Employee welfare costs according to regulations in 2025 are included in reasonable costs but do not exceed 1 month of the enterprise's actual average salary in the year, based on Clause 4, Article 3 of Circular 25/2018/TT-BTC and continue to be inherited in Circular 96/2015/TT-BTC (amended and supplemented in 2025).
For example, if a company has a total payroll of 12 billion VND, the maximum deductible benefit expense is 1 billion VND. Understanding this limit helps companies ensure employee benefits and optimize costs when settling corporate income tax.
Legal basis for employee benefit costs
To accurately determine the deductible employee benefit expenses when calculating corporate income tax, enterprises need to rely on current legal documents. These legal bases not only provide a common foundation but also provide detailed guidance on the scope, conditions and procedures for accounting for employee benefit expenses.
The table below summarizes important legal documents, helping businesses easily look up and correctly apply regulations when managing employee benefit costs:
| Legal basis | Main content related to employee benefit costs | Note |
| Law on Corporate Income Tax 2008 (amended and supplemented 2020) | Prescribes general principles for deductible expenses in calculating taxable income, including employee benefit expenses. | Is the basic legal basis. |
| Circular 96/2015/TT-BTC (revised 2025) | Detailed guidance on deductible and non-deductible expenses, clearly stating the conditions and scope of reasonable employee benefit expenses. | Help businesses apply correctly when settling taxes. |
| Decree 126/2020/ND-CP and Circular 78/2025/TT-BTC | Clarify the responsibility for declaring, accounting and managing employee welfare costs, especially in enterprises with related transactions. | Specific regulations for accounting and document storage. |
| Related guidance documents | Answering practical situations about employee benefit costs, providing specific instructions on applying tax laws. | Help businesses unify application methods, avoiding problems when tax authorities inspect. |
Employee benefit cost concept
Employee welfare costs are expenses other than salaries and wages that businesses spend to care for and improve the material and spiritual lives of employees. These can be support on special occasions such as funerals, weddings, vacations, study support, or voluntary health insurance.
Unlike wages directly related to work, welfare costs are incentives and motivations, helping employees to stay with the business for a long time, while contributing to building a humane and sustainable working environment. Therefore, tax law allows a reasonable portion of welfare costs to be included in the tax. deductible expenses when determining corporate income tax.
Employee benefit cost coverage
According to Circular 25/2018/TT-BTC (Clause 4, Article 3) and the successor guidance in new documents in 2025, the following amounts are considered reasonable welfare expenses if they meet the conditions and limits:
- Funeral and wedding expenses for employees and their families.
- Vacation and medical support for employees.
- Additional support for learning, training and improving qualifications for workers and their children.
- Reward and support employees in difficulty on special occasions.
- Accident insurance, health insurance in addition to compulsory insurance.
- Other benefits directly serve employees' lives, with full invoices and documents.
All these expenses are deductible only if they do not exceed 1 month of the actual average salary of the enterprise in the year.
Conditions for employee benefit expenses to be deductible
In order for employee benefit expenses to be included in reasonable expenses when determining corporate income tax, the enterprise must simultaneously satisfy the following conditions:
Related to production and business activities
Employee benefits expenses are deductible only when they are closely linked to the business operations. This means that the expenses must be aimed at caring for, encouraging and retaining employees, thereby maintaining resources for production and business.
For example, vacation expenses help restore labor, funeral support expenses help employees feel secure in their commitment, or voluntary health insurance expenses help them feel secure in their long-term work. If an expense is not reasonably linked to this goal, the tax authority can exclude it when finalizing.
Have full legal invoices and documents
One of the important requirements is to have full documentation according to the law. All expenses must be accompanied by VAT invoices, service contracts, payment vouchers, and payment documents. For cash expenses, the business must have a list of employees signing for receipt.
In the case of bank payments, such as payments for vacation services or health insurance, clear transfer receipts must be provided. If the receipts are missing or invalid, the benefit will not be eligible for deduction.
Specified in the company's documents
To demonstrate transparency and formality, welfare expenditures need to be stipulated in documents such as internal spending regulations, collective labor agreements or decisions of the Director or Board of Directors. This is the internal legal basis to confirm that the expenditure is a general policy, not personal or arbitrary. Having clear documents also helps businesses easily explain to tax authorities when needed.
Do not exceed the allowable limit
In addition to the above conditions, the law also limits the maximum amount of deductible welfare expenses. Specifically, the total welfare expenses must not exceed one month's actual average salary in the year of the enterprise. The calculation is as follows:
|
Average monthly salary = Total actual salary fund in the year / 12 months |
For example, a company with a total payroll of 12 billion VND in 2025, the average monthly salary is 1 billion VND, and the maximum deductible welfare expense is also 1 billion VND. If the company spends more than this amount, the excess will not be accepted when calculating reasonable expenses.
