Year-end and Christmas party expenses, if meeting certain conditions and having legal invoices and documents, can be included in the deductible expenses for corporate income tax.

This article was consulted by Lawyer Nguyen Quang Trung

Legal ground:

• Circular No. 96/2015/TT-BTC;
• Official Letter No. 3531/CT-TTHT dated April 7, 2020 of the Ho Chi Minh City Tax Department;
• Official Letter No. 109325/CTHN-TTHT dated December 23, 2020 of the Hanoi Tax Department.

We have received the following question:

TLT Legal, my company is planning a year-end party at the end of 2024. So is the organization fee deductible from corporate income tax, and what documents do I need to prepare?

Currently, expenses for organizing year-end and Christmas parties are considered welfare benefits for employees. If the enterprise pays welfare benefits in accordance with regulations, these expenses can be deducted when determining corporate income tax obligations.

Pursuant to Clause 2.30, Article 4 of Circular No. 96/2015/TT-BTC, the provisions on welfare expenses are as follows:

Welfare expenses paid directly to employees such as: expenses for funerals and weddings of the employee and his/her family; vacation expenses, treatment support expenses; expenses to support additional knowledge and study at training facilities; expenses to support employees’ families affected by natural disasters, war, accidents, and illnesses; expenses to reward employees’ children with good academic achievements; expenses to support employees’ travel expenses on holidays and Tet; accident insurance, health insurance, other voluntary insurance for employees (except for life insurance for employees as guided in point 2.6, voluntary retirement insurance for employees as guided in point 2.11 of this Article) and other welfare expenses. The total of the above welfare expenses shall not exceed 01 month of the actual average salary in the tax year of the enterprise.

In addition, Official Letter No. 3531/CT-TTHT dated April 7, 2020 of the Ho Chi Minh City Tax Department has the following instructions:

Based on the above regulations, as presented, in case the Company incurs expenses of a welfare nature for employees (buying food, year-end parties, Christmas parties) if it meets the conditions specified in Clause 10, Article 1 of Circular 26/2015/TT-BTC, Article 4 of Circular 96/2015/TT-BTC and the total expenses of a welfare nature do not exceed one month’s average actual salary in the year of the Company, the input VAT of goods and services used for production and trading of goods and services subject to VAT shall be deducted and included in deductible expenses when calculating CIT.

Official Letter No. 109325/CTHN-TTHT dated December 23, 2020 of the Ho Chi Minh City Tax Department. Hanoi has the following instructions:

In case Stanley Electric Company Limited (hereinafter referred to as the Company) has a year-end party expense for its employees, if the above expense is of a welfare nature paid directly to employees and the total expense of a welfare nature does not exceed 01 month of the actual average salary made during the tax year of the enterprise and meets the conditions as guided in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, it will be included in deductible expenses when determining taxable income of the enterprise.

Thus, with the welfare expense, the enterprise needs to note that the ceiling of deductible expenses when determining corporate income tax is not to exceed 01 month of the actual average salary made during the tax year of the enterprise;

In addition, based on Article 6 of Circular No. 78/2014/TT-BTC amended and supplemented by Circular No. 96/2015/TT-BTC, enterprises need to pay attention to other conditions including:

• Expenses must be incurred in reality and related to production and business activities;
• Have full legal invoices and documents;
• Have non-cash payment documents if each invoice has a value of VND 20 million or more.