Vietnam: Are sponsorship expenses eligible for deductible expenses when calculating CIT? What are the sponsorship expenses not eligible for non-deductible expenses when calculating CIT?
Is it required to issue invoices in Vietnam when funding sponsorship money?
According to Point b Clause 1 Article 16 of Circular 39/2014/TT-BTC (amended and supplemented in Clause 3 Article 5 of Circular 119/2014/TT-BTC and Point a Clause 7 Article 3 of Circular 26/2015/TT-BTC) as follows:
Issuing invoices
1. Rules for issuing invoices
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b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries (except for goods internally circulated or internally used to proceed with production), the seller must issue invoices.
Information on invoices must match the actual transactions; no erasure and change may be made; the ink used must be inedible and consistent in color; red ink is not permitted; numbers and text must be written continuously without interruption. Do not write on printed text. Any blank space shall be crossed out. It is not required to cross out blank spaces on self-printed invoices or ordered invoices issued by computers.
According to the above provisions, for goods used for financing, the seller must issue invoices.
Information on invoices must match the actual transactions; no erasure or change may be made.
Are sponsorship expenses eligible for deductible expenses when calculating CIT in Vietnam?
According to Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC) on deductible and non-deductible expenses when calculating taxable income as follows:
Article 6. Deductible and non-deductible expenses when calculating taxable income
1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:
a) The expense incurred is related to the enterprise’s business operation.
b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.
c) There is proof of non-cash payment for each invoice for the purchase of goods/ services of VND 20 million or over (including VAT).
The proof of non-cash payment must comply with regulations of law on VAT.
In case of a purchase of goods and services that are worth VND 20 million or over according to the invoice which is yet to be paid for by the enterprise when the expense is accounted for, the such expense will be deductible when calculating taxable income. Suppose the enterprise does not have proof of non-cash payment. In that case, the enterprise must remove the value of goods/services without proof of non-cash payment from expenses in the tax period in which cash payment is made (even when the tax authority and other authorities have issued a decision on tax inspection of the tax period in which such expense is incurred).
The invoices for goods and services paid in cash before the effective date of Circular No. 78/2014/TT-BTC shall not be adjusted under the regulations of this Point.
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Thus, sponsorship expenses will be eligible for deductible expenses when calculating CIT in Vietnam when meeting the above conditions.
What are the sponsorship expenses not eligible for non-deductible expenses when calculating CIT in Vietnam?
Under Article 6 of Circular No. 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC) on deductible and non-deductible expenses when calculating taxable income for CIT as follows:
Article 6. Deductible and non-deductible expenses when calculating taxable income
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2. The expenses below are not deductible when calculating taxable income:
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2.24. Provision of disaster recovery aid for illegitimate subjects according to Point (a) or without documentation mentioned in Point (b) below:
a) Disaster recovery aid includes direct provision of financial aid or in-kind aid serving disaster recovery for an organization established and operating under the law, for individuals suffering from the disaster via an organization permitted to call for aid as prescribed by law.
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2.25. Provision of sponsorship for building gratitude houses, houses for the poor, or great unity houses for illegitimate recipients according to Point (a) or without documentation mentioned in Point (b) below:
a) Recipients of sponsorships for building houses for the poor are poor households as prescribed by the Prime Minister. Financial or in-kind sponsorships provided directly or via an organization permitted to raise sponsorship as prescribed by law.
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2.26. Provision of sponsorship for scientific research against the law; provision of sponsorship for beneficiaries of incentive policies against the law; provision of sponsorship for extremely disadvantaged areas State programs.
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2.32. Provision of sponsorship for local governments; sponsorships for associations, and social organizations; charitable expenses (except for sponsorships for education, healthcare, disaster recovery, construction of houses for poor people, scientific research, beneficiaries of incentive policies, extremely disadvantaged areas under state programs mentioned in Points 2.22, 2.23, 2.24, 2.25, 2.26 in Clause 2 of this Article).
Thus, when calculating CIT, sponsorship, support, and charity expenses of enterprises in Vietnam will not be eligible for non-deductible expenses when falling under one of the above cases.
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