperation, statements, supplementary agreements and other forms. Pharmaceutical companies received the following form of sales rebates from pharmaceutical companies:

The pharmaceutical company received 5000 bottles of medicine donated by a pharmaceutical company (20 yuan per bottle, with a total value of 100000 yuan), but neither invoiced nor entered the company's financial account book.

- pharmaceutical companies charged 300 thousand yuan for pharmaceutical companies, and in the name of "sales discount", they issued 4 "unified invoice for merchandise sales" to pharmaceutical companies, and paid 51000 yuan to the company's account books with the account of "extra business income".

- the pharmaceutical company received 562155 yuan from the pharmaceutical company, and issued the general invoice of the local tax revenue under the name of "consultation fee", paying 32323.94 yuan to the company's account book with "other business income" subjects.

Later, the pharmaceutical company was investigated by the Ministry of Commerce and industry. The industry and Commerce Department decided to confiscate 879331.06 yuan of illegal gains and impose a fine of 100000 yuan.

What are the main problems for the above illegal activities?

The 5000 bottles of donated drugs are discounted in kind, but they are neither invoiced nor credited to the company's financial accounts.

As stated above, the standard practice is that the pharmaceutical companies should issue sales invoices to pharmaceutical companies for the sale of the donated drugs, which should be accounted for as sales, and at the same time be counted as sales discounts.

The 300 thousand yuan sales discount received by a pharmaceutical company should be accounted for by sales discount instead of "extra business income", because the subject of bookkeeping is incorrect and constitutes "out of balance".

The standard practice is to open a red letter invoice by the pharmaceutical company, and then reopen the sales invoice reflecting the 300 thousand sales discount, and the pharmaceutical company accounts for 300 thousand yuan into the sale discount subject with the reopened sales invoices.

- 562155 yuan "consulting fees" collected by pharmaceutical companies. The industry and Commerce Department decided that pharmaceutical companies did not actually provide advisory services to pharmaceutical companies, and they were subject to commercial bribery in the name of consulting fees.

In practice, it is difficult to identify whether the distributor has provided product promotion and publicity services. Even some business departments think that the distributor is selling their products, which is the responsibility of the manufacturer. The manufacturer should not provide the dealer with additional benefits of similar consulting fees and publicity fees outside the selling price of the products.

For this problem, the author's proposal is to use the discounted "safe harbor" to give the dealer incentives as far as possible in the form of a discount if there is any possibility of controversy.

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