Is the condolence money for employees deductible when calculating corporate income tax in Vietnam?

Is the condolence money for employees deductible when calculating corporate income tax in Vietnam?

Based on Point 2.30, Clause 2, Article 6 of Circular 78/2014/TT-BTC (as amended and supplemented by Article 4 of Circular 96/2015/TT-BTC and Clause 4, Article 3 of Circular 25/2018/TT-BTC), the regulations are as follows:

Expenses that are deductible and non-deductible when determining taxable income

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

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Expenses not corresponding to taxable turnover, except for the following expenses:

- Actual expenses for activities preventing and combating HIV/AIDS in the workplace of an enterprise, including: Training costs for HIV/AIDS prevention and control staff of the enterprise, costs of organizing communication about HIV/AIDS prevention for employees of the enterprise, costs of consultation, examination, and HIV testing, costs supporting employees with HIV who are workers of the enterprise.

- Actual costs for fulfilling the duties of national defense education and security training, activities of the self-defense militia, and serving other national defense and security tasks according to relevant legal regulations.

- Actual costs supporting Communist Party and socio-political organizations within the enterprise.

- Expenses for vocational education and training activities for employees, including:

+ Costs paid to trainers, study materials, equipment used for vocational education activities, practice materials, and other costs supporting learners.

+ Training costs for employees recruited to work at the enterprise

- Expenses of a welfare nature directly for employees such as: condolence money, wedding expenses of the employee and their family; vacation expenses, support expenses for medical treatment; expenses supporting additional learning at educational institutions; support for employees' families affected by natural disasters, enemy sabotage, accidents, and illnesses; rewards for employees' children with good academic achievements; expenses supporting travel costs for holidays and Tet for employees; accident insurance, health insurance, other voluntary insurance for employees (except life insurance for employees, voluntary retirement insurance for employees as guided in Point 2.11 of this Article), and other welfare-related expenses. The total welfare-related expenses mentioned above must not exceed one month's average actual salary implemented during the tax year of the enterprise.

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Therefore, based on the above regulations, an enterprise's condolence money for employees is deductible when calculating corporate income tax, but must not exceed one month's average actual salary implemented during the enterprise's tax year.

Is the condolence money for employees deductible when calculating corporate income tax in Vietnam? (Image from the Internet)

How long is the tax period for the conversion year in Vietnam?

Based on Clause 4, Article 3 of Circular 78/2014/TT-BTC, the tax calculation method is regulated as follows:

Tax Calculation Method

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4. In case an enterprise changes its corporate income tax period (including changing the tax period from the calendar year to the financial year or vice versa), the corporate income tax period of the conversion year does not exceed 12 months*. An enterprise in the period of enjoying corporate income tax incentives and changing the tax period can choose: To enjoy incentives in the conversion tax year or pay tax at the non-incentive tax rate for the conversion tax year and enjoy incentives in the following year.*

Example 1: Company A (Company A) uses the calendar year for its corporate income tax period in 2013, and at the beginning of 2014 decides to change to the financial year from April 1 of this year to March 31 of the following year. Thus, the corporate income tax period for the conversion year (2014 conversion year) is calculated from January 1, 2014, to March 31, 2014 (3 months), and the corporate income tax period for the following year (2014 financial year) is calculated from April 1, 2014, to March 31, 2015.

Example 2: In the same scenario but Company A is enjoying corporate income tax incentives (tax exemption for 2 years, 50% tax reduction in the next 4 years), starting from 2012, so Company A enjoys tax incentives as follows (tax-exempt in 2012, 2013; 50% tax reduction in 2014, 2015, 2016, 2017).

If the enterprise chooses to reduce corporate income tax by 50% for the conversion tax year 2014, it continues to reduce corporate income tax by 50% for the next 3 tax years from the 2014 financial year (financial year 2014 from 4/1/2014 to 3/31/2015) to the end of the 2016 financial year.

If the enterprise chooses not to enjoy a 50% reduction in corporate income tax for the conversion corporate income tax year 2014 (conversion tax year 2014 declared and paid according to the non-incentive tax rate), it receives a 50% reduction from the 2014 financial year (from 4/1/2014 to 3/31/2015) to the end of the 2017 financial year.

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Thus, based on the above regulations, the corporate income tax period of the conversion year does not exceed 12 months.

When is the time for determining turnover to calculate taxable income in Vietnam?

According to Clause 2, Article 5 of Circular 78/2014/TT-BTC, as amended by Article 3 of Circular 96/2015/TT-BTC, the time for determining turnover to calculate taxable corporate income is as follows:

- For goods selling activities, it is the point of transferring ownership and usage rights of goods to the buyer.

- For provisioning service activities, it is the point of completing the provision of services or completing each part of the service provision to the buyer, except as stated in Clause 3, Article 5 of Circular 78/2014/TT-BTC, Clause 1, Article 6 of Circular 119/2014/TT-BTC.

- For airline transportation activities, it is the point of completing transporting services to the buyer.

- Other cases follow legal regulations.