I. Key Considerations Regarding Non-Deductible Expenses
1. Tightening Non-Cash Payments and Expanding CIT Deductible Expenses
Decree 320/2025/ND-CP has issued new, critical regulations regarding the determination of deductible expenses for Corporate Income Tax (CIT) calculation, specifically by tightening requirements for non-cash payment methods. Companies must note the following key points:
a. Prerequisites for Determining Deductible Expenses
To be recognized as a deductible expense, an enterprise must simultaneously meet three conditions:
(1) Actual Occurrence: The expense must actually arise and directly serve production and business activities.
(2) Legal Documentation: It must be supported by full and lawful invoices and vouchers.
(3) Payment Method: For purchases of goods and services valued at 05 million VND or more (per transaction), there must be a non-cash payment voucher. (Note: From December 15, 2025, the value threshold for purchases of goods, services, and other payments requiring non-cash payment vouchers (per transaction) has been adjusted down to 05 million VND or more (inclusive of VAT). This regulation applies directly to the 2025 CIT tax period.)
b. List of Non-Deductible Expenses
Expenses excluded when determining taxable income include:
- Expenses failing to meet the 03 conditions mentioned above.
- Administrative fines (traffic, business registration, accounting, tax, late payment penalties).
- Expenses covered by available funding sources (e.g., Science and Technology Development Funds).
- Expenses exceeding limits prescribed by law.
- Violations in setting up and using provisions (inventory devaluation, financial investment loss, bad debts, warranties, occupational risks).
- Expenses not corresponding to taxable revenue (except for specific cases).
- Expenses violating specialized laws: Overtime pay exceeding Labor Code limits; advertising expenses for banned or unregistered products/services.
c. Key New Points in the Law on CIT 2025
- Regarding Deductible Expenses: The Law will specifically supplement the list of deductible expenses. The Government will provide detailed regulations for special cases that are exempt from the mandatory non-cash payment condition.
- Regarding Non-Deductible Expenses:
- Interest Expense Cap: Interest paid on loans from entities that are not credit institutions will be non-deductible for the portion exceeding the limit prescribed by the Civil Code 2015.
- VAT Treatment: Value Added Tax (VAT) paid under the credit method is not a deductible expense. However, this regulation does not apply to input VAT directly related to production and business activities that has not been fully credited but is ineligible for a tax refund. (Note: If input VAT has been accounted for as a deductible expense, it cannot be further deducted against output VAT).
2. Non-Deductible Labor Expenses for CIT Purposes
Decree 320/2025/ND-CP, guiding the Law on CIT 2025, clearly specifies groups of labor expenses that are not deductible when determining CIT taxable income. Key points to note include:
a. Business Trip Expenses and Non-Cash Payment Regulations
- Travel, accommodation, and per diem expenses lacking invoices or vouchers.
- For expenses of 05 million VND or more paid via individuals: These are deductible only if supported by lawful invoices/vouchers, mission dispatch orders, financial regulations allowing non-cash payment (reimbursement), and proof of reimbursement by the enterprise.
b. General Conditions for Deductible Expenses
To ensure validity, expenses must simultaneously meet 03 conditions:
- Actual occurrence directly related to production and business activities.
- Supported by full and lawful invoices/vouchers.
- Advisory Note: Although Tax Authorities have not issued an official response, to be prudent and avoid risk, enterprises should consider making salary payments of 5 million VND or more via non-cash methods.
II. New Points on CIT Incentives, Duration, Taxable Income, and Loss Offsetting
Decree 320/2025/ND-CP, effective December 15, 2025, establishes a new legal framework regarding tax exemptions, reductions, and taxable income determination.
1. Classification of CIT Incentives (Article 20, Decree 320/2025/ND-CP)
Level 1: Tax exemption for 04 years, followed by a 50% reduction for the subsequent 09 years.
Applicability: Income from activities specified in Clause 1, Article 19 and Point r, Clause 2, Article 18 located in incentive-eligible areas (Points a and b, Clause 3, Article 18).
