In 2015, the Do Thanh Pharmaceutical Co., Ltd. spent some benefits to employees directly in cash. This expense is specified in the bylaws of the Company when it is fully documented. So, are these expenses counted as valid expenses when determining CIT?

Regarding this issue, the General Department of Taxation - Ministry of Finance answers as follows:

Article 4 Circular No. 96/2015 / TT-BTC dated June 22, 2015 of the Ministry of Finance guiding the CIT amending and supplementing Article 6 of Circular No. 78/2014 / TT-BTC dated June 18, 2014 The Ministry of Finance's regulations on deductible and non-deductible expenses when determining taxable income are as follows:

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is

deductible if all of these following conditions are satisfied:

a) The actual expense incurred is related to the enterprise’s business operation.

b) There are sufficient and valid invoices and proof for the expense under the regulations of the

law.

c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND

20 million or over (including VAT).

The proof of non-cash payment must comply with regulations of law on VAT.

2. The expenses below are not deductible when calculating taxable income:

...

2.6. Expenditures on wages and bonus for employees in one of the following cases:

a) Expenditure on wages and other payables to employees that have been included in operating

costs in the period but are not actually paid or do not have proof of payment as prescribed by

law.

b) Wages, bonuses, life insurance premiums for employees that are not specified in one of the

following documents: employment contract, collective bargaining agreement, financial regulation

of the company, general company, corporation, reward scheme issued by the President of the

Board of Directors, General Director, or Director in accordance with the financial regulation of

the company or general company.

2.30. Expenses that do not correspond with assessable revenues, except for:

- Direct expenditures on the employees’ welfare: expenditures on employees’ family occasions;expenditures on holiday allowance or treatment support; expenditures on professional training;expenditures on supporting employees’ families affected by natural disasters, hostilities,accidents, illness; expenditures on rewarding employees’ children for their educationalachievements; expenditures on allowances for traveling during holidays of the employees;payment for unemployment insurance, health insurance, and other voluntary insurance foremployees (except for life insurance mentioned in Point 2.6, voluntary pension insurancementioned in Point 2.11 of this Article), and other welfare expenditures. The total expendituresincurred in the tax year must not exceed the practical average 1 month’s salary in the tax year.

The practical average 1 month’s salary equals (=) wage fund released within a year divided (:) by 12 months. In case the enterprise has not operated for 12 months, the practical average 1 month’s salary equals (=) wage fund released within the year divided (:) by the number of operating months.

Released wage fund is the total wage paid in the year until the deadline for submitting the annual tax declaration (not including the provision for wage fund of the previous year).

According to the above provisions, in principle, if the branch of Do Thanh Pharmaceutical Company Limited incurs benefits directly to employees if they meet the conditions specified in Article 4 of Circular No. 96/2015 / TT-BTC above, with all payment documents as prescribed, the level of expenditure by the regulations and regulations of the Company and the total expenditure not exceeding 1 month of actual average salary made in the year Tax calculation is included in deductible expenses when determining taxable income in the period.

The Hanoi Tax Department is requested to base itself on the provisions of law and the actual situation of enterprises to guide enterprises to comply with the tax law.