In Vietnam, it is very important for companies to know what expenses can be deducted when calculating their taxable income. The following is a detailed list of deductible expenses, including specific descriptions and applicable conditions for each type of expense.
Operating costs
1. Raw material procurement cost
Description: The cost of raw materials used to produce goods or provide services.
Conditions: There must be legal invoices and contracts as proof.
Note: Expenses must be directly related to the company’s main business.
2. Direct labor costs
Note: Direct labor costs in the production process, including workers’ wages and benefits.
Conditions: Pay slips and relevant social security payment records are required.
Note: Ensure that all employees’ wages and benefits comply with Vietnam’s labor law requirements.
3. Depreciation of production equipment
Description: Depreciation expense of production equipment.
Conditions: The equipment must be included in the company’s list of fixed assets and depreciated over the prescribed depreciation period.
Note: The depreciation method must comply with Vietnam Accounting Standards (VAS).
4. Transportation and storage costs
Description: Costs associated with transportation and storage of raw materials and products.
Conditions: A transport contract and an invoice for storage charges are required.
Note: Expenses must be directly related to the production and sales activities of the enterprise.
Sales Expenses
1. Advertising and marketing expenses
Description: Expenses used for advertising and marketing.
Conditions: Advertising contract and invoice are required.
Note: Advertising expenses must be reasonable and directly related to the company’s sales activities.
2. Salaries and commissions of sales staff
Description: Salaries and commissions of sales staff.
Conditions: Payroll and commission payment records are required.
Note: Make sure sales staff’s wages and commissions comply with labor law requirements.
3. Customer entertainment expenses
Description: Expenses used for client entertainment.
Conditions: Invoices and related records of entertainment expenses are required.
Note: Entertainment expenses must comply with the principle of reasonableness and have a clear upper limit.
Management expenses
1. Salaries and benefits for managers
Description: Salaries and benefits for management staff.
Conditions: Payroll and benefit payment records are required.
Note: Ensure that management staff salaries and benefits comply with labor law requirements.
2. Office rent and utility bills
Note: Office rent and utility bills.
Conditions: A lease agreement and utility bills are required.
Note: The expenses must be directly related to the management activities of the enterprise.
3. Depreciation of office equipment
Description: Depreciation expense of office equipment.
Conditions: The equipment must be included in the company’s list of fixed assets and depreciated over the prescribed depreciation period.
Note: The depreciation method must comply with Vietnam Accounting Standards (VAS).
Financial expenses
1. Bank loan interest
Description: Interest paid by a business on a bank loan to operate or expand its business.
Conditions: Loan agreement and bank statement are required.
Note: The loan interest must be directly related to the business activities of the enterprise.
2. Costs of issuing bonds
Note: Expenses related to the issuance of bonds by an enterprise, including issuance fees and interest.
Conditions: A bond issuance contract and invoices for related fees are required.
Note: The expenses must be directly related to the financing activities of the enterprise.
3. Foreign exchange losses
Note: Losses caused by foreign exchange fluctuations.
Conditions: Foreign exchange transaction records and loss calculation vouchers are required.
Note: Foreign exchange losses must be directly related to the company’s international business.
Research and Development Expenses
1. Salaries of R&D personnel
Note: Salaries and benefits of R&D personnel.
Conditions: Payroll and benefit payment records are required.
Note: Ensure that the wages and benefits of R&D personnel comply with labor law requirements.
2. Procurement costs of R&D materials and equipment
Note: Cost of materials and equipment used for research and development.
Conditions: Purchase contract and invoice are required.
Note: Expenses must be directly related to the R&D project.
3. External R&D service expenses
Note: Cost of R&D services outsourced to third parties.
Conditions: Service contract and invoice required.
Note: Expenses must be directly related to the R&D project.
Other deductible expenses
1. Employee education and training expenses
Description: Expenses for employee education and training.
Conditions: Training contract and invoice are required.
Note: Training costs need to be directly related to the employee’s job responsibilities.
2. Insurance costs
Note: Social insurance and commercial insurance costs purchased by the enterprise for its employees.
Conditions: Insurance contract and payment records are required.
Note: Ensure that insurance premiums comply with relevant national policies.
3. Legal and consulting service fees
Description: Fees paid by businesses for legal and consulting services.
Conditions: Service contract and invoice required.
Note: Expenses must be directly related to the business activities of the enterprise.
Environmental Protection Expenses
1. Purchase and maintenance costs of pollution control equipment
Description: Costs for purchasing and maintaining pollution control equipment.
Conditions: Purchase contract and invoice are required.
Note: The cost must be directly related to the company’s environmental protection measures.
2. Investment costs of environmental protection projects
Description: Investment costs for environmental protection projects.
Conditions: Project contract and invoice are required.
Note: Fees must comply with national environmental protection policies.
Non-deductible expenses
When declaring corporate income tax, certain expenses are not deductible. Enterprises need to pay special attention to the following:
Personal consumption expenditure: such as personal expenses of executives, personal luxury goods consumption, etc.
Fines and liquidated damages: Penalties imposed for violations of laws and regulations.
Donation expenses: Generally not deductible unless certain conditions are met.
Non-operating expenses: expenses not related to business operations, such as personal investment losses.
Things to note when applying
Voucher management: Ensure that all deductible expenses have legal invoices and contracts as vouchers.
Compliance: All expenditures must comply with Vietnam’s tax regulations to ensure compliance.
Record keeping: Keep all relevant records and vouchers for at least 10 years in case of tax audit.
Understanding the list of deductible expenses is crucial for corporate income tax declaration. Enterprises should carefully review each expense to ensure that it meets the deduction conditions and maintain good voucher management to optimize the tax burden and ensure compliance. It is recommended that enterprises consult professional tax consultants in actual operations to ensure the accuracy and legality of the declaration.
