Deductible expenses when calculating CIT in Vietnam

Corporate income tax (CIT) is an important source of revenue of the state budget, a tool to regulate the effective allocation of resources in the economy, promote or prevent the development of certain categories or certain types of goods. This is a tool to adjust and redistribute social income, helping to reduce the gap between rich and poor by applying progressive taxes or tax exemptions and reductions for low-income or disadvantaged taxpayers. When calculating income subject to corporate income tax, the accountant needs to determine the deductible expenses to ensure the correct calculation of the tax amount and benefits of the enterprise.

Definition of deductible expenses when calculating CIT

Deductible expenses when calculating enterprise income tax are expenses that meet the following conditions:

• Actual expenses incurred in the course of business activities of the enterprise.
• Expenses with sufficient valid vouchers and invoices as prescribed by law.
• Expenses with invoices greater than or equal to VND 20 million (VAT included) must have payment vouchers via bank – not cash.

Deductible expenses when calculating corporate income tax

Cost of raw materials

For this part of the cost, the enterprise balances and builds a norm of loss and use of raw materials. This norm is usually developed and planned from the beginning of the year or the beginning of the production period and is stored and managed at the enterprise. Deductible expenses include expenses for the purchase of raw materials and goods within the norms that the enterprise has built.

Interest expense

• Lenders are individuals: The loan interest rate does not exceed 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing. At the same time, when paying loan interest, 5% personal income tax must be deducted on the interest paid by that individual.
• The lender is an enterprise – not a credit institution: When paying loan interest, the enterprise must ask the lender to issue an invoice
• Conditions for deductible interest expenses when calculating CIT:
• Loan Agreement
• Proof of payment of a check or authorization of payment
• Lenders are banks or credit institutions: Must comply with the announced interest rates. In this case, the borrower is not required to pay via bank, and can be paid in cash.
• The enterprise has fully contributed charter capital, and in the course of doing business, there is a loan interest payment to invest in other enterprises. At that time, this expense is calculated as a reasonable expense of the enterprise when determining taxable income.

Fixed asset depreciation costs

• Expenses for the purchase of fixed assets for employees working at the company such as motels, cafeterias, toilets, medical facilities, furniture, garages, clean water tanks,…
• Depreciation of fixed assets in the name of the company or financial hire-purchase fixed assets.
• The depreciation deductions are within the level bracket prescribed by the Ministry of Finance
• For enterprises doing business in industry groups such as passenger transportation, hotels, tourism: The depreciation from the historical cost of cars serving the production and business activities of the enterprise shall be fully included in the reasonable expenses of the enterprise.
• For enterprises other than 3 business groups such as passenger transportation, hotels, and tourism: Reasonable expenses when calculating depreciation of passenger cars with 9 seats or less are the depreciation deduction corresponding to the historical cost of VND 1.6 billion or less and the assets must be in the name of the enterprise.
• Depreciation for works on land used for business purposes of enterprises.
• Depreciation of fixed assets when the enterprise suspends business for less than 9 months due to seasonal production: in case the fixed assets are owned by the enterprise and are being used for production and business activities of the enterprise. However, if the operation must be suspended due to the season, but this fixed asset continues to be used for production, during that suspension, the depreciation of the fixed asset shall be included in the reasonable expenses of the enterprise.

Purchase costs without invoice

Expenses for purchase of purchased goods and services shall be made according to form No. 01/TNDN but not enclosed with a list of payment vouchers for the seller in the following cases:

Conditions for recognition are reasonable expenses of the enterprise:

• The purchase list of goods according to form 01/TNDN must be signed by the legal representative or authorized person of the enterprise and they are responsible for the accuracy and truthfulness before the law;
• The seller must provide a photocopy of their ID card;
• These purchase expenses without invoices do not require bank transfer payment, and cash payment can be used.

