Businesses are not allowed to pay in cash for bills of VND 20 million or more, so is it mandatory for the rent of an individual to be transferred via bank?

This article was consulted by Lawyer Nguyen Quang Trung

Legal ground:

• Circular No. 78/2014/TT-BTC amended and supplemented by Circular No. 96/2015/TT-BTC;
• Official Letter No. 30300/CT-TTHT dated May 5, 2020 of the Hanoi Tax Department.

We have received the following question:

Hi TLT Legal, I would like to ask, my company rents a house from an individual to use as a office, the company takes care of all the house rental tax. So can my company pay the rent in cash? The amount of money over 20 million that the landlord does not want to receive the transfer.

Based on Point 2.5, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC amended and supplemented by Circular No. 96/2015/TT-BTC as follows:

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

Non-deductible expenses when determining taxable income include:

2.5. Expenses for renting assets of individuals without complete records and documents below:

• In case the enterprise rents assets of individuals, the documents to determine deductible expenses are the asset lease contract and the asset lease payment document.
• In case the enterprise rents assets of individuals and the asset lease contract has an agreement that the enterprise pays tax on behalf of the individual, the documents to determine deductible expenses are the asset lease contract, the asset lease payment document and the tax payment document on behalf of the individual.
• In case an enterprise leases assets from an individual and the lease contract stipulates that the asset rental does not include tax (value added tax, personal income tax) and the enterprise pays tax on behalf of the individual, the enterprise is allowed to include in the deductible expenses the total asset rental amount, including the tax paid on behalf of the individual.

In principle, for invoices with a total value (including VAT) minus VND 20 million or more, the enterprise must make non-cash payments to be accepted as a valid deductible expense when calculating corporate income tax.

However, for individuals who rent out houses, the tax authority does not issue individual invoices to households and individuals who rent out assets, even in cases where the rental revenue is over VND 100 million/year.

Thus, according to the above regulations:

• Enterprises are allowed to pay in cash for rental expenses of individuals and households
• However, enterprises need to have a complete set of documents including: property lease contract, property rental payment documents, tax payment documents on behalf of individuals (if the enterprise pays tax on behalf of individuals)

Official Letter No. 30300/CT-TTHT dated May 5, 2020 of the Hanoi Tax Department also has the following instructions:

Non-cash payment is only applicable in cases where the expense has an invoice for purchasing goods and services each time with a value of VND 20 million or more (prices including VAT). In case the Institute of Construction Materials and Construction Protection rents a house from an individual as an office, the documents to determine deductible expenses are the property lease contract and property rental payment documents. Individuals leasing property do not have to issue invoices in this case.

In case the contract agrees that the Institute of Construction Materials and Construction Protection pays tax on behalf of an individual, the total rental amount including the tax paid on behalf of the individual is included in deductible expenses when determining corporate income tax.