In order for business brokerage commissions to be accepted as deductible expenses when determining corporate income tax, businesses must ensure certain conditions.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Circular No. 111/2013/TT-BTC;
• Circular No. 96/2015/TT-BTC;
• Official Dispatch No. 4850/CTHN-TTHT dated January 24, 2024 of the City Tax Department Hanoi.

We receive the following questions:

My company pays brokerage commissions to some students who work as sales collaborators? So when spending this money, what does my company have to do to make it reasonable and tax-compliant?

Pursuant to Article 4 of Circular No. 96/2015/TT-BTC amending and supplementing Circular No. 78/2014/TT-BTC, in principle, all expenditures must meet the following 3 conditions to be accepted as recognized as deductible expenses when determining corporate income tax liability:

1. Actual expenses incurred related to production and business activities of the enterprise.
2. Expenses have enough legal invoices and documents according to the provisions of law.
3. Expenditures which 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.

Pursuant to Point c, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC  as follows:

Article 2. Taxable income

2. Income from salaries and wages

Income from salaries and wages is the income the employee receives from the employer, including:

…

c) Remuneration received in the form of: goods sales agent commission, brokerage commission; money to participate in scientific and technical research projects; money to participate in projects and schemes; royalties according to the provisions of law on royalties; money to participate in teaching activities; money to participate in cultural, artistic, physical training and sports performances; advertising service fees; Other service fees, other remunerations.

Pursuant to Point i, Clause 1, Article 25 of Circular No. 111/2013/TT-BTC as follows:

Article 25. Tax deduction and tax deduction documents

1. Tax deduction

Tax deduction is when organizations and individuals paying income calculate and deduct the tax amount payable from the taxpayer’s income before paying income, specifically as follows:

…

i) Tax deduction for some other cases

Organizations and individuals that pay wages, remunerations, and other payments to resident individuals do not sign labor contracts (as guided in Points c and d, Clause 2, Article 2 of this Circular) or sign labor contracts of less than 03 months with a total income of two million (2,000,000) VND/time or more must have tax deducted at the rate of 10% of income before paying to the individual.

According to the above regulations, when the company pays brokerage commissions to business collaborators, it is necessary to pay attention to the regulations on personal income tax and corporate income tax as follows:

• Regarding personal income tax: if a business collaborator works without a labor contract, the company must deduct personal income tax at a rate of 10% for income of 2,000,000 VND/time or more before paying it to the individual. The company is responsible for paying this deducted tax amount to the State;
• Regarding corporate income tax: to ensure that commission payments are deductible when determining corporate income tax, the company must ensure:
  • Expenses for business collaborators are actual expenses;
  • Have full documents of brokerage commission payments, signed to receive cash or pay via bank;
  • Issue personal income tax deduction documents to business collaborators (if deductions have been made).

In addition, Official Dispatch No. 4850/CTHN-TTHT dated January 24, 2024 of the City Tax Department Hanoi also has the following instructions:

In case the Company pays brokerage commissions to individuals who do not do business, do not sign labor contracts, or sign labor contracts of less than three (03) months, the income that the individual receives is subject to personal income tax from salaries, wages. The company is responsible for deducting personal income tax at the rate of 10% for income from two million (2,000,000) VND/time or more before paying to individuals as prescribed in Point i, Clause 1, Article 25 of Circular No. 111 /2013/TT-BTC dated August 15, 2013 of the Ministry of Finance.

In case the Company has expenses that meet the provisions of Article 4 of Circular 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, they will be included in deductible expenses when determining income subject to corporate income tax.

Determining the subject signing a brokerage service contract is not under the authority of the tax authority. It is recommended that the company base on the provisions of law and compare with business reality to comply with regulations.