Referencing contractor tax accounting:
- According to the provisions of Point 2.7, Article 6 of Circular 78/2014/TT-BTC, expenses that are not deductible when calculating corporate income tax include: “CIT, except the cases in which enterprises pay CIT for foreign contractors as agreed in the contracts with foreign contractors or foreign subcontractors that revenues received by foreign contractors or foreign subcontractors are exclusive of CIT”.
Therefore, the contractor’s CIT, if calculated at the NET price, will be considered a reasonable deductible expense; if calculated at GROSS price is not considered a reasonable cost and must be tracked at account 811.
- Contractor VAT expenses are withheld and tracked in account 138 (if tax has not been paid) or account 133 (according to tax payment documents).
1. In case of NET price:
- Accounts payable:
Debit account 627 / 642 / 641
Credit Account 331: Contract value
- FCT:
Debit Account 138 / 133: VAT amount
Debit Account 627 / 642 / 641: CIT amount
Credit Account 3338: Contractor tax payable
2. In case of GROSS price:
- Accounts payable:
Debit account 627 / 642 / 641
Credit Account 331: Payment value after deducting contractor tax (withhold contractor tax value from payment value)
- FCT:
Debit Account 138 / 133: VAT amount
Debit Account 811: CIT amount (because it is not considered a reasonable deductible expense)
Credit Account 3338: Contractor tax payable