I. REGARDING CORPORATE INCOME TAX
According to Article 4 of Circular 96/2015/TT-BTC and amended by Clause 2, Article 3 of Circular 25/2018/TT-BTC, it stipulates:
“1. Except for non-deductible expenses mentioned in Clause 2 of this Article, enterprises may deduct all expenses if they fully satisfy the following conditions:
a) Actual expenses incurred in connection with production and business activities of the enterprise.
b) The expenditure has proper lawful invoices and documents as prescribed by law.
c) Expenditures, if there is an invoice for purchase of goods and services each time with a value of 20 million VND or more (VAT included) upon payment must have a non-cash payment voucher.
2. Expenses that are not deductible when determining taxable income include:
2.6. Paying salaries, wages and bonuses to employees in one of the following cases:
b) Salaries and bonuses for employees are not specified in terms of eligibility and enjoyment level in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; The bonus regulations are prescribed by the Chairman of the Board of Directors, the General Director, the Director according to the financial regulations of the Company and the Corporation.
– In case the enterprise signs a labor contract with a foreigner in which the expenses for the education of foreigners’ children studying in Vietnam at the educational level from preschool to high school are recorded, the enterprise’s payment is of the nature of salary and wage and with proper invoices and vouchers as prescribed shall be included in deductible expenses when determining incomes subject to corporate income tax.
– In case the enterprise signs a labor contract with the employee, which records the payment of house rent paid by the enterprise to the employee, this payment is of salary and wage nature and with full invoices and vouchers as prescribed shall be included in deductible expenses when determining incomes subject to corporate income tax.
– In case a Vietnamese enterprise signs a contract with a foreign enterprise, which clearly states that the Vietnamese enterprise must bear the costs of accommodation for foreign experts during their working time in Vietnam, the rent for foreign experts working in Vietnam paid by the Vietnamese enterprise shall be included in deductible expenses when determining incomes subject to corporate income tax.”
II. REGARDING VALUE ADDED TAX
According to Article 14 of Circular 219/2013/TT-BTC:
“Article 14. Principles of input value-added tax deduction
– In case a business establishment has foreign experts who come to Vietnam to work, hold managerial positions in Vietnam, and receive salaries in Vietnam according to the labor contract signed with the business establishment in Vietnam, the business establishment is not entitled to deduct VAT on the rent for these foreign experts.
– In case the foreign experts are still employees of the overseas enterprise, are subject to the operation of the overseas enterprise, are paid by the overseas enterprise and enjoy the regimes of the overseas enterprise during the time of working in Vietnam, and there is a written contract between the overseas enterprise and the business establishment in Vietnam stating that the enterprise in Vietnam must bear the costs of accommodation for the foreign experts during their working time in Vietnam, the VAT on the rent for the foreign experts working in Vietnam paid by the business establishment in Vietnam will be deducted.”
“9. The input VAT amount is not deductible, business establishments may account it as an expense for calculating corporate income tax or include it in the historical cost of fixed assets, minus the VAT amount of goods and services purchased each time with a value of twenty million dong or more without non-cash payment vouchers.”
III. REGARDING PERSONAL INCOME TAX
Clause 2, Article 11 of Circular 92/2015/TT-BTC stipulates: “The house rent, payment for electricity, water supply, and associated services (if any) paid by the employer on behalf of the employee shall be included in taxable income according to the actual amount paid on behalf of employees. Nevertheless, the amount must not exceed 15% of the total taxable income (excluding house rent) earned at the workplace regardless of income payer”.
* In case the employee enjoys benefits such as a house rent allowance according to the salary specified in the labor contract, the entire amount must be included in taxable income when calculating PIT.