Corporate Income Tax: Reasonable deductible expenses

18 August, 2025 | TNTP LAW | Legal newsletter

Corporate Income Tax (“CIT”) is an important financial obligation that organizations engaged in the production and trading of goods and services must fulfill according to the law. When calculating CIT, one of the most important factors affecting the payable tax amount is deductible expenses. Accurately determining reasonable expenses not only helps enterprises comply with legal regulations but also reduce costs and optimize their capital. In this article, TNTP will analyze legal conditions for determining deductible expenses under Law on CIT and point out common deductible expenses that actually occur during the operation of enterprises.

1.Conditions for deductible expenses when calculating CIT

Law on CIT clearly stipulates which expenses are non-deductible when calculating assessable income. Accordingly, except for non-deductible expenses, other expenses of enterprises are deductible to calculate assessable income when meeting the conditions specified in Clause 1, Article 9 of the Law on Corporate Income Tax 2008 and its amendments, supplement and detailing documents (“CIT Law”).

Expenses are considered reasonable when satisfying the following conditions:

Actual expenses from the enterprises’ business operations and production activities

The expenses must be incurred during the operation of enterprises and be directly or indirectly related to generating revenue and taxable income.

This is to prevent organizations and individuals from declaring expenses for personal purposes or activities not serving production and business, thereby leading to tax evasion and loss of state budget.

Having sufficient legal invoices and documents according to the law

Invoices and documents are the legal basis to prove that the expenses are real and legal. These documents include: value-added tax invoices, contracts, acceptance minutes, payment vouchers, bank statements, and other documents related to the transaction.

Having sufficient invoices and documents will helps enterprises prove the validity of the expense when tax authority inspects, checks or audits.

Non-cash payment for expenses of VND 20 million or more

For expenses with a value of VND 20 million or more (including VAT), enterprises are required to make non-cash payments to be included in deductible expenses.

Non-cash payment methods include: bank transfer, card payment, payment order, payment order, or other legally accepted forms. This regulation ensures transparency and security in high-value transactions, while also allowing tax authorities to monitor and verify cash flows through the banking system and licensed payment service providers.

However, enterprises should note that from July 1, 2025, Decree No. 181/2025/ND-CP (detailing the implementation of certain provisions of the Law on VAT) will take effect. Pursuant to Article 26 of this Decree, for goods and services purchased (including imports) with a value of VND 5 million or more (VAT included), businesses must have documents of non-cash payment.

Therefore, for expenses ranging from VND 5 million to under VND 20 million, if paid in cash, the enterprise can only calculate it as deductible expenses when determining corporate income tax but cannot deduct input VAT.

2.Non-deductible expenses when calculating CIT

According to Clause 2, Article 9 of CIT Law, non-deductible expenses include:

Expenses that do not serve business activities (purchase of assets for individuals and families);
Salaries and bonuses without valid documentation;
Expenses exceeding the provisioning level according to the law on provisioning; and
Other expenses according to CIT Law.

Accordingly, CIT Law clearly stipulates non-deductible expenses.

3.Deductible expenses when calculating CIT

Although the CIT Law does not provide an detailed list of deductible expenses, it allows a wide range of expenses of enterprises to be deducted if these expenses meet the legal requirements. In practice, expenses that often arise during the operation of enterprises include but are not limited to the following:

a.Salary and wage payment

Salaries and wages paid to employees under labor contracts;
Bonuses, allowances and benefits specified in contracts or company policies; and
Social insurance, health insurance and unemployment insurance paid by an enterprise.

However, salary and wage payments will not be non-deductible if they have not been paid within the fiscal year or if payments are made without valid contracts or payment documentation.

b.Depreciation expense of enterprise fixed assets

Depreciation is deductible if the assets:

Are owned by an enterprise;
Are used for production and business activities; and
Have full legal purchase and payment documents.

Depreciation is not deductible if the asset is unrelated to business or fully depreciated.

c.Costs of raw materials and goods:

Includes purchases of materials and goods used in production and business.

d.Costs of outsourced services

Office rent, electricity, water, phone, internet; and
Third-party services such as security, cleaning, accounting or legal consultancy.

e.Costs of reception, conferences, advertising, marketing

Reasonable costs of reception, meals for business purposes;
Customer meetings, seminars and conferences; and
Advertising, marketing and promotion expenses.

The cap of 15% for advertising expenses that can be deducted from enterprise taxable income has been abolished. As a result, all advertising expenses are now fully deductible when calculating an enterprise’s taxable income.

f.Costs of loan interest

Interest on loans used for business purposes is deductible if:

There is a valid loan agreement;
The interest rate does not exceed the normal level on the market; and
Payments of VND 20 million or more are made through the bank.

However, interest payments are not deductible without a loan agreement or proper documentation that validates the asset loan transaction according to legal requirements.

g.Business travel expenses:

Includes airfare, transportation, and accommodation costs arise during business trips.

Thus, properly determining deductible expenses helps enterprises legally reduce their tax payments. Enterprises must keep complete records, make non-cash payments for transactions exceeding VND 20 million in accordance with the Law on CIT, and, from July 1, 2025, also apply this requirement to expenses of VND 5 million or more. Compliance with tax regulations will help enterprises minimize risks during tax finalization and enjoy full benefits of tax deductions.

This article on “Corporate Income Tax: Reasonable deductible expenses” has been prepared by TNTP to provide valuable insights into tax deduction regulations. We trust this information will serve as a helpful resource for your business operations.

Best regard,