2025 Employee Benefit Expense Limits and Caps
In 2025, tax law will continue to inherit the provisions of Circular 25/2018/TT-BTC (Clause 4, Article 3) and amended and supplemented documents, clearly defining the limit of employee welfare costs included in reasonable costs when calculating corporate income tax.
First, the limit on total expenditure
The total deductible reasonable welfare expenses must not exceed 01 month of the actual average salary in the tax year of the enterprise. This is the ceiling, ensuring that the enterprise has a welfare policy for employees but does not exceed the financial capacity and accounting principles.
Second, how to determine average salary
The average monthly salary is determined by taking the total actual salary fund spent during the year and dividing it by 12 months. This salary fund must be fully recorded in the books, financial reports and actually paid to employees.
For example, if the enterprise's salary fund in 2025 is 24 billion VND, the average monthly salary is 2 billion VND, which means the maximum reasonable welfare expense deducted is also 2 billion VND.
Third, the scope of expenses subject to the limit
The limit applies to all welfare expenses, including vacation expenses, funeral support, voluntary insurance in addition to compulsory insurance, scholarships for employees' children and other welfare expenses serving the lives of employees. Enterprises are not allowed to separate each item to exceed the limit.
Fourth, handling excess expenditure
If the total welfare expenditure exceeds one month's average salary, the excess will be excluded from deductible expenses when calculating corporate income tax. This means that the enterprise must pay for it itself and cannot claim tax deductions.
Documents and records required to substantiate employee benefit expenses
According to the Law on Corporate Income Tax 2008 (amended and supplemented in 2020) and the guidance in Circular 96/2015/TT-BTC, along with Circular 25/2018/TT-BTC (Clause 4, Article 3), welfare expenses can only be deducted when the enterprise has sufficient valid documents and vouchers proving their reality, legality and relevance to production and business activities.
Decisions and internal documents of the enterprise
Pursuant to Clause 1, Article 6 of Circular 96/2015/TT-BTC, expenses must have sufficient invoices, documents and be clearly defined. Therefore, enterprises need to issue official documents such as internal spending regulations, collective labor agreements, Board of Directors' resolutions or Director's decisions. This is the basis to affirm that welfare expenses are of a general policy nature, not random expenses.
Invoices and legal payment documents
Article 4 of the Law on Corporate Income Tax stipulates that reasonable expenses must have invoices and documents in accordance with the law. When welfare expenses arise, enterprises must keep VAT invoices, service contracts, payment vouchers or bank documents. In case of cash payments, there must be a list of employees signing and receiving according to the instructions in Article 6 of Circular 96/2015/TT-BTC.
List of employees receiving benefits
This list is evidence to prove the actual expenses related to employees, meeting the condition of “related to production and business activities” in Article 4 of the Law on Corporate Income Tax. The list must have a signature of confirmation or a document of direct payment to each individual.
Documents proving the event or need for payment
For special benefits, businesses need to have accompanying documents to prove their reasonableness. For example, funeral expenses need a death certificate or wedding invitation; scholarships for employees' children need a school admission letter; vacation expenses need a program, travel contract and payment documents. This is the way to meet the principle of "expenses with full legal documents" according to Clause 1, Article 6 of Circular 96/2015/TT-BTC.
Example of employee benefit costs
Business context
ABC Company Limited operates in the food production sector. In 2025, the company had a total actual salary fund paid to 200 employees of 24 billion VND. According to the calculation formula, the company's average monthly salary is 24 billion VND divided by 12 months, equal to 2 billion VND. This is the maximum ceiling that the company is allowed to calculate welfare costs into reasonable expenses when determining corporate income tax.
Welfare expenses incurred during the year
During its operation, the company has paid its employees various benefits. First, the company organized an annual vacation trip for all employees at a cost of 1.2 billion VND, with a travel contract, VAT invoice and valid payment documents.
Next, the company paid a total of 300 million VND in funeral support to employees and their families, with a payment receipt attached and a full list of employees signing. In addition, the company also purchased voluntary health insurance for all employees with a total cost of 800 million VND, with a contract and payment documents via bank.
Total benefit costs for the year
In total, the company spent VND2.3 billion on welfare in 2025. Thus, this amount exceeded the limit of an average monthly salary, which is VND2 billion. Although all expenses have full valid documents and are regulated in the internal spending regulations, the excess of VND300 million will not be counted as reasonable expenses.
Results and lessons learned
In this case, ABC LLC is only allowed to deduct 2 billion VND in welfare expenses when determining corporate income tax. The 300 million VND in excess of the ceiling must be excluded and the company must bear the cost. This situation shows that businesses need to plan and control the level of welfare expenses from the beginning of the year. Otherwise, even if there are legal documents and clear purposes, the excess expenses will not be counted when settling taxes.
