Are charitable donations considered deductible expenses for personal income tax purposes?
The Nghe An Tax Department has received letters from several businesses inquiring whether charitable donations are tax-deductible. The Nghe An Tax Department responds as follows:
Based on Article 4 of Circular 96/2015/TT-BTC dated June 22, 2015, of the Ministry of Finance, amending and supplementing Article 6 of Circular No. 78/2014/TT-BTC (which has been amended and supplemented by Clause 2, Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) as follows:
Article 6:
2. Expenses that are not deductible when determining taxable income include:
...2.24. Funding for disaster relief that is not provided to the beneficiaries specified in sub-point (a) of this section or lacks documentation identifying the funding as stated in sub-point (b) below...
2.25. Funding for housing for the poor that does not meet the eligibility criteria specified in Clause a of this Point; Funding for charitable housing, housing for the poor, and solidarity housing as stipulated by law without supporting documentation as specified in Clause b below:...
2.26. Expenditures for scientific research funding that do not comply with regulations; expenditures for policy beneficiaries that do not comply with the law; expenditures not in accordance with State programs for localities in areas with particularly difficult socio-economic conditions...
2.32. Expenditures supporting local communities; expenditures supporting associations and social organizations; charitable expenditures (excluding expenditures for education, healthcare, disaster relief, building houses for the needy, building houses for the poor, building houses for national solidarity; funding scientific research, funding policy beneficiaries as prescribed by law, funding under State programs for localities in areas with particularly difficult socio-economic conditions as stated in Points 2.22, 2.23, 2.24, 2.25, 2.26 of Clause 2 of this Article)...
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* Based on the above regulations, the Tax Department provides the following guidance to the unit in principle:
- For expenses related to funding education, healthcare, disaster relief, building charitable houses, houses for the poor, and solidarity housing; funding scientific research; funding policy beneficiaries as prescribed by law; and funding under state programs for localities in areas with particularly difficult socio-economic conditions, through agencies and organizations authorized to mobilize funding as prescribed by law, the Company may account for these expenses as deductible costs when determining taxable personal income (PIT) if the expenditure is for the correct beneficiaries and there is sufficient documentation to verify the funding as stipulated in Clauses a and b of Points 2.22, 2.23, 2.24, 2.25, and 2.26, Section 2, Article 6 of Circular 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular 96/2015/TT-BTC) mentioned above.
- For expenses related to supporting associations, social organizations, and charitable activities that do not meet the conditions stipulated in Article 4 of Circular 96/2015/TT-BTC, these expenses are not deductible when determining corporate income tax.
The company is requested to base its actions on the actual circumstances of its expenses, comparing them with the principles for determining deductible expenses as stipulated above. During the implementation of tax policies, if any difficulties arise, the company may contact the Tax Department for further details.
