Is it included in deductible expenses for educational funding costs that businesses transfer directly to students?

Are educational sponsorship costs that businesses transfer directly to students considered deductible expenses when calculating corporate income tax, according to the provisions of Clause 1 and Clause 2, Article 6 of Circular 78/2014/TT-BTC, amended by Clause 2, Article 6 of Circular 119/2014/TT-BTC, Article 4 of Circular 96/2015/TT-BTC as follows:

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 have enough legal invoices and documents according to the provisions of law.

c) Expenditures if there are invoices for each purchase of goods and services with a value of 20 million VND or more (price includes VAT). When paying, there must be non-cash payment documents.

…

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

…

2.22. Funding expenses for education (including funding for vocational education activities) are not for the right subjects specified in item a of this point or there are no documents to identify the funding mentioned in item b below:

a) Funding for education includes: funding for public, people-founded and private schools under the national education system according to the provisions of law on education but this funding is not for contributing capital or buying shares in schools; Sponsoring facilities to serve teaching, learning and school activities; Sponsor regular school activities; Sponsor scholarships for pupils and students at general education institutions and vocational education institutions and higher education establishments specified in the Law on Education (sponsoring directly to students or through educational institutions, through agencies and organizations with the function of mobilizing sponsorship according to the provisions of law); Sponsoring competitions on subjects taught in schools where the participants are learners; Funding to establish Education Promotion Funds according to the provisions of law on education and training.

…

According to the above regulations, in case an enterprise funds tuition for students at a vocational school that is a vocational education institution according to the provisions of the Education Law, the enterprise transfers this sponsorship directly to the student and it will still be included in deductible expenses when calculating corporate income tax.

What is included in the dossier to determine educational funding costs to be considered deductible when calculating corporate income tax?

Documents in the dossier determining the cost of funding education to be considered a deductible cost when calculating corporate income tax are specified in Clause 2, Article 6 of Circular 78/2014/TT-BTC, amended by Clause 2, Article 6 of Circular 119/2014/TT-BTC, Article 4 of Circular 96/2015/TT-BTC as follows:

Deductible and non-deductible expenses when determining taxable income

…

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

…

2.22. Funding expenses for education (including funding for vocational education activities) are not for the right subjects specified in item a of this point or there are no documents to identify the funding mentioned in item b below:

…

b) Documents to determine sponsorship for education include: Minutes confirming the sponsorship signed by the representative of the business establishment as the sponsor, the representative of the legal educational institution as the unit receiving the sponsorship, and the student (or agency or organization with the function of mobilizing sponsorship) receiving the sponsorship (according to form No. 03/TNDN issued with Circular No. 78/2014/TT-BTC); Enclosed with invoices, documents of purchase of goods (if financed in kind) or documents of payment (if financed in cash).

…

Accordingly, documents to determine educational funding costs to be considered deductible expenses when calculating corporate income tax include:

+ Minutes confirming the sponsorship signed by the representative of the business establishment as the sponsor, the representative of the legal educational institution as the unit receiving the sponsorship, and the student (or agency or organization with the function of mobilizing sponsorship) receiving the sponsorship.

+ Invoices, documents of purchase of goods (if financed in kind) or documents of payment (if financed in cash).

How is corporate income taxable income determined?

According to the provisions of Article 7 of the 2008 Law on Corporate Income Tax, amended and supplemented by Clause 4, Article 1 of the 2013 Revised Law on Corporate Income Tax, on determining taxable income as follows:

Determining taxable income

1. Taxable income in the tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years.

2. Taxable income is equal to revenue minus deductible expenses of production and business activities plus other income, including income received outside Vietnam.

3. Income from real estate transfer activities, transfer of investment projects, transfer of rights to participate in investment projects, transfer of rights to explore, exploit and process minerals must be determined separately for tax declaration and payment. Income from the transfer of investment projects (except for mineral exploration and exploitation projects), income from the transfer of the right to participate in investment projects (except for the transfer of the right to participate in mineral exploration and exploitation projects), income from the transfer of real estate, if there is a loss, this loss will be offset against profits from production and business activities in the tax period.

The Government shall detail and guide the implementation of Article this.

Thus, income subject to corporate income tax in the tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years.