An enterprise’s expenses must actually arise and comply with legal regulations to be accepted as a deductible expense when calculating corporate income tax.

This article was consulted by Lawyer Nguyen Quang Trung

Legal ground:

• Labor Code 2019;
• Circular No. 96/2015/TT-BTC.

We have received the following question:

TLT Legal, I wanted to ask, my company’s human resources department has proposed to pay money for the remaining leaves to some employees. I am an accountant and am wondering if this money is reasonable and valid to be deducted when settling corporate income tax?

Pursuant to Clause 3, Article 113 of the 2019 Labor Code as follows:

Article 113. Annual leave

3. In case of resignation or job loss without taking annual leave or not taking all annual leave days, the employer shall pay salary for the days not taken.

According to the above provisions, the enterprise’s payment to employees who have not taken all annual leave days is in compliance with labor laws. Thus, this is a reasonable expense.

However, when spending these amounts, enterprises need to pay attention to the principles stipulated in Clause 1, Article 6 of Circular No. 78/2014/TT-BTC, amended and supplemented by Circular No. 96/2015/TT-BTC as follows:

1. Except for non-deductible expenses specified in Clause 2 of this Article, enterprises are allowed to deduct all expenses if they meet the following conditions:

1. Actual expenses arising in relation to the production and business activities of the enterprise.
2. Expenses with sufficient legal invoices and documents according to the provisions of law.
3. Expenses with invoices for purchasing goods and services each time with a value of VND 20 million or more (prices including VAT) must have non-cash payment documents when paying.

Therefore, businesses need to take a note:

• This expense must actually arise and be related to production and business activities
• There must be full legal documents on the payment, as well as the employee’s work records must be complete according to legal regulations