What are the guidelines on the corporate income tax policy for expenses from the salary fund of Academies in Vietnam?
What are the guidelines on the corporate income tax policy for expenses from the salary fund of Academies in Vietnam?
On December 8, 2023, Hanoi Tax Department issued Official Letter 86486/CTHN-TTHT here on corporate income tax policy for expenses from the salary fund.
Accordingly, in Official Dispatch No. 86486/CTHN-TTHT in 2023, the Hanoi Tax Department has the following opinion:
- In case Academies sets up salary provisions in 2022 as prescribed in item c, point 2.6, clause 2, Article 4 of Circular 96/2015/TT-BTC and within 6 months from the end of the fiscal year, the Academy has used up the salary fund set aside for 2022, then the Academy does not have to calculate a reduction in salary and wage costs for the 2023 tax period.
- In case the Academy incurs welfare expenses paid directly to employees, the total expenses must not exceed 01 month's actual average salary made in the tax year as prescribed in Article 4 of the Circular 96/2015/TT-BTC, expenses are included in deductible expenses when determining income subject to corporate income tax.
What are the guidelines on the corporate income tax policy for expenses from the salary fund of Academies in Vietnam? (Picture from internet)
What are the non-deductible expenses when calculating taxable income in Vietnam?
Pursuant to the provisions of Article 4 of Circular 96/2015/TT-BTC amending and supplementing Article 6 of Circular 78/2014/TT-BTC stipulating non-deductible expenses when calculating taxable income specified in Clause 2, Article 6 of Circular 78/2014/TT-BTC amended and supplemented by Article 4 of Circular 96/2015/TT-BTC, enterprises can deduct all expenses when determining taxable income when they meet the following conditions:
- The actual expense incurred is related to the enterprise’s business operation.
- There are sufficient and valid invoices and proof for the expense under the regulations of the law.
- There is proof of cashless payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).
The proof of cashless 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, such expense will be deductible when calculating taxable income. If the enterprise does not have proof of cashless payment, the enterprise must remove the value of goods/services without proof of cashless 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 78/2014/TT-BTC shall not be adjusted under the regulations of this Point.
Which entities are payers of corporate income tax in Vietnam?
Pursuant to Article 2 of Circular 78/2014/TT-BTC stipulates as follows:
Taxpayers
1. Payers of corporate income tax (CIT) are organizations engaged in production and trading of goods or provision of services with taxable income (below referred to as enterprises), including:
a/ Enterprises established and operating under the Enterprise Law, the Investment Law, the Law on Credit Institutions, the Insurance Business Law, the Securities Law, the Petroleum Law, the Commercial Law or other legal documents in the forms of joint-stock company; limited liability company; partnership; private enterprise; lawyer office, private notary public office; party to business cooperation contract; party to petroleum product-sharing contract, oil and gas joint-venture enterprise and joint operating company;
b/ Public or non-public non-business units engaged in production and trading of goods or provision of services with taxable income in all areas;
c/ Organizations established and operating under the Cooperative Law;
d/ Enterprises established under foreign law (below referred to as foreign enterprises) and having permanent establishments in Vietnam;
Permanent establishments of foreign enterprises are manufacturing and trading establishments through which foreign enterprises carry out some or all of their production and trading activities in Vietnam, including:
- Branches, executive offices, factories, workshops, means of transport, mines, oil and gas fields or other sites of exploitation of natural resources in Vietnam;
- Construction sites and construction, installation or assembly works;
- Establishments providing services, including also consultancy services through employees or other organizations or individuals;
- Agents for foreign enterprises;
- Representatives in Vietnam, for representatives authorized to sign contracts in the name of foreign enterprises or representatives not authorized to sign contracts in the name of foreign enterprises but regularly delivering goods or providing services in Vietnam;
In case a double taxation avoidance agreement which the Socialist Republic of Vietnam has signed has different provisions on permanent establishments, the provisions of that agreement prevail.
e/ Organizations other than those referred to at Points a, b, c and d, Clause 1 of this Article which are engaged in production and trading of goods or provision of services and have taxable income.
2. Foreign organizations engaged in production and business activities in Vietnam not under the Investment Law or the Enterprise Law or earning income in Vietnam shall pay CIT under separate guidance of the Ministry of Finance. These organizations, if having capital transfer activities, shall pay CIT under the guidance in Article 14, Chapter IV of this Circular.
Thus, based on the above regulations, payers of corporate income tax (CIT) are organizations engaged in production and trading of goods or provision of services with taxable income and foreign organizations engaged in production and business activities in Vietnam not under the Investment Law or the Enterprise Law or earning income in Vietnam under separate guidance of the Ministry of Finance.
LawNet