Notes when accounting for employee benefit costs
To help businesses account for employee benefits expenses in accordance with regulations and avoid risks when settling taxes, it is necessary to understand some important principles. The notes below are presented in the table to help accountants easily compare, check and apply in practice.
| Note content | Detailed explanation | Illustrative example |
| Accurately classify the nature of the expense | Only expenses for employee welfare other than salary such as vacation, funeral, voluntary insurance are considered as welfare expenses. Not to be confused with salary or bonus. | Vacation expenses are counted as benefits, while year-end bonuses are counted as salary expenses. |
| Ensure full and valid documents | All expenses must have invoices and documents. If paying in cash, there must be a payment voucher and a list of employees signing the receipt; if paying through a bank, a contract, VAT invoice, and payment documents are required. | Travel contract with VAT invoice and transfer documents to the travel company. |
| Correctly record accounting accounts | Welfare expenses are recorded in account 642 - Business management expenses to ensure transparency and convenience in settlement. | Accounting: Debit account 642 / Credit account 111, 112. |
| Comply with deductible limits | The maximum deductible benefit expense is equal to 01 month of actual average salary in the year. The excess portion is still accounted for but must be eliminated when settling taxes. | Annual salary fund = 24 billion → average monthly salary = 2 billion → maximum deductible welfare expense = 2 billion. |
| Issue and maintain internal regulations | Expenditures must be stipulated in the spending regulations, collective labor agreements or decisions of the leadership. This is the legal basis when the tax authority conducts an inspection. | Director's decision on voluntary health insurance for employees. |
The impact of employee benefit costs on businesses
In human resource and financial management, employee welfare costs are not only expenses to take care of workers' lives but also have many direct and indirect impacts on the development of the business. Analyzing these impacts helps businesses clearly see the value of welfare policies and have reasonable spending strategies.
Positive impact on workers
Welfare costs contribute to improving the material and spiritual life of employees. Policies such as travel, health insurance, funerals or study support not only create peace of mind but also increase the level of commitment to the business. Employees feel cared for and appreciated, thereby increasing motivation and responsibility in work.
Increase productivity and operational efficiency
When employees are provided with appropriate benefits, they tend to work more efficiently and stay with the organization for a longer period of time. Businesses can reduce recruitment and retraining costs by reducing absenteeism. At the same time, a stable team will help improve productivity, product and service quality.
Impact on employer image and brand
Attractive welfare policies help businesses build a positive recruitment brand in the labor market. This is an important factor in attracting high-quality human resources, especially in the context of fierce competition. Businesses with good welfare policies are often highly appreciated for their culture and social responsibility.
Impact on costs and tax obligations
From a financial perspective, welfare expenses are a reasonable expense if they meet the conditions and are within the deduction limits. This helps businesses ensure the rights of employees while optimizing tax obligations. However, if the expenses exceed the prescribed level or do not have full documents, that part of the expense will be excluded when calculating corporate income tax, affecting after-tax profits.
New changes to employee benefit costs 2025
From 2025, the regulations on employee benefit expenses have many important changes, especially related to the deductible limit and the document requirements. To help businesses visualize, the table below summarizes the differences between the period before 2025 and after 1/10/2025, and points out the new trends in benefit management.
| Content | Before 2025 | From 1/10/2025 and new trends |
| Regulations on excess expenditure | Some benefit payments may be flexible, with no clear definition of when the excess exclusion will apply. | According to Article 9 of the 2025 Corporate Income Tax Law, the excess expenditure prescribed by the Government cannot be deducted when calculating corporate income tax. |
| Deduction limits | Maximum deduction is equal to 01 month of actual average salary in the tax year. | Continue to maintain this limit, but require the calculation of the actual average salary to be correct and have clear evidence. |
| Classification of income subject to personal income tax | Without strict guidance, businesses can easily confuse between benefits that are included/not included in personal income tax. | Strengthen the distinction: which items are exempt from personal income tax (funeral, wedding, sickness, health insurance, etc.) and which items must be added to taxable income. |
| Life insurance and voluntary retirement | Businesses can spend but are subject to few specific limits. | Deductions may only be made within the limits prescribed by law and expressed in collective bargaining agreements, financial regulations or employment contracts. Excess amounts must be eliminated. |
| Documents and certificates | General requirements: invoices, valid documents, employee list. | Tighten: prioritize non-cash payments for large amounts; missing documents will be excluded from eligible expenses. |
| Actual trends in business | Mainly focused on financial benefits and traditional support. | New trends: flexible, personalized benefits; focus on mental health, work-life balance; apply benefits management technology. |
Conclude
Employee benefits costs are an important tool for businesses to maintain and develop human resources, while optimizing tax obligations if managed properly. Understanding regulations, limits and documents not only ensures legal compliance but also improves human resource management efficiency.
Stay tuned MAN – Master Accountant Network to quickly update the latest tax regulations, detailed instructions and tips to optimize costs for your business. You will always be proactive and confident in accounting and managing employee welfare costs effectively.
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