Deductible expenses when calculating corporate income tax are the key factor that helps businesses determine the correct amount of corporate income tax to pay. If they take advantage of the regulations on deductible expenses, businesses can both save on tax costs and ensure compliance with the law. According to Corporate Income Tax Law 2025Enterprises with annual revenue of no more than 3 billion VND will be subject to the tax rate of 15%, from over 3 billion to 50 billion VND will be subject to the tax rate of 17%, the remaining majority of enterprises will be subject to the common rate of 20%.
To see clearly the role of deductible expenses when calculating corporate income tax, suppose a business has a revenue of 10 billion VND. If the total valid deductible expenses is 7 billion, taxable income is 3 billion, the tax payable at the tax rate of 17% is 510 million VND. But if only 5 billion in expenses are calculated, taxable income becomes 5 billion, tax payable increases to 850 million VND - a difference of 340 million VND. This shows that managing and declaring expenses correctly can help businesses significantly reduce their tax burden.
Overview of regulations on deductible expenses when calculating corporate income tax
According to the current Law on Corporate Income Tax and guiding circulars, deductible expenses when calculating corporate income tax are expenses incurred directly serving the production and business activities of the enterprise, with full legal invoices and documents and not included in the list of excluded expenses according to regulations. This is the basis for determining taxable income and the amount of corporate income tax payable.
What are deductible expenses?
Deductible expenses are valid expenses with clear legal basis, recognized by law when calculating taxable income. These expenses may include: raw material costs, employee salary costs, fixed asset depreciation costs, outsourcing service costs, business management costs, etc. All must ensure three conditions: related to production and business activities; have legal documents; and non-cash payment for transactions over 20 million VND.
What are deductible expenses when calculating corporate income tax?
Deductible expenses when calculating corporate income tax is a set of legal expenses that a business can include in its production and business expenses during the tax period, thereby reducing its taxable profit. In other words, these are expenses that are “accepted” by law when a business declares its corporate income tax.
The role of deductible expenses in calculating corporate income tax
Determining the correct deductible expenses when calculating corporate income tax is of particular importance:
- Optimize tax burden: legally reduce the amount of corporate income tax payable.
- Ensuring financial transparency: creating trust with investors, tax authorities and partners.
- Reduce legal risk: avoid cost exclusions, recoups or penalties due to false declarations.
Legal basis related to deductible expenses when calculating corporate income tax
To accurately determine deductible expenses when calculating corporate income tax, enterprises need to base on the current legal system including laws, decrees and guiding circulars. These documents not only stipulate the conditions for an expense to be counted as a valid expense, but also clearly list non-deductible expenses. A firm grasp of the legal basis will help enterprises be proactive in managing expenses, limiting tax risks when being inspected by competent authorities.
Below is a summary table of important legal bases related to deductible expenses when calculating corporate income tax that businesses need to note:
| Legal documents | Main content | Applicable |
| Corporate Income Tax Law No. 14/2008/QH12 and amended and supplemented laws (2012, 2013, 2014) | General legal framework regulations: taxable subjects, taxable income, eligible expenses, corporate income tax rates. | From January 1, 2009 to present (amended and supplemented). |
| Corporate Income Tax Law 2025 | Update tax rates based on revenue (15%, 17%, 20%), add regulations on deductible expenses in the context of applying electronic invoices. | Effective from October 1, 2025. |
| Decree 218/2013/ND-CP and the amending decrees (91/2014/ND-CP, 12/2015/ND-CP, 132/2020/ND-CP) | Detailed instructions on deductible and non-deductible expenses; regulations on interest expenses and related transactions. | From 2013, still in effect today. |
| Circular 78/2014/TT-BTC | Instructions for implementing the Law on Corporate Income Tax, which clearly states the conditions for deductible expenses (related to production and business, legal documents, non-cash payments). | Effective from 2014. |
| Circular 96/2015/TT-BTC | Amending and supplementing Circular 78/2014; adding list of deductible/non-deductible expenses. | Effective from 2015 to present. |
| Decree 123/2020/ND-CP and Circular 78/2021/TT-BTC | Regulations on electronic invoices and documents - important basis for determining the legality of expenses. | Applicable nationwide from July 1, 2022. |
Conditions for deductible expenses when calculating corporate income tax
For an expense to be recognized as a deductible expense when calculating corporate income tax, the enterprise must not only prove its reasonableness but also ensure full compliance with legal regulations. According to the Law on Corporate Income Tax and Circular 96/2015/TT-BTC, there are three basic conditions that all expenses must meet:
Directly related to production and business activities
Expenses must be incurred to serve the revenue-generating activities or maintain the management apparatus of the enterprise. Unrelated expenses, or expenses for the personal purposes of leaders and employees, will not be counted as deductible expenses when calculating corporate income tax.
