Finalization of corporate income tax: Enterprises need to review carefully to avoid errors

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Tax authorities support enterprises. Photo: Thuy Linh.

According to the provisions of the Law on corporate income tax, the expenses of enterprises which are determined as reasonable expenses to calculate corporate income tax must meet the following conditions: Actual expenditure related to production and business activities; expenditure with invoices and vouchers; and non-cash payment vouchers for payment of 20 million vnd or more.

Also, depreciation of fixed assets not used for production and business activities is non-deductible amount. However, depreciation of fixed assets for labourers in enterprises such as mid-shift rooms, mid-shift meals, dressing rooms, toilets, medical rooms, vocational training centers, libraries and kindergartens shall be included in reasonable expenses to calculate corporate income tax.

Remarkably, in order to consider fixed assets and property as reasonable expenses to calculate taxes, in the case where enterprises rent the property of individuals, they needn’t have financial invoices but they should have property lease contract, rent payment vouchers and tax receipts to calculate corporate income tax.

For calculating expenses of electricity and water charges into reasonable expenses, enterprises which sign contracts for lease must have sufficient legal documents and lease contract to calculate corporate income tax.

According to the General Department of Taxation, under the provisions of the Tax Law, the expenses and amounts are accounted into reasonable expenses to calculate corporate income tax as follows: Actual expenses for HIV / AIDS prevention and control in the workplace of enterprises; expenditures for defense, security, education, training and operations of the military force and other security tasks in accordance with the relevant Laws; expenditures to support Party organizations and socio-political organizations in enterprises; expenses for occupational education and vocational training for labourers; welfare expenditures directly paid to labourers; and other relevant expenditures.

In order to properly and accurately declare corporate income tax, Mrs. Nguyen Thi Cuc, the Chairwoman of the Vietnam Tax Consultants’ Association said that enterprises had to re-determine their temporary tax payment in the year. Accordingly, they shall review all expenses to clarify whether expenses are reasonable or not. The task of enterprises is to review what kind of expenses to be used for bills, invoices or through banks to determine deduction costs and tax incentives accurately.

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