If the business has not been established but the founders have signed a contract to procure machinery and materials for production, how should documents be handled?

Legal grounds:

• Circular No. 96/2015/TT-BTC;
• Official Dispatch No. 73172/CT-TTHT dated November 28, 2016 of the City Tax Department. Hanoi;
• Official Dispatch No. 12423/CT-TTHT dated March 29, 2018 of the City Tax Department. Hanoi.

When the business has not been established, founders can still invest and purchase equipment, supplies and goods to prepare for production and business activities. These investments, if paid before the enterprise is established, can still be included in reasonable deductible expenses when determining corporate income tax if they meet all the conditions for deductible expenses.

Specifically, Article 4 of Circular No. 96/2015/TT-BTC amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC stipulates the principles for determining deductible expenses as follows:

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

1. Except for non-deductible expenses stated in Clause 2 of this Article, enterprises can deduct all expenses if they meet all of the following conditions:
   1. Actual expenses incurred related to business activities of the enterprise.
   2. Expenses have enough legal invoices and documents according to the provisions of law.
   3. Expenditures if there are invoices for each purchase of goods and services with a value of 20 million VND or more (price includes VAT) must have non-cash payment documents when paying.

However, it should be noted that because there is no legal entity to carry out transactions, the company founders need to authorize individuals and organizations to make investments and purchases. The company will then make payments back to authorized individuals and organizations. Specifically:

Official Dispatch No. 73172/CT-TTHT dated November 28, 2016 of the Hanoi Tax Department provides instructions as follows:

• In the case of the Company, before establishing a business, the Board of Directors of the Company authorized by written for CEOSUITE PRIVATE LIMITED (referred to as the authorized organization) to make payments related to expenses of the establishing the business such as: purchasing photocopiers and accompanying equipment, consumables, replacement parts, paper, printing page fees, software… then the invoices bear the name of the authorized organization, The company does not have to adjust invoices (purchase party information) and are considered reasonable and valid documents to account for reasonable deductible expenses when determining corporate income tax if these invoices fully meet the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance mentioned above.
• The company must make payments to authorized organizations via banks for invoices valued at twenty million VND or more.

Official Dispatch No. 12423/CT-TTHT dated March 29, 2018 of the City Tax Department. Hanoi guides as follows:

• In case before establishing the company, the founders of the company have written authorization for the Investor of the Company and another company in Vietnam (referred to as authorized organizations) to make payments some expenses related to establishing a business, purchasing goods and supplies, with purchase invoices bearing the name of authorized organization, the Company does not have to adjust the invoice (buying party information) and are considered reasonable and valid documents for accounting into reasonable deductible expenses when determining corporate income tax if these invoices meet the conditions specified in Article 4 of Circular No. 96 /2015/TT-BTC mentioned above. The company is allowed to declare and deduct input VAT according to VAT invoices in the name of authorized organization according to the instructions at Point b, Clause 12, Article 14 of Circular No. 219/2013/TT-BTC above.
• The company must make payments to authorized organizations via banks for invoices valued at twenty million VND or more.