Typical examples include the cost of purchasing raw materials for production, the cost of renting a warehouse to store goods, the cost of shipping products to customers, or the cost of advertising to expand the market. Conversely, the cost of purchasing assets for personal use (such as a car for the board of directors to use privately) will be excluded.
Have full legal invoices and documents
This condition is to ensure transparency and legal basis for recording expenses. Required documents include: valid VAT invoices, payment vouchers, labor contracts, payroll, service acceptance records, and social insurance payment documents.
If an expense arises without supporting documents, or the invoice is invalid (for example, floating purchase invoices, fake invoices), then that expense will not be considered a deductible expense when calculating CIT. This is especially important in the context that from 2022, all businesses must apply electronic invoices according to Decree 123/2020/ND-CP.
Cashless payment (for bills over 20 million VND)
For expenses with a value of 20 million VND or more, businesses are required to make payments via bank or other non-cash payment methods (such as transfer, card, e-wallet). If paid in cash, even with a valid invoice, the expense will still be excluded when settling taxes.
For example, a business spends 50 million to buy raw materials for production. If the payment is made through a bank and there is a valid VAT invoice, this expense will be recognized as a deductible expense when calculating corporate income tax. Conversely, if the entire payment is made in cash, the expense will be deductible.
Common deductible expenses when calculating corporate income tax
When determining deductible expenses when calculating corporate income tax, enterprises cannot apply them arbitrarily but must rely on specific legal regulations. The current system of documents from the Corporate Income Tax Law, decrees to guiding circulars has clearly stated the conditions, scope and limits for each type of expense. Mastering these regulations not only helps enterprises optimize the amount of tax payable, but also avoids risks when tax authorities inspect and audit.
Below is a summary table of deductible expense groups when calculating corporate income tax, along with the content, applicable conditions, illustrative examples and legal basis for businesses to easily look up and apply:
| Cost group | Cost content | Conditions for deduction | Illustrative example | Legal basis |
| Raw materials, goods, services |
|
Directly related to production and business, with valid invoices and documents | Enterprise A buys steel for production, has VAT invoice and pays by bank transfer | Law on Corporate Income Tax 2008, amended in 2013; Circular 78/2014/TT-BTC; Circular 96/2015/TT-BTC |
| Labor |
|
Have full labor contract, salary sheet, and insurance payment documents | Company B spends 200 million to pay salary + social insurance for employees | Law on Corporate Income Tax; Circular 78/2014; Circular 96/2015 |
| Depreciation of fixed assets |
|
Fixed assets serving production and business, registered and depreciated according to the framework | Enterprise C depreciates plastic injection molding machines for 5 years. | Law on Corporate Income Tax; Circular 45/2013/TT-BTC (depreciation) |
| Outsourcing services |
|
Have valid service contract and invoice | Enterprise D hires a marketing agency, with contract + VAT invoice | Law on Corporate Income Tax; Circular 96/2015 |
| Finance |
|
Payment via bank, interest within limit | Enterprise E pays 100 million interest on bank loan, with documents | Law on Corporate Income Tax; Decree 132/2020/ND-CP |
| Business Management |
|
Have full documents and invoices, payment according to regulations | DN F spent 30 million on business expenses, with settlement and hotel bill. | Law on Corporate Income Tax; Circular 96/2015 |
Expenses not deductible when calculating corporate income tax
In addition to deductible expenses when calculating corporate income tax, the law also clearly stipulates non-deductible expenses. These are expenses that do not meet the conditions of reasonableness, validity or are excluded according to regulations to avoid the situation where enterprises declare "virtual" expenses to reduce the amount of tax payable.
According to Article 6 of Circular 78/2014/TT-BTC (amended by Circular 96/2015/TT-BTC) and the Law on Corporate Income Tax, common non-deductible expenses include:
| Cost group | Non-deductible cost content | Reason for exclusion | Legal basis |
| Not related to production and business | Spending on personal expenses, luxury entertainment, shopping not serving production and business | Does not generate revenue or profit for the business | Article 6, Circular 78/2014 |
| No legal invoices or documents | Purchase without invoice, invalid documents (fake invoice, absconding invoice) | Insufficient basis to prove valid expenses | Article 4, Law on Accounting 2015; Article 6, Circular 96/2015 |
| Cash payment (>20 million) | Invoice over 20 million but paid in cash | Violation of non-cash payment conditions | Article 6, Circular 78/2014; Decree 123/2020/ND-CP |
| Invalid depreciation of fixed assets | Depreciation of fixed assets not serving production and business; incorrect depreciation framework | Not in accordance with accounting principles, not linked to production and business | Circular 45/2013/TT-BTC |
| Interest expense exceeds the prescribed level | – Interest portion exceeds 30% EBITDA
– Borrow from individuals without going through a credit institution, without a contract |
Limits against transfer pricing and document risks | Decree 132/2020/ND-CP |
| Fines | Administrative fines, tax fines, contract breach fines | Not recommended, not for business purposes | Article 6, Circular 96/2015 |
| Overspending | – Meal allowance over 730,000 VND/person/month
– Costumes in cash exceed 5 million/person/year – Promotion beyond the ceiling according to the Commercial Law |
Exceeding the prescribed ceiling is therefore invalid. | Article 6, Circular 96/2015; Commercial Law 2005 |
New points in regulations on deductible expenses when calculating corporate income tax in 2025
In 2025, corporate income tax (CIT) policy will continue to have notable adjustments, especially regulations related to deductible expenses when calculating tax. This is content that directly affects the amount of tax payable, so businesses need to understand it clearly to be proactive in financial planning and comply with the law.
