Are goods damaged due to change of the natural biochemical process deductible expenses for determining CIT taxable income in Vietnam?

Are goods damaged due to change of the natural biochemical process deductible expenses for determining CIT taxable income in Vietnam?

Based on Clause 2, Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC), it is stipulated as follows:

Deductible and non-deductible expenses when determining taxable income

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Non-deductible expenses when determining taxable income include:

2.1. Expenses that do not meet the conditions prescribed in Clause 1 of this Article.

In cases where an enterprise incurs expenses related to the loss value due to natural disasters, epidemics, fires and other force majeure cases that are not compensated, these expenses are deductible when determining taxable income. Specifically:

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b) Goods damaged due to change of the natural biochemical process, expired goods not compensated are deductible when determining taxable income.

Documentation for goods damaged due to change of the natural biochemical process, and expired goods considered deductible includes:

- Inventory record of the value of damaged goods prepared by the enterprise.

The inventory record of damaged goods value must clearly identify the value of the damaged goods, the cause of damage; the type, quantity, value of goods that can be recovered (if any) accompanied by the import-export balance sheet of damaged goods certified by the legal representative of the enterprise who signs and takes responsibility before the law.

- Damage compensation dossier approved by the insurance agency (if any).

- Documentation stipulating the responsibility of the organization or individual responsible for compensation (if any).

c) The above documents are to be kept at the enterprise and presented to the tax authorities when requested.

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Thus, goods damaged due to change of the natural biochemical process are considered deductible expenses for calculating CIT.

Are goods damaged due to change of the natural biochemical process deductible expenses for determining CIT taxable income in Vietnam? (Image from the Internet)

What conditions must deductible expenses meet when determining CIT taxable income in Vietnam?

Based on Clause 1, Article 9 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 5, Article 1 of the Law amending and supplementing the Law on Corporate Income Tax 2013 and Clause 3, Article 1 of the Law on Amending, Supplementing Certain Articles of Tax Laws 2014), deductible expenses when calculating CIT must meet the following conditions:

- The expense must actually arise related to the business activities of the enterprise; expenses related to the national defense, security tasks of the enterprise as prescribed by law.

- There must be adequate invoices, vouchers as prescribed by law. For invoices of goods and services purchased with a value of 20 million VND or more in each purchase, there must be evidence of non-cash payment, except for cases where non-cash payment evidence is not required as prescribed by law.

- Not falling under non-deductible expenses as prescribed in Clause 2, Article 9 of the Law on Corporate Income Tax 2008.

Which expenses are non-deductible when determining CIT taxable income in Vietnam?

Based on Clause 2, Article 9 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 5, Article 1 of the Law amending and supplementing the Law on Corporate Income Tax 2013, and some points abolished by Clause 4, Article 1 of the Law amending, supplementing certain articles of tax laws 2014), non-deductible expenses when calculating CIT include:

- Expenses that do not meet the conditions prescribed in Clause 1, Article 9 of the Law on Corporate Income Tax 2008, except for loss values due to natural disasters, epidemics, and other force majeure cases that are not compensated;

- Fines for administrative violations;

- Expenses compensated by other funding sources;

- The portion of business management expenses allocated by foreign enterprises to their permanent establishments in Vietnam exceeding the level calculated according to the apportionment method prescribed by Vietnamese law;

- Expenses exceeding the regulations on setting aside provisions;

- Interest expenses on loan capital used for production and business activities from entities not being credit institutions or economic organizations exceeding 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing;

- Depreciation of fixed assets not in conformity with the law;

- Previous entries into expenses not compliant with the law;

- Salaries, wages of private enterprise owners; remunerations paid to business founders not directly involved in managing production or business; salaries, wages, other distinct accounting entries meant for payment to employees but not actually paid or without invoices, vouchers as prescribed by law;

- Interest expenses on loan capital corresponding to the outstanding charter capital;

- Deductible input VAT that has been deducted, VAT payable under the credit method, corporate income tax;

- Sponsorships, except those for education, health care, scientific research, remediation of natural disaster consequences, solidarity houses, gratitude houses, houses for policy subjects as prescribed by law, sponsorships under state programs for localities with special socio-economic difficulties;

- Contributions to voluntary pension funds or social welfare funds, or purchase of voluntary retirement insurance for employees exceeding prescribed limits according to the law;

- Expenses of business activities such as banking, insurance, lottery, securities, and some other specific business activities as prescribed by the Minister of Finance.