Is the director's salary in a single-member LLC subject to PIT?

Many business organizations grapple with a fundamental compliance question: are the salary and bonus expenses of a single-member limited liability company director legally deductible? Navigating the dual landscape of corporate and personal taxation is critical for optimizing cash flow, which is why founders frequently ask: Is the director’s salary in a single-member LLC subject to PIT? From a professional legal perspective, Viet An Law provides a comprehensive analysis of the latest legal frameworks (updated for the 2026 tax period) to resolve this practical bottleneck.

Summary of tax management for the director’s salary and bonus in a single-member LLC

Applicable legal framework:

• Law on Corporate Income Tax 2025; Law on Personal Income Tax 2025
• Decree 320/2025/ND-CP guiding the Law on Corporate Income Tax 2025
• Circular 20/2026/TT-BTC detailing the Law on Corporate Income Tax 2025; Circular 111/2013/TT-BTC detailing the Law on Personal Income Tax
• Guiding official dispatches from tax authorities.

Corporate income tax regulations on the director’s salary in a single-member LLC

Legal nature of the director’s salary in a single-member LLC

• Pursuant to Article 74 of the Law on Enterprises 2020, a legal entity cannot establish a bilateral labor contract with the individual owner because there is no independence between the participating parties;
• Paying a salary to the company owner is fundamentally a distribution of pre-tax profit, not an actual incurred labor cost;
• Accountants must accurately identify the director’s legal capacity to apply the correct tax reporting mechanism.

Case where the director is the company owner

• Under Clause 8, Article 10 of Decree 320/2025/ND-CP and Point 2.h, Article 9 of the Law on Corporate Income Tax 2025, a single-member LLC owned by an individual is not permitted to include wages and remuneration paid to the owner in the list of deductible expenses when calculating corporate income tax (CIT);
• All derivative expenses such as health and social insurance, business flight tickets, and accommodation allowances provided to the business owner are also classified as non-deductible expenses (guided by Official Dispatch 5421/CT-TTHT of the Hanoi Tax Department dated February 16, 2017);
• The input value-added tax corresponding to these expenses is also not creditable.
• Internal accountants must carefully review documents and absolutely exclude this remuneration from the enterprise’s annual PIT finalization dossier.

Case where the director is a hired employee

• The relationship between the enterprise and the hired executive is legally established through a transparent labor contract under the Labor Code 2019 and the Law on Social Insurance 2024;
• Salary and bonus payments for a hired director are considered deductible expenses for corporate income tax calculation if they fully satisfy the following conditions (under Article 9 of the Law on Corporate Income Tax 2025, Articles 9 and 10 of Decree 320/2025/ND-CP, and Article 3 of Circular 20/2026/TT-BTC):
  • The actual expense arises in connection with the company’s production and business activities;
  • There are sufficient lawful invoices and documents as prescribed by law;
  • There are non-cash payment vouchers for each disbursement of VND 5,000,000 or more;
  • The salary, bonus levels, and entitlement conditions must be specifically recorded in one of the following documents: (i) Labor contract; (ii) Collective labor agreement; (iii) Financial regulations of the company; (iv) Bonus regulations issued by the owner, Members’ Council, or Director under the financial regulations.
  • The expense must be actually paid (cannot be provisioned in the accounting books without actual payment).
• For non-mandatory welfare expenses (such as vacations, weddings, funerals, medical support, health insurance, etc.), the total expenditure must not exceed one month’s average actual realized salary in the enterprise’s tax year.

Personal income tax on the director’s salary in a single-member LLC and related conditions

Detailed rules on personal income tax for director salaries

For an owner acting as the director, the received funds do not carry the nature of wages, so they are not subject to personal income tax on salaries according to the guidance in Official Dispatch 1404/TCT-TNCN:

“The money received by the General Director of a single-member LLC, paid by the General Director themselves, is not income from wages or remuneration and is not subject to personal income tax from wages and remuneration.”

For a director hired to manage a single-member LLC, all income from salary and compulsory allowances is subject to taxation according to the partially progressive tax schedule (updated under the new 5-bracket schedule in the Law on Personal Income Tax 2025, applicable from January 1, 2026). The company (as the paying organization) is obligated to withhold tax at the source using the partially progressive schedule and finalize the tax on the individual’s behalf if authorized (under Point d.1, Clause 6, Article 8 of Decree 126/2020/ND-CP).

