Guidance on Deducting Input VAT and Allowable Expenses for Recruitment Costs
How is the input VAT deduction for the production and trading of VAT-taxable goods and services guided?
According to Clause 1, Article 14 of Circular 219/2013/TT-BTC on the principle of input value-added tax deduction as follows:
Principle of input value-added tax deduction
1. Input VAT on goods and services used for the production and trading of VAT-taxable goods and services shall be fully deducted, including the input VAT not compensated for VAT-taxable goods that are damaged.
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Simultaneously, according to Article 15 of Circular 219/2013/TT-BTC (amended and supplemented at Clause 6, Article 3 of Circular 119/2014/TT-BTC, Article 10 of Circular 151/2014/TT-BTC and Clause 10, Article 1 of Circular 26/2015/TT-BTC) as follows:
Conditions for input value-added tax deduction
1. Having a legal VAT invoice for purchased goods and services or proof of VAT payment at the import stage or proof of VAT payment on behalf of foreign parties according to the Ministry of Finance's guidance applicable to foreign organizations without legal status in Vietnam and foreign individuals doing business or earning income in Vietnam.
2. Having non-cash payment documents for purchased goods and services (including imported goods) worth twenty million dong or more each, except in cases where the value of each import is less than twenty million dong, goods, and services purchased each time according to an invoice valued less than twenty million dong, including VAT, and cases where businesses import goods as gifts from foreign organizations or individuals.
Non-cash payment documents include bank payment documents and other non-cash payment documents as guided in Clauses 3 and 4 of this Article.
Based on Official Dispatch 49303/CTHN-TTHT in 2022, the Hanoi Tax Department guides as follows:
In the case where a Company incurs input VAT for serving production and trading of VAT-taxable goods and services, it shall be fully deductible if it meets the conditions for input VAT deduction stipulated in Clause 10, Article 1 of Circular 26/2015/TT-BTC dated February 27, 2015, of the Ministry of Finance, and complies with the principles of input VAT deduction stipulated in Article 14 of Circular 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance.
Guidance on input VAT deduction and deductible expenses relating to labor recruitment costs? (Image from the Internet)
How is the determination of deductible expenses for support money for foreign workers renewing or obtaining new visas guided?
According to the provisions of Point 2.30, Clause 2, Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC and Clause 4, Article 3 of Circular 25/2018/TT-BTC), the deductible and non-deductible expenses when determining taxable income are stipulated as follows:
Deductible and non-deductible expenses when determining taxable income
2. Non-deductible expenses when determining taxable income include:
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2.30. Expenses not corresponding to taxable revenue, except for the following expenses:
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- Welfare expenses directly paid to employees such as funeral, marriage expenses for employees and their families; vacation expenses; assistance for medical treatment; expense support for supplementary knowledge learning at training institutions; support for employees' families affected by natural disasters, enemy destruction, accidents, sickness; commendation for employees' children with excellent academic performance; support for traveling expenses during holidays, New Year for employees; accident insurance, health insurance, other voluntary insurance for employees (except life insurance for employees, voluntary retirement insurance for employees as guided at Point 2.11 of this Article) and other welfare expenses. The total welfare expenses mentioned above do not exceed one-month average salary actually paid in the tax year of the enterprise.
Based on Article 6 of Circular 78/2014/TT-BTC (amended and supplemented at Clause 2, Article 6 of Circular 119/2014/TT-BTC, Article 1 of Circular 151/2014/TT-BTC and Article 4 of Circular 96/2015/TT-BTC) as follows:
Deductible and non-deductible expenses when determining taxable income
1. Except for the non-deductible expenses mentioned in Clause 2 of this Article, enterprises are allowed to deduct all expenses if they meet the following conditions:
a) Actual expenses arising related to the production and business activities of the enterprise.
b) Expenses with sufficient legal invoices and documents as required by law.
c) For expenses with invoices for the purchase of goods and services valued at 20 million dong or more each time (including VAT), payment must be made with non-cash payment documents.
Non-cash payment documents are implemented according to the regulations of legal documents on VAT.
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2. Non-deductible expenses when determining taxable income include:
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Based on Official Dispatch 49303/CTHN-TTHT in 2022, the Hanoi Tax Department guides as follows:
In the case where a Company pays for service support for foreign workers to extend or process visas to qualify for working in Vietnam, and if this expense is of a welfare nature for the workers, it shall be considered a deductible expense when determining taxable corporate income if the total welfare expenses do not exceed one-month average salary actually paid in the tax year of the enterprise as stipulated in Clause 4, Article 3 of Circular 25/2018/TT-BTC and meets the conditions according to Article 4 of Circular 96/2015/TT-BTC dated June 22, 2015.
See detailed contents at: Official Dispatch 49303/CTHN-TTHT in 2022
What expenses are deductible when determining taxable income?
Based on Article 6 of Circular 78/2014/TT-BTC (amended and supplemented at Clause 2, Article 6 of Circular 119/2014/TT-BTC, Article 1 of Circular 151/2014/TT-BTC and Article 4 of Circular 96/2015/TT-BTC) the deductible and non-deductible expenses when determining taxable income are stipulated as follows:
Except for non-deductible expenses mentioned in Clause 2 of this Article, enterprises can deduct all expenses if they meet the following conditions:
- Actual expenses incurred related to the production and business activities of the enterprise.
- Expenses with sufficient legal invoices and documents as required by law.
- For expenses with invoices for the purchase of goods and services valued at 20 million dong or more each time (including VAT), payment must be made with non-cash payment documents.
- Non-cash payment documents are implemented according to the regulations of legal documents on value-added tax.
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