Regulations on reasonable expenses in Vietnam

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Regulations on reasonable expenses in Vietnam

What is a reasonable expense? Why do businesses always pay attention to this expense? According to Vietnamese law, which fees are considered reasonable expenses?

Usually, when working, we often hear about increasing reasonable expenses in every possible way to increase profits at the end of the year. However, few people know that reasonable expenses are not actually regulated in the law in general and the tax law in particular.

The reason for this is because the reasonable expense is very broad. Expenses that can be considered reasonable expenses are very large and it is difficult to determine whether each expenditure is a reasonable expense or not.

Although there is no general concept, the conditions to be classified as reasonable expenses are clearly regulated by the Government.

Specifically, Article 4 of Circular 96/2015/TT-BTC stipulates that a reasonable expense is an expense that is deductible when determining taxable income and calculating corporate income tax if all the conditions under regulations of the corporate income tax law are satisfied.

Conditions to become reasonable expenses

Article 4 of Circular 96/2015/ND-CP stipulates that in addition to the expenses specified in Clause 2 of this Article, all other expenditures that satisfy the following 03 conditions will be classified as reasonable expenses:

• Actual expenses incurred in connection with production and business activities of the enterprise.

• Expenses with sufficient legal invoices and documents as prescribed by law.

• Expenses if there is an invoice for purchasing goods and services each time with a value of 20 million VND or more when paying, must have non-cash payment documents in accordance with the law on value added tax.

Accordingly, when there are enough legal invoices and documents or in the absence of invoices and documents, the enterprise fills out a table according to form 01/TNDN signed by the legal representative or an authorized person from the enterprise and takes responsibility for the accuracy and truthfulness before the law, such expenses will be considered as reasonable expenses.

Expenses that are considered reasonable expenses

Generally, the following expenses would be considered reasonable expenses:

– Wages, salaries and other expenses paid to employees such as insurance, allowances, etc.

– Money paid by the enterprise to the employee for his/her annual unpaid days off.

– Expenses for allowances for business trips, travel expenses and accommodation rents for employees on business trips.

– Money spent on vocational training and vocational education for employees.

– Money spent on raw materials, fuel, and supplies for business activities.

– The money spent does not exceed the consumption norm of raw materials, materials, fuel, energy and goods for a number of raw materials, materials, fuel, energy, and goods already promulgated by the State.

– Money for rewards for initiatives and improvements that enterprises have specific regulations on.

– Expenses for transportation allowances on vacation in accordance with the provisions of the Labor Code.

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