Interest expense
From 2025, the regulation on the limit on interest expenses will remain at no more than 30% EBITDA (earnings before interest, taxes, depreciation and amortization). However, there is an important new point: the part of interest expenses exceeding the ceiling will be allowed to be deducted in the following tax periods. This regulation helps reduce financial pressure for businesses with large loans in the expansion investment phase, while creating more flexibility in managing eligible expenses.
Electronic invoice
From January 1, 2025, all businesses are required to use electronic invoices. All paper documents (except for special cases regulated by the tax authority) will no longer have legal value for accounting expenses. This means: expenses without valid electronic invoices will be excluded when calculating corporate income tax. This regulation not only tightens management but also promotes digital transformation in accounting and tax work of businesses.
Research and development (R&D) costs
A positive new point is that the State encourages enterprises to invest in research and development (R&D). Expenses for this activity, including research personnel costs, testing materials, software, R&D equipment, etc., will be counted as deductible expenses when determining taxable income. This is a driving force to help enterprises innovate technology and improve competitiveness in the context of the digital economy.
Costs related to related party transactions (transfer pricing)
The new regulations in 2025 also tighten the rules for businesses with related-party transactions, aiming to limit transfer pricing. Businesses must prepare more detailed transfer pricing documents, and some unreasonable expenses in transactions with related parties may be excluded from deductible expenses. This forces foreign-invested enterprises and multinational corporations to strictly adhere to market principles in internal transactions.
Experience and notes for businesses related to deductible expenses when calculating corporate income tax
To manage effectively and ensure compliance with the law, businesses need to pay attention to some important experiences and notes in recording and accounting for deductible expenses when calculating corporate income tax. Good implementation of these steps not only helps to optimize the amount of tax payable but also minimizes risks when tax authorities inspect and audit.
Manage invoices and legal documents
Any expense that wants to be recognized must have full invoices and documents according to regulations. Enterprises should build a scientific storage process, clearly classify (by month, by department, by type of expense). In case of lost invoices or invalid invoices, the expense will be excluded. For example, the cost of purchasing materials without a standard VAT invoice will not be considered a valid expense.
Payment via bank with bill over 20 million
According to regulations, invoices with a value of 20 million VND or more must be paid non-cash (transfer, payment order, bank card). If the enterprise pays in cash, the cost will be excluded from the deductible expenses when calculating corporate income tax. This is a common mistake in small and medium-sized enterprises, so it is necessary to establish strict internal payment rules.
Transparency in salary and bonus payments
Personnel costs always account for a large proportion of total deductible expenses. To be valid, businesses need: labor contracts, payroll, bonus decisions, and bank payment documents. If salaries are paid “off the books” or without accompanying documents, this expense will be eliminated. For example, Tet bonuses in cash without a bonus payment decision are not deductible when calculating corporate income tax.
Periodic inspection, internal review
Enterprises should periodically (quarterly or 6 months) review expenses, especially large or high-risk expenses. This helps to promptly detect expenses that do not meet the requirements, avoiding the discovery at the end of the year, leading to difficulties in resolving. This is also a way to limit the risk of being charged or fined when the tax authority inspects.
Expert advice, accounting - tax
In the context of frequent changes in legal regulations, specific expenses such as M&A costs, transfer pricing costs, or R&D costs need to be consulted by experts. Thanks to that, businesses can both maximize deductible expenses when calculating corporate income tax and avoid being excluded due to lack of understanding or incorrect application of regulations.
Conclude
Deductible expenses when calculating corporate income tax are key factors that help businesses effectively manage their finances, minimize legal risks and optimize the amount of tax payable. From determining conditions, classifying valid expenses, to storing documents, making bank payments and complying with new points in 2025, all contribute to creating a transparent and sustainable tax management system.
However, in practice, tax laws and regulations are constantly changing, along with specific situations that arise in each business. Therefore, working with a professional consulting partner is essential for businesses to both comply with the law and maximize legal benefits.
If your business wants to optimize costs and plan taxes effectively, please contact us. MAN – Master Accountant NetworkWith a team of experienced experts in the field of accounting and tax, MAN is committed to providing safe, transparent and optimal management solutions.
Contact information for corporate income tax services at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
