Is the salary of a sole proprietorship owner deductible when determining CIT in Vietnam?

Is the salary of a sole proprietorship owner deductible when determining CIT in Vietnam?

Salaries, wages, and bonuses for workers in any of the following cases are not deductible when determining taxable income for CIT, based on item 2.6, clause 2, Article 6 of Circular 78/2014/TT-BTC (as amended and supplemented at clause 2, Article 6 of Circular 119/2014/TT-BTC, clause 1, Article 4 of Circular 96/2015/TT-BTC, and clause 2, Article 3 of Circular 25/2018/TT-BTC) as follows:

Deductible and non-deductible expenses when determining taxable income

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

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2.6. Salary, wage, and bonus expenses for employees in the following cases:

a) Expenses for salary, wage, and other payables to employees which have been recorded in business production expenses in the period but not actually paid or lack lawful payment vouchers as prescribed by law.

b) Salaries and bonuses for employees that do not clearly specify conditions and levels entitled in one of the following documents: Labor contract; Collective labor agreement; Financial regulation of the Company, Corporation, Group; Bonus regulation stipulated by the Chairman of the Board of Directors, General Director, Director in accordance with the company's financial regulations.

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d) Salaries, wages for sole proprietorship owners*, owners of single-member limited liability companies (owned by individuals); remuneration to founders, members of the members' council, the board of directors who do not directly participate in the management of production and business.*

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Thus, the salaries and wages of sole proprietorship owners are not deductible when determining CIT.

Is the salary of a sole proprietorship owner deductible when determining CIT in Vietnam? (Image from the Internet)

Which expenses of sole proprietorships are deductible when determining CIT in Vietnam?

Based on the provisions in clause 1, Article 6 of Circular 78/2014/TT-BTC (as amended and supplemented at clause 2, Article 6 of Circular 119/2014/TT-BTC and amended by Article 4 of Circular 96/2015/TT-BTC) as follows:

Deductible and non-deductible expenses when determining taxable income

1. Except for non-deductible expenses specified in Clause 2 of this Article, enterprises may deduct all expenses if they meet the following conditions:

a) The actual expenses incurred related to the business and production activities of the enterprise.

b) Expenses with sufficient lawful invoices and documents as prescribed by law.

c) Expenses with invoices for goods and services purchased each time with a value from 20 million VND or more (Vat included) when payment must have a non-cash payment voucher.

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

In the case of goods and services purchased each time with a value of twenty million VND or more recorded on the invoice but payment has not been made by the time of cost recognition, the enterprise may calculate it into deductible expenses when determining taxable income. If payment is made without non-cash payment vouchers, the enterprise must declare, adjust, and reduce expenses for the value of goods and services without non-cash payment vouchers in the tax period where the payment by cash arises (including cases where tax authorities and relevant agencies have decided to inspect and audit the tax period where this expense incurred).

For invoices for goods and services that have been paid in cash prior to the effective date of Circular 78/2014/TT-BTC, no adjustments need to be made in accordance with this Point.

Thus, except for non-deductible expenses, sole proprietorships may deduct all expenses when determining CIT taxable income if they meet the above conditions.

Is a sole proprietorship owner the legal representative of the enterprise in Vietnam?

Based on the provisions in Article 190 of the Law on Enterprises 2020 regarding the management of sole proprietorships as follows:

Management of sole proprietorships

1. The sole proprietorship owner has full authority to decide on all business activities of the sole proprietorship, the use of profits after tax payment, and fulfillment of other financial obligations as prescribed by law.

2. The sole proprietorship owner may directly or hire another person to act as General Director or Director to manage business operations; in this case, the sole proprietorship owner is still responsible for all business activities of the sole proprietorship.

3. The sole proprietorship owner is the legal representative, representing the sole proprietorship as the claimant, defendant, person with related rights and obligations before Arbitration, the Court, representing the sole proprietorship to exercise other rights and obligations as prescribed by law.

Thus, the sole proprietorship owner is the legal representative, representing the sole proprietorship as the claimant, defendant, person with related rights and obligations before Arbitration, the Court, representing the sole proprietorship to exercise other rights and obligations as prescribed by law.