Are unemployment allowances considered deductable expenses when calculating CIT in Vietnam?

Are unemployment allowances considered deductable expenses when calculating CIT in Vietnam?

According to Clause 2, Article 6 of Circular 78/2014/TT-BTC, as amended by Article 4 of Circular 96/2015/TT-BTC regulations on deductible and non-deductible expenses when determining taxable corporate income are as follows:

Deductible and Non-deductible Expenses for Determining Taxable Income

...

2. Non-deductible expenses for determining taxable income include:

...

2.12. Expenses for unemployment allowances to employees not compliant with current regulations.

...

Therefore, if a company pays severance allowances to employees according to current regulations, it will be eligible for a CIT deduction.

Are unemployment allowances considered deductable expenses when calculating CIT in Vietnam? (Image from the Internet)

What are deductible expenses for CIT calculation in Vietnam?

Based on Article 4 of Circular 96/2015/TT-BTC, deductible expenses for CIT calculation are stipulated as follows:

- Except for non-deductible expenses outlined in Clause 2, Article 4 of Circular 96/2015/TT-BTC, enterprises can deduct any expenses if they satisfy all of the following conditions:

+ The expense actually arises and is related to the production and business activities of the enterprise.

+ The expense has complete and legal invoices and documents as required by law.

+ For expenses with an invoice for goods or services of 20 million VND or more (including VAT), payment must be made through non-cash payment methods.

- Non-cash payment vouchers must comply with the regulations of legal documents on value-added tax.

- In the case of purchasing goods or services with a value of 20 million VND or more noted on the invoice but unpaid at the time of recognizing the expense, the enterprise can still deduct the expense when determining taxable income. If no non-cash payment vouchers are available upon payment, the enterprise must declare and adjust to reduce the expense value without non-cash payment vouchers in the tax period related to cash payment (including cases where tax authorities and other competent authorities have decided to inspect, examine the tax period in which this expense arises).

- For invoices for goods or services paid in cash before the effective date of Circular 78/2014/TT-BTC, there is no requirement to adjust them according to this regulation.

- When enterprises buy goods or services related to production and business activities and have invoices directly printed from cash registers as per legal requirements; if these invoices valued at 20 million VND or more, enterprises base on this invoice and non-cash payment vouchers of the enterprise to calculate deductible expenses for determining taxable income.

- If enterprises buy goods or services related to production and business and have invoices printing directly from cash registers as per legal regulations; for invoices valued below 20 million VND with cash payments, enterprises will use this invoice and cash payment vouchers of the enterprise to calculate deductible expenses for determining taxable income.

In summary, apart from non-deductible expenses, enterprises are allowed to deduct all expenses if they satisfy the conditions outlined above.

Which entities are subject to CIT in Vietnam?

Based on Article 2 of the Corporate Income Tax Law 2008, amended and supplemented by Clause 1, Article 1 of the Amended Corporate Income Tax Law 2013, taxpayers are defined as follows:

- Corporate income taxpayers are entities engaged in the production and trading of goods and services with taxable income as per this Law (hereinafter referred to as enterprises), including:

+ Enterprises established under Vietnamese law;

+ Enterprises established under foreign laws (hereinafter referred to as foreign enterprises) with or without permanent establishments in Vietnam;

+ Organizations established under the Law on Cooperatives;

+ Public service units established under Vietnamese law;

+ Other organizations engaged in production and trading activities with income.

- Enterprises with taxable income as defined in Article 3 of the Corporate Income Tax Law 2008 must pay corporate income tax as follows:

+ Enterprises established under Vietnamese law pay tax on taxable income arising within and outside Vietnam;

+ Foreign enterprises with permanent establishments in Vietnam pay tax on taxable income arising within and outside Vietnam related to the activities of that permanent establishment;

+ Foreign enterprises with no permanent establishments in Vietnam pay tax on taxable income arising in Vietnam.

- The permanent establishment of a foreign enterprise is a production or business location through which the foreign enterprise conducts part or all of its production and business activities in Vietnam, including:

+ Branches, executive offices, factories, workshops, transportation means, oil fields, gas fields, mines, or other natural resource extraction sites in Vietnam;

+ Construction sites, construction, installation, and assembly projects;

+ Service supply locations, including consultancy services through employees, or other organizations or individuals;

+ Agents for foreign enterprises;

+ Representatives in Vietnam in cases where they are authorized to conclude contracts in the name of the foreign enterprise or represent the foreign enterprise without the authority to conclude contracts but regularly conduct goods delivery or service supply in Vietnam.