NON-DEDUCTIBLE EXPENDITURES WHEN CALCULATING CORPORATE TAXABLE INCOME

Taxable income is the basis for calculating corporate income tax payable in the tax period. In particular, taxable income is equal to revenue minus deductible expenses according to regulations if it meets the provisions of law. Expenditures that do not satisfy or fall under the prescribed circumstances will be considered as non-deductible expenditures when calculating corporate taxable income.

1. Taxed income

Taxed income is determined as follow:

– Taxed income in a tax period is the taxable income minus tax-exempt incomes and losses carried forward from previous years.

– Taxable income is turnover minus deductible expenses for production and business activities plus other incomes, including income received outside Vietnam.

–  Incomes from transfers of real estate, project of investment, the right to participate in projects of investments, the right to explore, extract, and process minerals must be separated. The loss on transfers of projects of investment (except for mineral exploration and mineral extraction projects), incomes from transfers of the right to participate in projects of investment (except for the mineral exploration and mineral extraction projects), incomes from transfer of real estate shall be offset against the profit in the tax period.

>> CORPORATE INCOME TAX RATE https://linconlaw.vn/corporate-income-tax-rate/

>> BENEFITS FOR MEDICAL EXAMINATION AND TREATMENT UNDER HEALTH INSURANCE AT APPROPRIATE MEDICAL FACILITIES https://linconlaw.vn/benefits-for-medical-examination-and-treatment-under-health-insurance-at-appropriate-medical-facilities/

2. Deductible expenditures when calculating corporate taxable income

Enterprises are entitled to deduction of all expenses which fully meet the following conditions:

– Actual expenses incurred related to production and business activities of the enterprise; Expenses for vocational education activities; Expenditures for carrying out national defense and security tasks of the enterprise according to the provisions of 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.

3. Non-deductible expenditures when calculating corporate taxable income

– The expenditures that fail to meet all conditions in section 2, except for the loss cause by natural disasters, epidemics, and other force majeure that are not compensated;

– Fines for administrative violations;

– The expenditures that are covered by other budgets;

– The administrative expense allocated by the foreign enterprise to the permanent establishment in Vietnam that exceeds the limit imposed by the laws of Vietnam.

– The extra expenditure according to the laws on making provision;

– The expenditure on interest on loans that are not given by credit institutions or economic organizations and exceed 150% of basic interest rates announced by the State bank of Vietnam when the loan is taken;

– Improper depreciation of fixed assets;

– Improper accrued expenses;

– Wages and remunerations of owners of private enterprises; wages of founders that do not participate in business management; wages, remunerations, and amounts payables to the employees that are not actually paid or do not have invoices according to law;

– The expenditures on loan interests corresponding to the charter capital deficit;

– Deducted input VAT, VAT paid using the deduction method, enterprise income tax;

– Sponsorships, except for sponsorships for education, health, scientific research, disaster recovery, houses of unity, houses of gratitude, houses for beneficiaries of social policies according to law, sponsorships for localities facing extreme socio-economic difficulties according to state programs;

– Voluntary payments to retirement funds or social security funds, payments for voluntary retirement insurance for employees that exceed the limits imposed by law;

– Expenditures on businesses: banking, insurance, lottery, securities, and some other special businesses specified by the Minister of Finance.