Circular 96/2015/TT-BTC stipulates the deductible and non-deductible expenses when determining taxable income as follows:
1. Expenses Deductible for Enterprises When Determining Taxable Income
According to Article 4 of Circular 96, enterprises are eligible to deduct all expenses if they meet the following conditions:
- The actual expenses are related to the business operations of the enterprise;
- The expenses are supported by legitimate invoices and documentation;
- In the case of interest expenses relating to individual transactions of 20 million VND or more (including VAT), payments must be made through non-cash payment methods, and proper documentation for these payments must be available.
For interest expenses with invoices for individual transactions of 20 million VND or more, if the payment has not been made at the time of recording the expense, it can still be included in deductible expenses. However, if there is no non-cash payment documentation available, adjustments must be made to recognize the expense in the tax assessment period when cash payments are made.
2. Expenses Not Deductible for Enterprises When Determining Taxable Income
Enterprises will not be allowed to deduct certain expenses if they do not meet the conditions mentioned in section 1. Additionally, Article 4, Section 2 of Circular 96 provides detailed regulations on other non-deductible expenses. Circular 96 specifies a total of 37 expenses that enterprises are not allowed to deduct when determining PIT.
3. Are Bank Loan Interest Expenses Considered Deductible Expenses When Determining PIT?
Article 4, Section 2 of Circular 96 provides regulations regarding interest expenses on loans as follows:
“The interest expense on production and business capital borrowed by entities that are not credit institutions or economic organizations shall not exceed 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing.”
If the interest expense on loans incurred by the enterprise is borrowed from a bank, it does not fall under the category mentioned above. This is because a bank is considered a credit institution according to the laws of Vietnam. Therefore, when these expenses meet the conditions outlined in section 1, they will be considered deductible.
(Extracted from Official Letter No. 29617/CTHN-TTHT dated 28 April 2023)
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