VAT input on housing allowance for expats is deductible or not?

Many expats working in Vietnam are entitled to a lot of allowance from their Company and Housing allowance is a kind of these benefits.

For some enterprises, the housing allowance are capped at a specific amount and paid along with the monthly salary to expats staff. For others, the Company shall settle rental charge directly to the lessor.

The question is that the VAT invoice issued by the lessor for such housing allowance is deductible or not?

In accordance with the Circular 219/2013/TT-BTC providing guidance on implementation of the Law on Value Added Tax, it is regulated at the Article 14: rules for VAT input deduction that:

  • In case a foreign expert is working under labour contract or holding managerial positions with Vietnam party and entitled to a housing allowance paid by Vietnam party, the Vietnam party is not allowed to claim the VAT input on housing allowance to such expats.
  • In case the foreign expert is still under labour contract with oversea company, receive wages and benefits from the overseas company during their Vietnam assignment and the overseas company and the taxpayer in Vietnam sign a contract specifying that the Vietnam party shall cover the accommodation cost for the foreign experts while they are working in Vietnam, the VAT on such accommodation cost paid by Vietnam party shall be deductible.

It is also regulated at Point 9 of the same Article that:

 Input VAT that is not deductible shall be aggregated with costs to calculate corporate income tax, or aggregated with costs of fixed assets, except for the VAT on any purchase that costs 20 million VND or more without receipts for non-cash payments

In light of the above, the VAT input on housing allowance for expats shall be specified in 2 cases:

  • In case that the expats are working under labour contract with Vietnam Company and/or holding a position in management board of Vietnam Company, the VAT amount for housing allowance to such expats is non-deductible but can be recorded as expense .
  • In case that the expats are working under secondment, receiving wages and salaries from oversea company while the housing allowance to such expats is paid by Vietnam party (for and with the terms which are clearly stated in the agreement between Vietnam and oversea company), the VAT amount on such housing allowance is deductible.

Above is the regulation related to case of input VAT on housing allowance.

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