Expenses for renting houses and renting assets

• Expenses for renting warehouses, factories and warehouses in service of production and business activities must be registered with the managing state agencies.
• Payment of house rent and property lease to individuals and organizations with valid vouchers and invoices.
• Expenses for renting houses and renting assets in service of production and business activities of enterprises.
• In case the lease contract stipulates that the enterprise pays the property rental tax on behalf of the individual, the valid dossier to be calculated as a deductible expense includes:
  • Lease Agreement
  • Rent payment vouchers and property leases
  • Documents of payment of property rental tax on behalf of individuals
• For repair expenses during the lease of the property: If the contract clearly states that the lessee must be responsible for repairs during the lease period, this expense shall be calculated as a deductible expense. Enterprises are allowed to account in expenses or allocate gradually, but the maximum allocation period is 36 months.
• In case the enterprise leases the property of an individual: In the contract, there is a clause agreeing on the property rent, excluding VAT and PIT. At the same time, if the enterprise pays taxes on behalf of the landlord, the enterprise shall be included in the reasonable expenses of the enterprise the amount payable for the lease of the property and the tax paid on behalf of the landlord. Enterprises must register the tax declaration dossier for renting property to the landlord with the tax authority at the place where the lease location arises.

Expenditure on salaries, wages, and bonuses for employees

• Expenses must be specified in the labor agreement contract, financial regulations and salary and bonus regulations of the enterprise.
• There must be a salary payment voucher with the employee’s signature.

Allowances such as rice, uniforms, telephones, overtime; working expenses; Expenses for paying voluntary insurance premiums

• These allowance expenses shall be specified in the labor contract, financial regulations and salary and bonus regulations of the enterprise or have valid and lawful invoices and documents.
• Expenses must have salary payment slips and salary payment slips signed by employees.
• The cost of voluntary insurance deduction and payment is calculated when the employee fully participates in the compulsory insurance obligations and the enterprise no longer owes insurance money according to the State’s regulations.

Employee Benefits

• Specific provisions in the regulations on salaries and bonuses of enterprises.
• Service contracts, economy, contract liquidation,..
• Valid and legal invoices and payment documents such as travel company service invoices, food and beverage invoices, tuition payment invoices,…
• In case an enterprise buys goods as gifts or gives promotional goods to employees, it must make a VAT invoice.
• The total welfare expenses must not exceed 1 month’s actual average salary implemented in the tax year of the enterprise.

Spending bonuses for initiatives, improvements and scientific research

• Specific provisions in the regulations on remuneration and remuneration of enterprises on remuneration for initiatives, reforms and scientific research and the establishment of an initiative and reform acceptance council.
• Expenditures on funding for scientific research must comply with the State’s program.
• A record of full confirmation of signatures between the donor, the donor and the donor or prize recipient.
• If the prize or sponsorship is in kind, there must be invoices and payment vouchers.
• If the reward or sponsorship is in cash, there must be a voucher for spending money.

Provisions

• Reserve for inventory price reduction: there must be invoices and valid payment vouchers for the purchase of goods and services, and inventory can be identified when under the ownership of the enterprise.
• Provision for bad debts: there must be original documents or proof of unpaid debts such as economic contracts, debt acceptance contracts, debt reconciliation,…
• Provision for financial investment losses: must be securities that have been listed or registered for trading on the domestic stock market in which the enterprise is investing and the actual value of securities on the market is lower than the value in which the enterprise is investing and recorded in the books at the time of making financial statements.
• Provision for warranty of goods, services and construction works: There must be an economic contract, a construction work contract and clearly show the terms of warranty and repair as in the contract committed between the two parties.
• Provisions set aside from the salary and wage fund: There must be a decision or report of the board of directors or director of the company on the reserve expenditure.

Cost of promotional goods and gifts for customers

• Have legal invoices and documents when buying goods as gifts. If the expenditure for the purchase of goods is valued at VND 20 million or more, there must be a non-cash payment document.
• Enterprises must make VAT invoices when giving, donating, giving gifts or promotional goods to customers.
• Declare, calculate and pay VAT like invoices sold to customers.
• The VAT calculation price for donated, donated goods is determined according to the selling price of the same type or the price of equivalent goods.
• The actual expenditure must be related to the business and production activities of the enterprise.

Expenses for electricity and water to rent company offices and business locations

• There is a location lease contract and the contract clearly states which party pays this electricity and water bill.
• There is a utility bill.
• There is a receipt of payment for electricity and water bills. In case the company pays the lessor, the payment voucher for electricity and water bills is consistent with the actual amount of electricity and water consumed by the company.

If you have any difficulties or questions related to deductible expenses when calculating CIT in 2025, please contact Viet An Tax Agent for the most specific advice.