On 29 November 2018, the DGT issued a new Circular Number 24/PJ/2018 (“SE-24”) regarding the Tax Treatment on the Compensation that is received by buyers in connection with certain conditions in sale/purchase transactions.

The certain conditions referred to in this Circular are as follows:

1. Achievement of certain conditions:

• Purchase by Buyer in a certain amount;
• Buyer who reaches a certain amount of selling the product; and/or
• Payment by the Buyer according to a certain period of time.

2. Provision of certain space and/or equipment.

3. Compensation income is received due to buying and selling transactions.

The compensation is given to guarantee the following risks:

• Price fluctuations
• Delay in shipping goods; and/or
• Certain sales program from the Seller.

SE-24 defines the buyer as a party who buys products from a seller for the purpose of resale, including distributors, agents, and retailers.

In general, the transaction is an object of income tax and VAT except for some certain conditions. In particular, this letter states that the compensation that is received due to certain conditions as mentioned above is not a discount. Therefore, it is not included in the invoice and tax invoice as a discount in calculating the tax base.