What are the conditions for deducting expenses when determining income subject to corporate income tax for payment of unpaid annual leave days of employees?

What are the conditions for deducting expenses when determining income subject to corporate income tax for the payment of unpaid annual leave days of employees?

Pursuant to the provisions of Article 6 of the Circular 78/2014/TT-BTC amended by Article 4 Circular 96/2015/TT-BTC stipulates:

Deductible and non-deductible expenses when determining taxable income

1. Except for non-deductible expenses mentioned in Clause 2 of this Article, enterprises can deduct all expenses if they fully meet the following conditions:

a) Actual expenses incurred related to production and business activities of the enterprise.

b) Expenses with sufficient invoices and legal documents according to the provisions of law.

c) Expenses if there are invoices When purchasing goods and services worth 20 million VND or more (price includes VAT), payment must have non-cash payment documents.

Non-cash payment documents comply with the provisions of legal documents on value-added tax.

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2. Expenses that are not deductible when determining taxable income include:

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2.6. Payment of salaries, wages and bonuses to employees in one of the following cases:

a) Payment of salaries, wages and other payables to employees of the enterprise that has been accounted for in production and business expenses in the period but does not actually pay or does not have payment documents according to the provisions of law.

Pursuant to Clause 2, Article 3 of the Circular 25/2018/TT-BTC amends the first paragraph in section b, point 2.6, clause 2, Article 6 Circular 78/2014/TT-BTC as follows:

2. Amending the first paragraph in item b, point 2.6, clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance):

b) Salaries and bonuses for employees are not specifically recorded. The conditions and benefit levels are in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of Companies, Corporations, and Groups; Bonus regulations are prescribed by the Chairman of the Board of Directors, General Director, and Director according to the financial regulations of the Company and Corporation.

In Official Dispatch 876/CTBGI-TTHT 2024 of the Tax Department of Bac Giang province, there are instructions on this issue as follows:

Based on the above regulations and instructions and the content of the Company’s Official Letter of Inquiries, the Tax Department of Bac Giang Province responded as follows:

In case the Company incurs expenses to pay for the number of unused annual leave days of employees in accordance with the provisions of the 2019 Labor Code and guiding documents, the Company will be included in deductible expenses when determining income. CIT is payable on the above expenditure if it meets the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, Clause 2, Article 3 of Circular No. 25/2018/TT-BTC dated March 16, 2018 of the Ministry of Finance and related amendments and supplements (if any).

Thus, the conditions for deducting expenses when determining income subject to corporate income tax for payment of unpaid annual leave days of employees are as follows:

+ The payment is in accordance with the provisions of the 2019 Labor Code and its guiding documents.

+ Meets the conditions in Article 4 of Circular 96/2015/TT-BTC

+ Salaries and bonuses for employees are specifically recorded in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of Companies, Corporations, and Groups; Bonus regulations are prescribed by the Chairman of the Board of Directors, General Director, and Director according to the financial regulations of the Company and Corporation.

What is the current corporate income tax rate?

Based on current regulations, the current corporate income tax rate is as follows:

(1) Corporate income tax rate of 20% (Clause 1, Article 10 of the Law on Corporate Income Tax 2008, amended by Clause 6, Article 1 of the Law on Corporate Income Tax, 2013).

The tax rate applicable to all businesses is 20%, except for cases where tax rates from 32% to 50% are applied in Section 2, Section 3 below or in cases where businesses are eligible for preferential tax rates.

(2) The corporate income tax rate is from 25% to 50% for oil and gas activities in accordance with each oil and gas contract. (Clause 6, Article 1 of the 2013 Amended Corporate Income Tax Law is replaced by Clause 1, Article 67 of the 2022 Petroleum Law)

(3) The corporate income tax rate is from 32% to 50% for search, exploration and exploitation of other rare and precious resources in Vietnam, suitable for each project and each business establishment. (Clause 6, Article 1 of the 2013 Amended Corporate Income Tax Law is replaced by Clause 1, Article 67 of the 2022 Petroleum Law)

How is the corporate income tax period determined?

Pursuant to the provisions of Article 5 of the Law on Corporate Income Tax 2008, the corporate income tax period is determined as follows:

(1) The corporate income tax period is determined according to the calendar year or fiscal year, except in cases where (2)

(2) Corporate income tax period for each time income is generated applicable to the following foreign enterprises:

– Foreign enterprises with permanent establishments in Vietnam pay tax on taxable income arising in Vietnam that is not related to the operations of the permanent establishment;

– Foreign enterprises without permanent establishments in Vietnam pay tax on taxable income arising in Vietnam.