Conditions for recognizing valid salary expenses

• The payment level must be specifically stipulated in the labor contract, collective labor agreement, or the financial regulations of the enterprise;
• Pursuant to the Law on Value-Added Tax 2024 and the Law on Corporate Income Tax 2025, it is mandatory to have non-cash payment vouchers for every transaction of VND 5 million or more (applied synchronously from 2026);
• The disbursed amount must actually occur within the accounting period and cannot be falsely provisioned in the ledger system according to the recognition principles in Article 9 of the Law on Corporate Income Tax 2025.

Practical case study on determining valid salary expenses for a single-member LLC director

To answer the question of whether a single-member LLC director’s salary is deductible intuitively, consider the following enterprise scenario:

Mr. A is the legal representative and business owner of Company X, receiving a management remuneration of VND 50 million/month (totaling VND 600 million/year). Additionally, Mr. A is provided with a Tet bonus, social insurance, health insurance, business flight tickets, and apartment rental fees totaling VND 450 million/year.

Mr. A’s total salary, bonus, and allowances: VND 1,050,000,000.

During the accounting period, this entire VND 1,050,000,000 is still normally recorded as an administrative expense in the ledger of the single-member LLC owned by the individual under Vietnamese Accounting Standards (VAS).

• When preparing the corporate income tax return: Because this is not a valid salary expense under Clause 8, Article 10 of Decree 320/2025/ND-CP, the accountant must legally separate and exclude the entire VND 1,050,000,000 since it falls under non-deductible expenses. This amount is subject to the standard 20% tax rate.
• Preparing the PIT return: The enterprise does not include this VND 1,050,000,000 in taxable income when declaring Mr. A’s personal income tax obligations.
• Handling VAT: The input VAT for Mr. A’s flight tickets and house rent is not creditable (according to Official Dispatch 5421/CT-TTHT dated February 16, 2017, from the Hanoi Tax Department).

Optimal solutions when the director’s remuneration is not deductible

• Enterprises can restructure their cash flow by signing contracts for the legal entity to lease personal assets (housing, vehicles) with a presumptive tax rate in accordance with regulations;
• Shift the budget toward investing in vehicles registered under the company’s name to extract fixed asset depreciation (meeting the legal ceiling limits) and legalize operational expenses;
• Maximize business travel allowances, reception expenses, and conference costs serving business purposes, accompanied by complete and legal invoices;
• Enhance the collective welfare budget and health insurance for personnel who do not hold contributed capital to increase the limit of deductible expenses for the legal entity.
• When the revenue scale is large, and the owner-director’s salary becomes a significant figure, the company may consider converting to a multi-member LLC or a joint-stock company. At that point, the company is no longer classified as a “single-member LLC owned by an individual,” and the director’s salary (even if they are a contributing member) becomes normally deductible for corporate income tax.

Frequently asked questions about personal income tax on director salaries

Is the remuneration paid to a founder not participating in management deductible?

This remuneration is not included in deductible expenses when calculating PIT or CIT. This is a consistent regulation in Circular 96/2015/TT-BTC and formally codified in Clause 8, Article 10 of Decree 320/2025/ND-CP.

Does a hired director have to pay social insurance?

Yes. A hired executive works under a labor contract and is therefore subject to compulsory social insurance participation under the Law on Social Insurance 2024. The cost of paying this insurance will be accounted for as a reasonable expense of the enterprise.

Are profits distributed to the owner-director after paying corporate income tax subject to personal income tax?

No. Based on Point c, Clause 3, Article 2 of Circular 111/2013/TT-BTC (amended by Circular 92/2015/TT-BTC) and Official Dispatch 2709/CT-CS, dividends distributed to the owner of a single-member LLC after paying CIT will not be included in the individual’s taxable income from capital investments.

Tax accounting services at Viet An Law

• Support reviewing and evaluating the entire accounting dossier, accurately detecting and separating risky expenses before the tax reporting period.
• Provide consultancy on cash flow restructuring and legalizing civil transactions to optimize financial obligations for the legal entity.
• Represent the enterprise in working and explaining directly with competent state agencies during the dossier inspection and examination process.

In summary, addressing the question of whether a single-member LLC director’s salary is deductible depends entirely on the legal position of the executive. Depending on whether the director is the owner or a hired employee, the disbursements will have fundamentally different impacts on cash flow and budget remittance obligations.

If clients require in-depth consultancy on corporate regulations or professional tax accounting services, please contact Viet An Law directly for dedicated support from our expert team to resolve your concerns regarding the question: Is the director’s salary in a single-member LLC subject to PIT?