Guidance of tax treatment (Corporate Income Tax (“CIT”) and Personal Income Tax (“PIT”)) on expenses given to employees during the Covid-19 pandemic.

The Hanoi Tax Department has recently issued the official letter No. 44403/CT-TTHT dated 1st Jun 2020, providing guidelines of CIT and PIT treatment on expenses given to employees during the Covid-19 pandemic.

Summary for the aforesaid official letter is as below:

  • Pursuant to the Article 4, Circular No. 96/2015/TT-BTC dated Jun 22, 2015, guiding on the determination of deductible and non-deductible expenses when defining taxable income for CIT calculation;
  • Pursuant to the Article 2 Circular No. 111/2013/TT-BTC dated Aug 15, 2013, regulating personal taxable income;
  • Pursuant to the Article 63 Circular No. 200/2014/TT-BTC dated Dec 22, 2014, regulating the bonus and welfare fund;

Pursuant to the above regulations, in case during the Covid-19 pandemic, there have expenses incurred for purchasing face masks, hand-washing liquid, protective clothing and expenses related to testing of infectious diseases for employees in prevention of the spread of Covid-19:

  • If the expense is given to any individual with specific name, this expense shall be treated as personal taxable income;
  • If the expense does not specify any individual name but is spent for a collective of workers, it shall not be treated as personal taxable income.

The above are direct expenses for the employees, which are not inclusive in the agreed salary/bonus and complied with the law to improve the living standard of the employee.

These expenses shall be treated as deductible expenses when defining taxable income for CIT calculation in case they are complied with the regulation as of Item 1, Article 4, Circular No. 96/2015/TT-BTC mentioned above with the condition that the total welfare expenses shall not exceed the actual average 1 month’s salary in the tax year. Circular 96/2015/TT guiding for profit tax

Article 4. Article 6 of Circular No. 78/2014/TT-BTC (amended in Clause 2 Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) is amended as follows:

“Article 6. Deductible and non-deductible expenses when calculating taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:

a) The actual expense incurred is related to the enterprise’s business operation.

b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.

c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).

The proof of non-cash payment must comply with regulations of law on VAT.


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