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Expenses when calculating Corporate Income Tax in 2025
Expenses are defined as “a decrease in economic benefits during an accounting period, in the form of a decrease in assets or an increase in liabilities.” Simply put, expenses are the amounts a business must spend to achieve its business goals.
An amount is recorded as a business expense and reflected in the business performance report when it fully meets the following criteria:
- Reduces future economic benefits through a decrease in asset value or an increase in liabilities.
- This decrease must be reliably determined.
- There is a match between expenses and income.
Expenses need to be measured in money and determined within a specific period of time. In short, business expenses are the total costs of production, product consumption, business management, and indirect taxes that a business must incur to conduct business activities in a certain period.
Enterprises are obliged to record expenses incurred during the period to report to the tax authority when preparing financial statements. According to Law Corporate Income Tax 2025, these expenses are classified into two types: (i) deductible expenses and (ii) non-deductible expenses. Accurately determining reasonable expenses is extremely important, helping enterprises minimize their tax obligations.
Deductible expenses when calculating corporate income tax
Deductible expenses are necessary expenses in the production and business process of an enterprise, such as fixed asset depreciation costs, raw material purchase costs, salary costs, and allowance costs, and have sufficient legal invoices and documents to be deducted from revenue to calculate taxable income for corporate income tax (hereinafter referred to as “corporate income tax”). Specifically:
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No |
Conditions for tax deduction |
|
1 |
Actual expenditures on business operation of the enterprise, including additional deductible expenses that are a percentage (%) of the actual expenses incurred during the tax period related to the enterprise’s research and development activities. |
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2 |
Expenditures on national defense and security education, training, activities of the self-defense forces, and other national defense and security tasks as prescribed by law. |
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3 |
Expenditures on activities of party organizations and political-social organizations within the enterprise. |
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4 |
Expenditures on vocational education and training for workers in accordance with the provisions of the law. |
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5 |
Actual expenditures on HIV/AIDS prevention and control in the workplace of the enterprise; |
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6 |
Funding for education, healthcare, and culture; funding for disaster prevention and mitigation of disaster and epidemic consequences; funding for building solidarity houses, houses of affection, and homes for policy beneficiaries as prescribed by law; funding as regulated by the Government and the Prime Minister for extremely disadvantaged areas; and funding for scientific research, technological development and innovation, and digital transformation. |
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7 |
Expenditures on scientific research, technological development and innovation, and digital transformation. |
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8 |
Value of losses due to natural disasters, diseases, and other cases of force majeure where compensation is not eligible. |
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9 |
Actual expenses for individuals seconded to participate in the management, operation, and control of credit institutions put under special control and commercial banks undergo mandatory transfer in accordance with the Law on Credit Institutions. |
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10 |
Certain operating expenses of the enterprise that do not correspond with the revenue generated during the period as stipulated by the Government. |
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11 |
Expenditures on supporting the construction of public works, while also serving the business operation of the enterprise. |
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12 |
Expenditures related to the reduction of greenhouse gas emissions aimed at carbon neutrality and net zero, reducing environmental pollution as well as the production and business of the enterprise. |
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13 |
Some contributions to funds established under the decision of the Prime Minister and regulations of the Government. |
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14 |
Expenditures with adequate invoices and proofs of cashless payment in accordance with provisions of law (a non-cash payment document for goods and services purchased for 5 million VND or more, including value-added tax), except for specific cases stipulated by the Government. |
Non-deductible expenses when calculating corporate income tax
The following expenses are not deductible when determining taxable income for corporate income tax:
No | Cases that are not deductible when calculating tax |
1 | Expenses that do not meet the conditions for deduction as in Part I. |
2 | Fine for administrative violations. |
3 | Expense already covered by other funding sources. |
4 | Expense in excess of the Government-prescribed norm for: Business management costs allocated by foreign enterprises to their Vietnam-based permanent establishments; costs of management of gambling video game businesses and casinos; payment of interests on loans taken by enterprises with related-party transactions; direct payment of benefits for employees; contributions to additional pension insurance as mandated by the Social Insurance Law or social welfare-like funds, voluntary pension insurance, and life insurance for employees. |
5 | Provisions made incorrectly or exceeding the limits set by the law regarding provisions. |
6 | Depreciation expense for fixed assets that is incorrect or exceeds the limits prescribed by law. |
7 | Improper prepaid expenses. |
8 | Wages and remunerations of owners of sole proprietorships, individual owners of single-member limited liability companies; wages of founders that do not directly participate in production and business management; wages, remunerations, and accounting expenses allocated for the employees that are not actually paid or are paid without invoices or payment documents as prescribed by law. |
9 | Payment of interests on loans corresponding to the charter capital deficit; interest payments for loans during the investment process that have been recorded in the investment value; interest payments for loans for the implementation of contracts for oil and gas exploration and exploitation; payment of interests on business loans of entities that are not credit institutions that exceed the limits prescribed by the Civil Code. |
10 | Recoverable expenses exceeding the rate stipulated in the approved petroleum contract; in cases where the petroleum contract does not specify a recovery rate, the expenses exceeding the limits set by the Government shall not be considered deductible expenses. |
11 | The input value-added tax (VAT) that has been deducted; the VAT paid using the credit-invoice method; the input VAT on the value of passenger cars with fewer than 10 seats exceeding the limits set by the Government; corporate income tax; other taxes, fees, charges, and revenues not considered as expenses according to the provisions of law, and late payment interests as stipulated by the law on tax administration. |
12 | The VAT paid using the credit-invoice method specified in this point shall not include the input VAT on goods and services directly related to the production and business of the enterprise that has not been fully deducted and also not refundable. |
13 | The input VAT that has been recorded as deductible expenses shall not be deducted from the output VAT. |
14 | Expenses not corresponding to assessable revenue, except for the expenses specified in No.2 to No.13 of Part I; expenses that do not meet the conditions for expenditure and the items of expenditure as stipulated by specialized laws. |
15 | Donations, except for donations specified in No.6 of Part I. |
16 | Expenditures on basic construction investment during the investment period to form fixed assets; expenditures directly related to the increase or decrease of the enterprise’s equity. |
17 | Expenses of business operations: banking, insurance, lottery, securities, BT contracts, BOT contracts, and BTO contracts that are incorrect or exceed the limits prescribed by law. |
18 | Other expenses. |
Refer to Corporate Secretary Service to let Thele.blog supports you in calculating corporate income tax.
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