Is the vacation for employees deductible when calculating corporate income tax in Vietnam?

Is the vacation for employees deductible when calculating corporate income tax in Vietnam?

Pursuant to Clause 2 Article 6 of the Circular 78/2014/TT-BTC (amended by Article 4 of the Circular 96/2015/TT-BTC and Clause 4 Article 3 of the Circular 25/2018/TT-BTC) stipulating deductible and non-deductible expenses for determining taxable income:

Deductible and non-deductible expenses for determining taxable income

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2. The expenses below are not deductible when calculating taxable income:

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2.2. Depreciation of fixed assets in one of the following cases:

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- The actual expenditures on HIV/AIDS prevention at workplace, including expenditure on provision of training in HIV/AIDS prevention for employees, expenditure on raising employees’ awareness of HIV/AIDS prevention, fees for HIV consultation, examination and testing, and expenditure on supporting employees who are HIV sufferers.

- Expenditures on performance of duties pertaining to security and defense education, training, activities of militia forces, and other defense and security duties as prescribed;

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- Direct expenditures on the employees’ welfare: expenditures on employees’ family occasions; expenditures on holiday allowance or treatment assistance; expenditures on professional training; assistance in employees’ families affected by natural disasters, hostilities, accidents, illness; expenditures on rewarding employees’ children for their educational achievements; allowances for traveling during holidays of the employees; payment for unemployment insurance, health insurance, and other voluntary insurance for employees (except for life insurance, voluntary pension insurance mentioned in Point 2.11 of this Article), and other welfare expenditures. The aforementioned total expenditures must not exceed the practical average 01 month’s salary in the tax year.

As regulations above, if the vacation expenditures for employees are directly paid to the workers with complete invoices, documents, and the total expenditure not exceeding 01 month of the actual average salary implemented in the tax year, they can be deducted when calculating corporate income tax.

Is the vacation for employees deductible when calculating corporate income tax in Vietnam? - image from internet

What are places for payment of corporate income tax in Vietnam?

Pursuant to Clause 1 and 2, Article 12 of the Decree 218/2013/ND-CP stipulating place of tax payment:

- Enterprises shall pay their tax at locality where their head offices are located. Where the enterprises have their production establishment of dependent accounting in provinces and centrally run cities different from locality where their their head offices are located, the amount of tax calculated shall be paid at the place of head office and place of production establishment.

The amount of income tax the corporate shall pay in the provinces and centrally run cities where their production establishment of dependent accounting are located is determined by the amount of tax the enterprises shall pay in a period multipled (x) by the rate between the expenses incurred production establishment of dependent accounting with the enterprises’ total expenses.

The payment of tax specified in this Clause does not apply to works, works items or construction establishment of dependent accounting;

The decentralization, management and use of revenue on corporate income tax shall comply with the provisions of the Law on the State Budget.

- The dependent accounting units or overall sector accounting enterprises having their income in addition to the main business activities shall pay tax in provinces or cities where there are those business activities.

What are conditions for deduction of expenses upon determination of corporate income tax in Vietnam?

Pursuant to Clause 1 Article 9 of the Law on Corporate income tax in 2008 (amended by Clause 5 Article 1 of the Law on amendments to the Law on Corporate income tax in 2013 and Clause 3 Article 1 of the Law on amendments to Tax Laws in 2014) stipulating conditions for deduction of expenses upon determination of corporate income tax in Vietnam:

- Actual expenditures on business operation of the company; expenditures on vocational education; expenditures on the company’s national defense and security duties as prescribed by law;

- Expenditures that have sufficient invoices and documents according to law. The invoice for any purchase of goods or services of at least 20 million VND must be enclosed with proof of cashless payment, except for the cases in which proof of cashless payment is not required by law.

- The expenditures not mentioned in Clause 2 Article 9 of the Law on Corporate income tax in 2008.

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