Are social insurance and health insurance costs of the owner of a limited liability company deductible when calculating corporate income tax?

Pursuant to item d, point 2.5, clause 2, Article 6 of Circular 78/2014/TT-BTC amended by Article 4 of Circular 96/2015/TT-BTC, regulations on deductible expenses when calculating corporate income tax are as follows:

Deductible and non-deductible expenses when determining taxable income
…
2. Expenses that are not deductible when determining taxable income include:
…
2.6. Payment of salaries, wages, and bonuses to employees in one of the following cases:
…
d) Salaries and wages of private enterprise owners, owners of one-member limited liability companies (owned by an individual); remuneration paid to founders, members of the board of members, and board of directors who do not directly participate in production and business management.
…

In addition, based on Section 6 of Official Dispatch 65143/CT-TTHT in 2017 of the Hanoi Tax Department, guiding the costs of social insurance and health insurance for LLC owners as follows:

The Director and owner of a Japanese LLC is not paid but the Company still pays health insurance to the Director monthly. So is the health insurance paid for the Director included in deductible expenses when calculating corporate income tax?

Answer:
– Pursuant to Clause 18, Article 4 of the Enterprise Law 2014 stipulates:
“18. Enterprise manager means a company manager and private enterprise manager, including private enterprise owner, partnership member, Chairman of the Board of Members, member of the Board of Members, Company President, Chairman of the Board of Directors, member of the Board of Directors, Director or General Director and individuals holding other management positions with authority to sign company transactions on behalf of the company according to the provisions of the company’s Charter.”
– Pursuant to Point dd, Clause 1, Article 2 of Decree 115/2015 detailing a number of articles of the Law on Social Insurance on Compulsory Social Insurance, regulating the subjects of application:
“d) Enterprise managers and cooperative managers receive salaries;”
– Pursuant to Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 2, Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC):
“Article 6. Deductible and non-deductible expenses when determining taxable income:
…2. Expenses that are not deductible when determining taxable income include:
…2.6. Payment of salaries, wages, and bonuses to employees in one of the following cases:
…d) Salaries and wages of private business owners, owners of one-member limited liability companies (owned by an individual); …”
Pursuant to the above regulations, in case a LLC does not pay a monthly salary to the Director but deducts health insurance for the Director, the health insurance payment to the Director cannot be deducted when determining income subject to corporate income tax.
Thus, if the owner of a limited liability company owned by an individual is not paid a salary, if the company pays social insurance and health insurance for the company owner, these amounts will not be included in deductible expenses when calculating corporate income tax.

What rights does the owner of a limited liability company owned by an individual have?

Pursuant to Clause 1, Article 76 of the Law on Enterprises 2020, regulations on the rights of owners of one-member limited liability companies owned by individuals are as follows:

Rights of company owners
1. Company owners who are organizations have the following rights:
a) Decide on the content of the company’s Charter, amend and supplement the company’s Charter;
b) Decide on the company’s development strategy and annual business plan;
c) Decide on the company’s organizational and management structure, appoint, dismiss, and dismiss managers and controllers of the company;
d) Decide on investment and development projects;
d) Decide on solutions for market development, marketing and technology;
e) Approve contracts for borrowing, lending, selling assets and other contracts prescribed by the company’s Charter with a value of 50% or more of the total asset value recorded in the company’s most recent financial report or another smaller ratio or value specified in the company’s Charter;
g) Approve the company’s financial statements;
h) Decision to increase the company’s charter capital; Transfer part or all of the company’s charter capital to other organizations or individuals; decision to issue bonds;
i) Decision to establish a subsidiary or contribute capital to another company;
k) Organize monitoring and evaluation of the company’s business activities;
l) Decide on the use of profits after completing tax obligations and other financial obligations of the company;
m) Decide to reorganize, dissolve and request bankruptcy of the company;
n) Recover the entire value of the company’s assets after the company completely dissolves or goes bankrupt;
o) Other rights according to the provisions of this Law and the company’s Charter.
2. The company owner is an individual with the rights specified in Points a, h, l, m, n and o, Clause 1 of this Article; decide on investment, business and internal management of the company, unless otherwise stipulated in the company charter.
Thus, the owner of a limited liability company owned by an individual has the following rights:

– Decide on the content of the company’s Charter, amend and supplement the company’s Charter;

– Decide to increase the company’s charter capital, transfer part or all of the company’s charter capital to other organizations or individuals, decide to issue bonds;

– Decide on the use of profits after completing tax obligations and other financial obligations of the company;

– Decide to reorganize, dissolve and request bankruptcy of the company;

– Recover the entire value of the company’s assets after the company completely dissolves or goes bankrupt;- Decide on investment, business and internal management of the company unless otherwise stipulated in the company charter;

– Other rights according to the provisions of the Law on Enterprises 2020 and the company Charter.

What are the obligations of the owner of a limited liability company owned by an individual?

Pursuant to Article 77 of the Law on Enterprises 2020, the obligations of the owner of a limited liability company owned by an individual are as follows:

Obligations of company owners
1. Contribute the company’s charter capital in full and on time.
2. Comply with the Company Charter.
3. Must identify and separate the assets of the company owner from the assets of the company. Company owners who are individuals must separate their personal and family expenses from the expenses of the company President, Director or General Director.
4. Comply with the provisions of law on contracts and other relevant provisions of law in buying, selling, borrowing, lending, renting, leasing, contracts and other transactions between the company and the company owner.
5. The company owner is only entitled to withdraw capital by transferring part or all of the charter capital to another organization or individual; In case of withdrawing part or all of the charter capital contributed from the company in another form, the company owner and related individuals and organizations must be jointly responsible for the debts and other property obligations of the company.
6. Company owners are not allowed to withdraw profits when the company fails to pay all due debts and other property obligations.
7. Other obligations according to the provisions of this Law and the Company’s Charter.

Thus, the owner of a limited liability company owned by an individual has the following obligations:

– Contribute fully and on time the company’s charter capital.

– Comply with the company Charter.

– Identify and separate the company owner’s assets from the company’s assets.

– Separate personal and family spending from the spending of the company President, Director or General Director.

– Comply with regulations on contracts in buying, selling, borrowing, lending, renting, leasing, contracts and other transactions between the company and the company owner.

– The company owner is only entitled to withdraw capital by transferring part or all of the charter capital to another organization or individual. In case of withdrawing part or all of the charter capital contributed from the company in other forms, the company owner and related individuals and organizations must be jointly responsible for the debts and other property obligations of the company.

– The company owner is not allowed to withdraw profits when the company fails to pay all due debts and other property obligations.

– Other obligations according to the provisions of the company’s charter andLaw on Enterprises 2020.