DEDUCTIBLE EXPENSES AS LOSSES BY STORMS AND FLOODS IN CIT

Yagi typhoon – typhoon no. 3, the strongest storm in decades, has left severe consequences in Vietnam. Many enteprises face huge losses in assets and business operations. In this context, the question arises, are enteprises entitled to the deductible expenses as losses by storms and floods, in order to reduce tax burden and financial pressure?

Enteprises are entitled to the deductible expenses as losses by storms and floods

Pursuant to Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC), enterprises are entitled to deductible expenses if 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).

However, if an enterprise has expenses related to the losses due to natural disasters, epidemics, fires and other force majeure cases, they can be included in deductible expenses when determining corporation income tax (CIT), even if not meeting or not fully meeting the above conditions.

Note, the expense of losses due to storms and floods can only be deducted if this amount is not compensated.

Notes on the responsibility of enterprises toward deductible expenses of losses by storms and floods when determining income subject to CIT

Enterprises must clearly determine the total value of losses due to storms and floods, determined according to the provisions of law.

Uncompensated loss equals (=) total loss minus (-) loss that must be compensated by insurers other entities as prescribed by law.

Documents for lost assets and goods to deduct loss expense due to storms and floods

Enterprises must prepare, save at the enterprise and present to the tax authority when requested by the tax authority for the following documents:

– A statement of losses of assets/goods prepared by the enterprise, where clarifies:

+ A statement of losses of assets/goods must specify the losses, causes, responsibilities for such damage;

+ Categories, quantity, value of recoverable assets/goods (if any);

+ The legal representative of the enterprise shall sign and take legal responsibility for the statement.

– An insurance claim accepted the insurer (if any).

– Documents about responsibility for provision of compensation (if any).

>> WHO MUST PAY CORPORATE INCOME TAX? https://linconlaw.vn/who-must-pay-corporate-income-tax/

>> PENALTIES FOR ILLEGALLY USING INVOICES AND DOCUMENTS https://linconlaw.vn/penalties-for-illegally-using-invoices-and-documents/