What are conditions for life insurance premiums for employees to be deductible when determining corporate income tax in Vietnam?

What are conditions for life insurance premiums for employees to be deductible when determining corporate income tax in Vietnam?

Based on Clause 1, Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC) governing deductible and non-deductible expenses for determining taxable income as follows:

Deductible and Non-Deductible Expenses for Determining Taxable Income

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

a) The expense actually arises in relation to the enterprise's production and business activities.

b) The expense is supported by adequate and legal invoices and documents as stipulated by law.

c) For any purchase of goods or services with an invoice value of VND 20 million or above (VAT inclusive), the payment must be made via non-cash payment documents.

Non-cash payment documents are implemented according to the regulations of legal documents concerning value-added tax.

In the event of purchasing goods or services with an invoice value of VND 20 million or more, if at the time the expense is recorded the payment has not been made, the enterprise is allowed to account it as a deductible expense when determining taxable income. If, upon payment, the enterprise does not have non-cash payment documents, it must declare and adjust to reduce the cost by the value of goods or services without non-cash payment evidence in the tax period where the cash payment occurs (even in cases where the tax authority and other competent agencies have decided to conduct inspections or auditing of the tax period where this expense arises).

For invoices for goods and services paid in cash arising before the effective date of Circular No. 78/2014/TT-BTC, no adjustment is required according to this point.

If an enterprise purchases goods or services related to its production and business activities and receives an invoice printed directly from the cash register as per invoice regulations; for invoices valued at 20 million VND or more, enterprises base it on the invoice and non-cash payment documents to account as deductible expenses for determining taxable income.

If an enterprise purchases goods or services related to its production and business activities and receives an invoice printed directly from the cash register as per invoice regulations; for invoices valued below 20 million VND and paid in cash, enterprises rely on the invoice and cash payment documents to account as deductible expenses for determining taxable income.

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Therefore, life insurance premiums for employees can be considered deductible expenses for corporate income tax if they meet the following conditions:

- Must be an actual expense of the company for employees;

- Supported by adequate and legal invoices and documents as stipulated by law;

- The enterprise must have paid all mandatory insurance contributions for employees (no outstanding mandatory insurance payments) before purchasing life insurance;

- The expenses for purchasing life insurance must be clearly specified in one of the following documents:

+ Labor contract;

+ Collective labor agreement;

+ Financial regulations of the Company, Corporation, or Group;

+ Bonus regulations stipulated by the Chairman of the Board of Directors, General Director, Director in accordance with the company's financial regulations.

- The cost for life insurance premiums for employees must not exceed VND 3 million per month per person (any excess is considered a non-deductible expense for corporate income tax purposes).

What are conditions for life insurance premiums for employees to be deductible when determining corporate income tax in Vietnam? (Image from the Internet)

Is interest income from life insurance contracts exempt from personal income tax in Vietnam?

According to Clause 7, Article 7 of the Personal Income Tax Law 2007 (amended and supplemented by Clause 3, Article 2 of the Law Amending and Supplementing Laws on Tax 2014) which stipulates cases exempt from tax:

Exempt Income

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7. Interest income from deposits at credit institutions and income from life insurance contracts.

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Thus, income from interest accrued from life insurance contracts is exempt from personal income tax.

What are regulations on payment of life insurance premiums in Vietnam?

According to Article 37 of the Insurance Business Law 2022, the payment of life insurance premiums is stipulated as follows:

- The policyholder may pay the insurance premium in a lump sum or multiple installments according to the term and method agreed upon in the insurance contract.

- In cases where the premium is paid in installments and the policyholder has paid one or some installments but cannot continue paying the subsequent premiums, the grace period for premium payment is 60 days.

- The parties may agree to reinstate the effectiveness of an insurance contract that has been unilaterally terminated according to Clause 1, Article 26 of the Insurance Business Law 2022 within 02 years from the date of termination, provided the policyholder has paid the outstanding premium.

- If the policyholder does not pay or does not pay the full premium, the insurer is not entitled to automatically deduct the premium from the refund value of the insurance contract without the policyholder's consent and cannot file a lawsuit to compel the policyholder to pay the premium. This provision does not apply to group insurance.