Businesses can rent apartments of individuals to use as business locations. However, not all costs related to the use of the apartment are accepted.

Legal grounds:

Circular No. 78/2014/TT-BTC;
Circular No. 96/2015/TT-BTC;
Official Dispatch No. 93847/CT-TTHT dated December 16, 2019 of Hanoi Tax Department.

Many businesses rent an individual’s apartment as a headquarters, business location and often agree in the lease contract that the business will bear the electricity, water and building management fees.

Pursuant to Article 6 of Circular No. 78/2014/TT-BTC, amended and supplemented by Circular No. 96/2015/TT-BTC, in principle, enterprises are entitled to deduct expenses when determining CIT if they satisfy all 3 conditions:

Actual expenses incurred in relating with production and business activities of the enterprise.

Expenses with sufficient legal invoices and documents as prescribed by law.

Expenses if there is an invoice for buying goods and services each time with a value of VND 20 million or more (price includes VAT) upon payment must have non-cash payment vouchers.

However, for the cost of management of the apartment building, although it may be an actual expense during the using the rented apartment as a business location, if the Building Management Board does not issue a management fee invoice directly for the enterprise, this cost is not deductible when determining CIT .

Specifically, Official Letter No. 93847/CT-TTHT dated December 16, 2019 of the Hanoi Tax Department instructs as follows:

In case, the Company signs a contract to rent an individual’s apartment, the contract stipulates that the Company shall pay the management fee, electricity, water and other services to the Management Board of the apartment building. Invoices issued by the Building Management Board still bear the individual name of the apartment owner, then:

Input VAT on the management fee invoice bearing the name of the individual owner of the apartment, without the name, address, and tax code of the company, it does not meet the conditions for VAT deduction…

For the apartment management fee, the Company does not meet the conditions to account it in deductible expenses when determining taxable income according to regulations…