The cost of renting a company headquarters and business location is a significant expense for some businesses. However, businesses need to pay attention to the documents to Deduct from CIT.

Legal grounds:

• Circular No. 96/2015/TT-BTC;
• Official Dispatch No. 5973/CT-TTHT dated June 20, 2018 of Ho Chi Minh City Tax Department.

When carrying out business registration procedures, individual establishing the business must provide the business’s headquarters address in the file. Also businesses must ensure that the headquarters address belongs to their legal using rights.

Therefore, if an individual rents a location for the business headquarters before being granted a Certificate of Business Establishment, will the rent paid by the individual be considered a deductible expense? and how are documents done?

Pursuant to Article 4 of Circular No. 96/2015/TT-BTC, amend and supplement Article 6 of Circular No. 78/2014/TT-BTC 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.

According to the above regulations, in principle, businesses can count deductible expenses when determining corporate income tax if the expenses meet the following 3 conditions:

• Expenditures are actually incurred and related to business activities;
• Have legal invoices and documents;
• Comply with non-cash payment regulations if each payment value is 20 million VND or more.

In addition, Official Dispatch No. 5973/CT-TTHT dated June 20, 2018 of the Ho Chi Minh City Tax Department has the following instructions:

• In case the Company’s founders have a written authorization for an individual to rent an office before establishing the Company, if the use of this office is related to the establishment of a business, there are full invoices and documents. According to regulations (invoices, documents in the name of an authorized individual, invoices with a value of 20 million VND or more that must be paid via bank) are accounted for as deductible expenses when calculating corporate income tax. Expenses are gradually allocated to business expenses, no more than 3 years from the time the business begins operations.
• In case the Company … signs a contract to rent an office to Mr. …, the Company … issues an invoice to him … according to regulations.

So:

• Head office rent before the company was established can still be included in deductible expenses when determining corporate income tax if the 3 conditions mentioned above are complied with;
• Rent is gradually allocated to expenses, but not more than 3 years from the time the business begins operating;
• Office rental invoices can be issued in the name of the individual establishing the business.