Penalties for Late Payment: Can They Be Deducted When Calculating Corporate Income Tax?

According to Article 4 of Circular 96/2015/TT-BTC, the following expenses are not allowed to be deducted:

Administrative fines, including: violations of traffic laws, violations of business registration policies, violations of accounting and statistical policies, violations of tax laws including late payment fines according to the provisions of the Law on Tax Administration, and other administrative fines as prescribed by law.

Therefore, fines for contract violations are not among the non-deductible expenses.

Furthermore, Clause 3 of Article 1 of the 2014 Law on Amendments to Tax Laws stipulates: Except for expenses specified in Clause 2 of this Article (non-deductible expenses for determining taxable income), enterprises are allowed to deduct all expenses when determining taxable income if they satisfy the following conditions:

- Expenses actually incurred related to the production and business activities of the enterprise; expenses for vocational education activities; expenses for the performance of national defense and security duties of the enterprise as prescribed by law;

- Expenses with sufficient invoices and documents as prescribed by law. For invoices for the purchase of goods and services of twenty million VND or more per transaction, there must be non-cash payment documents, except in cases where non-cash payment documents are not required by law.

Therefore, if the fine for contract violations (late penalty) meets the above conditions, your company will be allowed to deduct this expense when determining the taxable income of the enterprise.

Respectfully!