[Reference details:]
[… Article 19. Preferential tax rates
1. A tax rate of 10% for a period of 15 years applies to:
a) Income of enterprises from implementing new investment projects specified in Points a, b, c, d, and đ, Clause 2, Article 18; income of enterprises specified in Point e, Clause 2, Article 18 of this Decree;
b) Income of enterprises from implementing investment projects specified in Points g and h, Clause 2, Article 18 of this Decree;
c) Income of enterprises from implementing new investment projects located in areas specified in Point a, Clause 3, Article 18 of this Decree;
d) Income of enterprises from implementing new investment projects in high-tech zones, high-tech agricultural zones, concentrated digital technology zones; new investment projects in economic zones located in incentive-eligible areas specified in Points a and b, Clause 3, Article 18 of this Decree, including cases where the location of the new investment project in the economic zone has over 50% of its area lying within the incentive-eligible areas specified in Points a and b, Clause 3, Article 18 of this Decree. …]
[… Article 18. Principles and subjects of Corporate Income Tax incentives …
2. Sectors and trades eligible for Corporate Income Tax incentives include the following cases: …
r) Socialization in the fields of education-training, vocational training, healthcare, culture, sports, and the environment, in accordance with the List of types, scale criteria, and standards prescribed by the Prime Minister; judicial expertise; …]
[… 3. Areas eligible for Corporate Income Tax incentives include:
a) Areas with specially difficult socio-economic conditions as prescribed by the law on investment, excluding areas with specially difficult socio-economic conditions specified in ordinal number 55, Appendix III of the List of investment incentive areas issued with the Government’s Decree No. 31/2021/ND-CP dated March 26, 2021 (amended and supplemented in Clause 37, Article 1 of the Government’s Decree No. 239/2025/ND-CP dated September 3, 2025);
b) Areas with difficult socio-economic conditions as prescribed by the law on investment, excluding areas with difficult socio-economic conditions specified in ordinal number 55, Appendix III of the List of investment incentive areas issued with the Government’s Decree No. 31/2021/ND-CP dated March 26, 2021 (amended and supplemented in Clause 37, Article 1 of the Government’s Decree No. 239/2025/ND-CP dated September 3, 2025); …]
Level 2: Tax exemption for a maximum of 04 years, followed by a 50% reduction for not more than the subsequent 05 years.
Applicability: Income from activities specified in Point r, Clause 2, Article 18 but not located in incentive-eligible areas.
[Reference details:]
[… Article 18. Principles and subjects of Corporate Income Tax incentives …
2. Sectors and trades eligible for Corporate Income Tax incentives include the following cases: …
r) Socialization in the fields of education-training, vocational training, healthcare, culture, sports, and the environment, in accordance with the List of types, scale criteria, and standards prescribed by the Prime Minister; judicial expertise; …]
Level 3: Tax exemption for 02 years, followed by a 50% reduction for the subsequent 04 years.
Applicability: Income from activities under Clause 4, Article 19.
[Reference details:]
[… Article 19. Preferential tax rates 4. A tax rate of 17% for a period of 10 years applies to:
a) New investment projects falling within the incentive sectors and trades specified in Points m, n, and o, Clause 2, Article 18 of this Decree;
b) New investment projects implemented in areas specified in Point b, Clause 3, Article 18 of this Decree;
c) New investment projects in economic zones not located in the areas specified in Points a and b, Clause 3, Article 18 of this Decree, including cases where the new investment project of the enterprise is implemented in an economic zone where the location of the new investment project has over 50% of its area lying within areas that are not tax incentive-eligible areas specified in Points a and b, Clause 3, Article 18 of this Decree…]
Special Incentives: The Prime Minister has the authority to decide on extending the tax exemption and reduction period for new investment projects under Point h, Clause 2, Article 18, up to a maximum of 1.5 times the incentives of Level 1, provided it does not exceed the project duration.
[Reference details:]
[… Article 18. Principles and subjects of Corporate Income Tax incentives…
2. Sectors and trades eligible for Corporate Income Tax incentives include the following cases:…
h) Investment projects subject to special investment incentives and support as prescribed in Clause 2, Article 20 of the Law on Investment.
The disbursement period of the total investment capital of projects specified in this Point must not exceed 10 years from the time of issuance of the Investment Registration Certificate or approval for investment in accordance with the law on investment;…]
2. Method for Determining Incentive Duration
- General Principle: The incentive period commences from the first year the enterprise generates taxable income from the investment project.
- Cases with No Taxable Income Yet: If the project generates revenue but has no taxable income within the first 03 years (from the first year of revenue generation), the incentive period commences from the 4th year.
- For subjects with Incentive Certificates: The period starts from the issuance year. If no income in the issuance year, it starts from the first year of income. If no taxable income arises after 03 years from issuance, it starts from the 4th year after issuance.
3. Mechanism for Determining Taxable Income and Loss Offsetting (Article 6, Decree 320/2025/ND-CP)
Income Determination: For multi-sector enterprises, taxable income is the total income from all business activities during the period.
Loss Offsetting: Enterprises may offset losses from production and business activities against the taxable income of profitable activities. The remaining income applies the corresponding CIT rate.
Exclusions (Non-Offsettable Cases):
- Real Estate & Investment Projects: Losses from the transfer of real estate, investment projects, or rights to participate in investment projects cannot be offset against income from production and business activities currently enjoying tax incentives.
- Mineral Activities: Income from the transfer of projects/rights for mineral exploration, mining, and processing must be declared/taxed separately and cannot offset losses/profits with other activities.
