In the process of production and business, especially for businesses that produce and trade pharmaceuticals, food, cosmetics, etc., expired and expired goods are inevitable. So to destroy these expired goods, what procedures do businesses need to follow?
1. Procedures to follow with tax authorities
According to the provisions of Circular 78/2014/TT-BTC, Circular 95/2016/TT-BTC detailing the Law on Corporate Income Tax, goods are damaged due to changes in the natural biochemical process. Expired goods that are not compensated are included in deductible expenses when determining taxable income.
Records for goods damaged due to changes in natural biochemical processes and expired goods are included in deductible expenses as follows:
- Record of inventory of damaged goods value prepared by the enterprise.
The inventory record of the value of damaged goods must clearly identify the value of damaged goods and the cause of damage; Type, quantity, value of recoverable goods (if any) accompanied by a list of import and export of damaged goods with confirmation signed by a legal representative of the business and responsible before the law .
- Damage compensation documents accepted for compensation by the insurance agency (if any).
- Documents specifying the responsibilities of organizations and individuals that must compensate (if any).
The above documents are kept at the enterprise and presented to the tax authority upon request.
2. Procedures with the health department
Currently, the law does not have specific regulations on procedures for destroying expired drugs, so the same will apply as Clause 6, Article 15 of Circular 11/2018/TT-BYT on the process of destroying expired drugs. as follows:
- The head of the facility where the drugs are destroyed shall decide to establish a Drug Destruction Council. The Council has at least 03 people, of which there must be 1 representative who is professionally responsible.
- The destruction of drugs must ensure safety for people and animals and avoid environmental pollution according to the provisions of law on environmental protection.
- The facility that destroys drugs must report with a record of drug destruction to the Department of Health according to the provisions in Form No. 06, Appendix III issued with this Circular.
3. Procedures for destroying inventory
Request to destroy expired inventory: quantity, product name, date of import, expiration date.
- Expired inventory inspection record.
- Decision to allow destruction of expired inventory by Company leaders.
- The minutes of inventory destruction are signed by witnesses and the Company's leaders. (The witness should be a representative of the Tax Department)
But if the destruction of these goods has an impact on the environment, a permit/certification of how to destroy the goods is required from the authorities.
At the same time as destroying expired goods, accountants need to make provisions for devaluation of inventory as follows (Refer more to Circular 228/2009/TT-BTC dated December 7, 2009 on Establishment and use of provisions for devaluation of inventory)
Article 4. Provision for devaluation of inventory.
Handling and destruction of supplies and goods for which provisions have been made:
a) Backlog of goods due to expiration date, loss of quality, disease, damage, or no longer having value for use such as: pharmaceuticals, food, medical supplies, breeds, livestock, and supplies Other goods that must be canceled shall be handled as follows:
Enterprises set up an Asset Handling Council to appraise destroyed assets. The appraisal record must detail the name, quantity, value of goods to be destroyed, reasons for cancellation, value recovered due to liquidation, and actual damage value.
The actual level of loss of each type of unrecoverable backlog is the difference between the value recorded in the accounting books minus the recovery value due to liquidation (compensated by the person causing the damage, due to liquidation sale). goods).
b) Handling authority:Board of Directors (for enterprises with a Board of Directors) or Board of Members (for enterprises with a Board of Members); General Director (or Director) for enterprises without a Board of Directors or Council of Members; The business owner, based on the Minutes of the Handling Council and evidence related to backlogged goods, decides to handle and destroy the above mentioned supplies and goods; decide to handle the responsibilities of those related to those materials and goods and be responsible for their decisions before the owner and before the law.
c) Accounting processing:
The actual loss value of unrecoverable unsold goods that have been decided to cancel, after being compensated by the inventory devaluation reserve, the difference is accounted for in the cost of goods sold of the company. enterprise.
