Enterprises may include salaries and bonuses for employees in their operating expenses, but may not be able to deduct CIT in some cases

Legal grounds:

• Circular No. 78/2014/TT-BTC;
• Circular No. 96/2015/TT-BTC;
• Circular No. 25/2018/TT-BTC.

Normally, salaries, wages and bonuses for employees will be included in the deductible expenses when determining the payable CIT of the enterprise.

However, in some cases, expenses for employees are not included in deductible reasonable expenses if such expenses are not clearly specified in the agreement with employees, or are not related to production, business activities … even though there are actual arising.

Pursuant to Clause 2, Article 6 Circular No. 78/2014/TT-BTC, as amended and supplemented by  Circular No. 96/2015/TT-BTC and Circular No. 25/2018/TT-BTC, the expenses for The following employees are not allowed to deduct when calculating CIT:

1. Paying salaries, wages and other payables but not actually paying or without payment documents;
2. The salary and bonus amounts are not specified conditions for enjoyment and level of enjoyment in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; The bonus regulation shall be prescribed by the Chairman of the Board of Directors, the General Director, the Director according to the financial regulations of the Company and the Corporation;
3. Salaries, wages and other allowances payable to employees but has not actually been spent yet at the end of time for submission of tax finalization dossiers. Except for cases where the enterprise has set up a reserve fund to supplement the salary fund of the following year. The annual provision level is decided by the enterprise but must not exceed 17% of the salary fund.
   • Salary fund is the total actually paid salary of that settlement year by the prescribed deadline for submitting the final settlement dossier (excluding the amount of money set aside for the salary provision fund of the previous year for expenses in the tax year).
   • The setting up of salary provision must ensure that after making the deduction, the enterprise does not suffer a loss, if the enterprise suffers a loss, it is not allowed to fully deduct 17%.
   • In case the enterprise has made a deduction for the salary provision fund in the previous year, but after 6 months from the end of the fiscal year, the enterprise has not used it or has not used up the salary reserve fund, the enterprise must calculate the cost reduction of the following year.
   • For example: When submitting the 2014 tax finalization dossier, enterprise A has deducted the salary reserve fund of 10 billion dong, up to June 30, 2015 (in case the enterprise applies the tax period according to the calendar year), enterprise A just spent the amount from the salary reserve fund in 2014 is 7 billion dong, then enterprise A has to calculate the reduction in salary expenses next year (2015) by 3 billion dong (10 billion – 7 billion dong). When preparing the 2015 finalization dossier, if enterprise A needs to make deductions, it shall continue to set up the salary reserve fund as prescribed.
4. Salary and wages of:
   • Private business owner;
   • Owner of a one-member limited liability company (owned by an individual);
   • Remuneration to founders, members of the Members’ Council, the Board of Directors who are not directly involved in production and business management.