New points on deductible and non-deductible expenses when determining taxable income

The Ministry of Finance issued Circular No. 96/2015/TT-BTC dated June 22, 2015 providing guidance on corporate income tax in Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government and amending and supplementing a number of articles of Circular No. 78/2014/TT-BTC on deductible and non-deductible expenses when determining taxable income, including 14 expenses amended and supplemented specifically as follows:

1. Expenses related to the value of losses due to natural disasters, epidemics, fires and other force majeure events are not compensated.

Records determining the value of losses due to natural disasters, epidemics, fires and other force majeure events are as follows:

a) Records for assets and goods lost due to natural disasters, epidemics, and fires are included in deductible expenses as follows:

- Minutes of inventory of lost assets and goods made by the enterprise.

The record of inventory of the value of lost assets and goods must clearly identify the value of the lost assets and goods, the cause of the loss, the responsibility of the organization or individual for the loss; the type, quantity, and value of recoverable assets and goods (if any); the list of exported, imported, and stored goods lost, confirmed by the legal representative of the enterprise, who shall be responsible before the law.

- Damage claim file accepted for compensation by insurance agency (if any).

- The dossier specifies the responsibilities of the organization or individual that must compensate (if any).

b) Goods damaged due to changes in natural biochemical processes, expired goods, and not compensated are included in deductible expenses when determining taxable income.

Records for goods damaged due to changes in natural biochemical processes, expired goods, are included in deductible expenses as follows:

- Minutes of inventory of damaged goods value prepared by the enterprise.

The inventory record of damaged goods must clearly identify the value of damaged goods, the cause of damage; the type, quantity, and recoverable value of goods (if any), accompanied by a list of exported, imported, and stored damaged goods, confirmed by the legal representative of the enterprise, who shall be responsible before the law.

- Damage claim file accepted for compensation by insurance agency (if any).

- The dossier specifies the responsibilities of the organization or individual that must compensate (if any).

The records determining the loss value are kept at the enterprise and presented to the tax authority when requested by the tax authority.

2. On depreciation of fixed assets

Supplementing fixed assets of enterprises serving employees and organizing vocational education activities that are included in deductible expenses when calculating corporate income tax include: libraries, kindergartens, sports areas and equipment and furniture that qualify as fixed assets installed in works serving employees working at the enterprise; facilities, machinery and equipment are fixed assets used to organize vocational education activities.

3. Regarding payment of rental fees for personal property

- In case an enterprise leases assets from an individual, the documents to determine deductible expenses are the asset lease contract and documents proving the asset lease payment.

- In case an enterprise leases assets from an individual and the lease contract stipulates that the enterprise pays taxes on behalf of the individual, the documents to determine deductible expenses are the lease contract, documents proving the lease payment, and documents proving the tax payment 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 deductible expenses the total asset rental amount including the tax paid on behalf of the individual.

4. Regarding salary, wages and bonuses for employees, the following contents are amended and supplemented:

- Add a provision that life insurance expenses for employees that are not specifically stated in one of the following documents are not deductible: Labor contract; Collective labor agreement; Financial regulations of the company, corporation, group; Bonus regulations prescribed by the chairman of the board of directors, general director, director according to the financial regulations of the company, corporation.

(To be continued)

NGHE AN TAX DEPARTMENT