Three Conditions for Determining Reasonable Expenses Accountants Need to Know

 All 37 expenditures not counted as reasonable expenses

In Clause 1, Article 4 of Circular 96/2015/TT-BTC, it has been stipulated that except for expenses prescribed by law as non-deductible, enterprises can deduct all expenses if they meet the following three conditions:

1. The expense genuinely incurred related to the enterprise's production and business activities

In cases where expenses actually arise but are not related to the enterprise's production and business activities, such expenses are not considered reasonable and deductible in the final corporate income tax settlement. Therefore, it is essential to clearly determine that deductible expenses are those that genuinely arise within the enterprise and are directly related to its production and business activities.

2. The expense is supported by sufficient legal invoices and documents according to regulations

Depending on specific cases, the invoices and documents here can include VAT invoices, sales invoices, payment vouchers, bank transfer documents when purchasing, or payroll, attendance sheets when paying salaries, etc.

Additionally, these invoices and documents must be legally prepared according to the law. To be specific: the invoices must be provided by tax authorities or self-printed by the enterprise in accordance with the regulations of the Government of Vietnam and the Ministry of Finance. Fake invoices, self-printed invoices that have not been announced, etc., are not legally valid.

3. The expense, if supported by an invoice for goods or services with a value of 20 million VND or more per each transaction (including VAT), must be accompanied by non-cash payment documents

Note at Point c, Clause 1, Article 6 of Circular 78/2014/TT-BTC which stipulates that in cases of purchasing goods or services valued at 20 million VND or more per transaction as recorded on the invoice, if by the time the expense is recognized, the enterprise has not paid and does not have non-cash payment documents, the enterprise can still count it as a deductible expense when determining taxable income. However, if at the time of payment, the enterprise does not have non-cash payment documents, it must declare and adjust to reduce the expenses related to the value of goods or services which do not have non-cash payment documents in the tax period when the payment with cash takes place.

Duy Thinh

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